Thursday, February 19, 2009

Welcome to Brown's Billions: a farce remade as a tragedy

£Billions per annum

Another excellent article by Iain Martin. However, does Mr Martin go far enough with his proposed £50 billion pounds government spending cut? The UK government is annually burning through, in real terms, about £219 billion pounds more a year than it did back in 1993 - an increase of 77% on its former budget of £283 billion - so why not an annual cut of £219 billion?

Gordon Brown could save half a million of that straightaway just by sacking tax thief Jacqui Smith. He could replace her with a cardboard cut-out, plus a looping tape from an answerphone; who would know the difference? Add to that the policing costs of guarding two homes, with extra police now to be posted outside of her "main home" even on days when she's back with her husband and kids in her "second home", to give the impression that she's in two places at once, and the saving could be a cool £5 million.

In fact, why not sack the entire cabinet? Even when Gordon Brown doesn't do their jobs for them, the rest of these socialist tax munchers do nothing that any of us would notice if they stopped. And then while he's at it, Gordon Brown can sack himself.

Here is more on Bankrupt Britain, the report Iain Martin refers to in his piece:

=> Who will be the first politician to tell the truth about Britain's public finances?

Here is the PDF of the report itself:

=> Bankrupt Britain

The report is sobering reading. One key section is this:

There are basically three levers a government can pull to try to return national debt as a percentage of GDP back to 40%:
• Increase taxes;
• Cut public spending; and/or
• Debase sterling (again) by allowing inflation to rise.
All governments have two constituencies. The first is the tax payer class, who demand that the government cut taxes. The second is the tax consumer class, who demand that the government raise taxes. To burn both ends against the middle and to retain support from both camps, governments generally turn to the magic of inflation to raise spending on the tax consumer class without raising taxes on the tax payer class. This is why governments are inherently inflationary. This is why the Maturin Towers prediction is that Gordon Brown will deliberately turn to inflation to stay in power.

The author of the report, Malcolm Offord, suggests instead that the government combines steps one and two to create a "balanced" solution; a top-rate tax rate of 50% combined with a government expenditure cut of £100 billion pounds, within the next few years.

Maturin Towers predicts that neither step is feasible for Gordon Brown. If he raises taxes any more, he will need a one-way ticket to the IMF to avoid being lynched in the street by the tax payer class. If he cuts public spending in any way, he will need a one-way ticket to the IMF to avoid being lynched in the street by the tax consumer class.

Inflation is therefore the only game in town. More people, particularly in the tax consumer class, will then be dragged up into the 40% higher rate, which will be an effective and silent way of both raising taxes and cutting public spending. Government debt will also become easier to service as the pound becomes more worthless. Inflation is a real winner!

Expect lots of it.

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