It’s official and it’s a shocker. Cameron’s first Budget puts VAT up to 20%. It cuts company tax cut from 28 % to 24%. Govt dept spending is cut by a staggering 25%. Capital gains tax is up from 18% to 28%.
A budget suplus in 3 years? – dreaming. The social dislocation will be too awful to describe.
This is an uber-Tory Budget that relies on neoliberal economic ideology.
Given that Brown had already cut spending by GBP 72bn and this cuts another GBP 40bn it contains real risks of stagflation/deflation. If that spreads through a Europe bound together by linked currencies, it could contribute to a double- dip recession that mayaffect us.
And of course we are now more vulnerable after Mssrs Key anad English borrowed more for unaffordable tax cuts.
For now, here is David Milliband’s reaction:
The Tory-Lib Dem Budget is a hammer blow to families and business across the country – and to the future of the British economy. George Osborne’s measures are driven by ideology not economic reality. And the price will be paid in higher unemployment and lower living standards for the poorest and those on middle incomes.
When they asked for your vote at the last election, David Cameron and Nick Clegg said they would reduce the deficit without hitting the frontline or hurting the poorest – but they have already broken that promise.
…
Below I set out what I would do differently – read on and then sign up to my Broken Promises campaign – help me show David Cameron and Nick Clegg that we will expose and oppose their Broken Promises every step of the way.
- I would make reducing unemployment a top priority. We must oppose the Tories’ decision to scrap Labour’s job guarantee, which provided work to the long term unemployed. The Tories are making the same mistake they made in the 1980s, of letting unemployment devastate lives and communities.
- I would not increase VAT, which is a regressive tax that hits the poorest hardest. Don’t take my word for it, David Cameron said it. And the Lib Dems promised to fight against a VAT rise until they decided to support it.
- We should be supporting the industries that will drive jobs and prosperity in the future – like Sheffield Forgemasters who have been robbed of a loan that offered world-beating jobs for Britain.
- The Tories’ four pounds of spending cuts for every one pound of tax rises is extreme. Even Mrs Thatcher went for a pound of spending cuts for a pound of tax rises. I would strike a fairer balance between reductions in spending and tax rises to reduce the deficit. If we need more tax let’s look at measures like a Mansion Tax on £2m homes not VAT rises.”
Sound familiar?
Oh yes it DOES sound familiar!
This is shocking! 
I was just reading about this, D.C. It seems to me like they *want* riots in the streets.
I cannot believe this Government is borrowing to fund tax cuts for the rich: it makes me ill in the guts.
(However that increase in capital gains tax is worth examining…that is really going to hit the high rollers; also basic foodstuffs are VAT exempt in the UK are they not?)
Your post makes me want to start fundraising for the NZLP tomorrow. In fact I just might.
Could you provide a link to the above, please?
Having been in the UK since July 09 I was a little concerned that Osborne might be the weak link in the Tory line up. I was wrong – so far he has been outstanding.
It is obvious that the Tories and even the Lib Dems who count, have a good grip on what is required to get the UK out of the financial mire the Labour Government left it in.
It is now time for John Key and Bill English to take note and take similar actions in NZ,
From the BBC. Corporations get a big tax break while ordinary citizens get wage freezes and VAT increase.
http://news.bbc.co.uk/2/hi/business/10379329.stm
I can see NACT having inspired day dreams about this budget.
Loota – who is going to employ the people if it is not businesses. If you want lower unemployment and higher wages lower tax rates all round.
Common sense really.
Brown cuts $72bn and thats OK , but an extra $40 bn cut by Cameron isnt?
The blame for this budget lies with labour.
Years of profligacy and over spending. Somebody needed to have the balls to sort it out , before Britain became the next Greece.
It seems to be a global issue with socialist Governments , spend up large on the credit card and leave someone else to clean up the mess.
Oh I see, they are using the Labour Party as scape goats for their cruel and unnecessary policies. Whose fault was it last time they were in?
Spud – 13 years of Labour in the UK and 9 years in NZ almost stuffed both countries. Drastic steps are needed and Key and co are dragging the chain while Cameron and Osborne are getting stuck in and fixing the problem.
Spud
you seem to think there is a vast right wing conspiracy by anyone who has a counter view to posters on this site.
The post yesterday on political allegiances dispelled that.
I dont represent the right, unless you mean by right , not wrong.
Left wing financial excesses are a regular occurence , followed by right wing austerity which is why I guess, the party you would call Tories , are Conservatives.
The BLP have put their country in the worst financial state since WW2
Agreed Mark – according to Cameron on the Beeb earlier today Britain has the highest debt level of any country. Without positive action they will be the next Greece.
I can see NACT having inspired day dreams about this budget.
A Bank Levy is being introduced, Capital Gains Tax is being increased as well and they’re investigating a “Financial Activities Tax”.
I didn’t expect this…
I thought they were going to follow a New Labour-Lite policy…
P D M said
This Budget package is prioritising bond holders and equity markets ahead of small and medium businesses.
Every estimate of the Budget’s impact on UK economic growth syas that this budget will cause a reduction of growth by between 0.3 and o.8% p.a. To around 2% growth or just over.
Listen out for the phrase ‘may push the UK into a double dip recession’.
There goes your expansion by the public sector, and your common sense, in a puff of smoke.
The Tories never change whether they live in the Northern Hemisphere or the south
Really? Did it, in your own mind?
Anyhows not a conspiracy if its obvious and in plain sight, correct?
Isn’t it funny how corporates get their tax cuts even though everyone else has to tighten their belt by a hge margin?
That means the major banks, major funds and highly capitalised large shareholders still win from this budget.
Oh, the Tories never change.
However this is a major lesson for UK Labour. Because they did not handle their finances as astutely and as conservatively as Cullen did here, they have set themselves up to be the scape goats for the entirety of this electoral cycle.
Michael Cullen left NZ in a far superior fiscal position than UK Labour left the UK. Its crystal clear today.
StephenR – yes there are some measures affecting both sides and I think the capital gains tax is indeed a major – but the 25% cut to the civil service and a 15% reduction in corporate tax rates – that’s the Right wing ingredients they will be gleeful over.
NB corporate tax rates are argued to go down in good times and bad, odd huh, while taxes on people don’t behave in that way.
P D M soz I meant “your expansion by the private sector”.
Private sector growth is being socked in the stomach because of this Budget.
Also – tax cuts have rarely generated growth on their own. Its a right wing fairy tale. They’ve (obviously) generated wealth for the few who already had large incomes and major capital bases to start with.
What the left here (and over there) seem to forget is the simple concept of cause and effect.
This budget is needed – the excesses of the UK’s spending was out of control. The new government are not doing this for fun – the state of the countries books were in disarray – thank God they are strong enough to make the hard decisions that needed to be made – if Labour had of remained in doing the same old – same old – they would end up broke.
Oh
, no M ark M , I wasn’t talking about you, I was talking about the tory government in the UK 
I respect your right to comment here
All you apologists need to realise that whatever happens to the UK economy over the next few years IS a direct result of ‘New’ Labour p–s poor handling of the economy by Gordon Brown and his lackeys. Brown pillaged taxpayers from the productive sector to pay for the unproductive and when that cash cow ran out, he borrowed, borrowed some more, then borrowed more again to pay back the borrowing. THEN, when that stopped working he simply printed more money, then borrowed even more.
‘New’Labour got Britain into two wars yet Brown CUT defense spending, he introduced over 100 (yes, one hundred) new and increased forms of taxation, council tax (rates) have gone up more than 100% since 1997, PFI/PPP contracts have been milked for all they’re worth just so Brown can keep even more excessive spending off the books. Brown has done more to privatise public services than the Tories could ever have dreamed of.
On other points, ‘New’ Labour moved to abolish trial by jury, stifle free speech and protest, wanted to give everyone ID cards and abandoned their election pledge for a referendum on the EU constitution.
The country is broke, there is nothing left. The emergency budget just announced is a direct result of the Blair/Brown years. Spud, Labour inherited a strong and growing economy in 1997 and squandered the lot so yes, in this instance is is RIGHT to blame ‘New’ Labour for the mess they have gotten the country into. With any luck, the Con/Lib Dem government will work and make ‘New’ Labour the 3rd party in UK politics making them unelectable for a generation.
‘New’ Labour did NOTHING for their core voters, they warmed up to big business, lauded the city of London then when things went wrong, blamed all their ills on the bankers despite this mess happening right under the noses of government regulators and were solely responsible for the rise and success of the BNP (a FAR LEFT party).
They also presided over a rather large expenses scandal that makes a mockery of the dodgy spending by our politicians.
The government debt is unaffordable, just because benefit recipients don’t like it, doesn’t make it wrong for the country.
“Michael Cullen left NZ in a far superior fiscal position than UK Labour left the UK. Its crystal clear today.”
This is a very good point, by paying down so much debt, Cullen took anyway any chance for rapid economic change to be implemented, by controlling the purse strings and resisting the desire to reduce taxes before debt he has extended his control of popular policies for longer than the 9 years he was in control… Whether yiu agree with those policies or not, that is clever…
DC, Brown DID NOT cut spending by GBP 72bn, he promised to make a dent in the deficit by this figure but had no idea on how to achieve this and did not provide any plans or insight. What he also promised was to keep increasing spending on public services, so how on earth can he keep spending at the same rate, borrowing and printing so much yet still able to cut spending by 72bn?
*rapid economic change to be implemented by the current government
*you
So, Milliband’s labour policy – “2 – I would not increase VAT, which is a regressive tax that hits the poorest hardest. Don’t take my word for it, David Cameron said it. And the Lib Dems promised to fight against a VAT rise until they decided to support it.”
Interesting….
“(Peter)Mandelson told Gordon Brown in the run up to the pre-budget report last December that Britain should follow the example of the former German SPD / CDU grand coalition which opted for a deferred rise in VAT. He told Brown that raising VAT from April 2011 would have two key benefits for Britain as it emerged from the recession:
• It would stimulate the economy by encouraging consumers to spend in the run up to the VAT rise.
• Once VAT is increased, it boosts Treasury coffers quickly. The chancellor announced today that increasing VAT from 17.5% to 20% on 4 January next year will generate £13bn in extra revenues by the end of the parliament.”
Simon says is repeating Tory rubbish, and getting it all twisted up in the process. Actually the new labour policies were the same as expoused by Key and English before the recession, ie spend and borrow
@ Loota: Here is the link to David Miliband’s campaign against the Budget of broken promises.
http://action.davidmiliband.net/page/s/BrokenPromises
@ Simon: Please don’t think my initial post was pretending the world under Labour was perfect or that the GFC did not happen. However it is fascinating to reflect that New Labour was well known for “triangulating” on the political center, and going some way to appropriating some of the techniques of the center-right (eg PFI’s). By contrast the incoming Cameron government is no longer a “wolf-in-sheep’s-clothing” kind of Crosby-Textor “caring conservative”. Those clothes got dumped before they were even in the door, and that was even with a Lib Dem coalition! What worked on the campaign trail was instantly discarded once their hands were on the levers of power.
The contrast with NZ National is that the dance is more subtle and the veils is taking a longer to come off; but the implications of NZ Budget 2010’s fiscal hole, lower company tax rate and high-end tax cuts won’t be lost on voters.
As commentators have said though, the UK situation means the zero net debt achieved in NZ under Michael Cullen looks especially good now…
I wonder how those UK LibDem voters are feeling right now?
UK Labour did a miserable job of managing their debt and spending, Labour NZ did great! And now we can see the contrast
Oh, and thanks, D.C. I’ll check it out.
What Tory rubbish is that Ghost? It’s not just the tory rags that deserted Brown and Labour you know. I left the UK three years ago so have witnessed what has happened to the country under Brown/Blair and it’s not pretty. The economic conditions are quite different here in NZ, we don’t have a colossal behemoth of a public sector that the UK has (NHS a perfect example), we don’t rely on financial services to prop us up and NZ Labour and Nat, from what I can see, just do not have the same tax, borrow and spend policy in the same criminal disregard that Brown does.
VAT is not fair, Simon, the tories are doing much worse to the country
An excellent summary of the UK Budget courtesy of the Beeb:
http://news.bbc.co.uk/2/hi/politics/10374475.stm
Cheers all and thanks to Chris for the link.
@ Simon: Britain’s problme’s run deep, but remeber tht Brown did make massive spending reductions even before the election…
Poor Britain
Again Spud, ‘New’ Labour under Brown financially ruined the country and introduced several tax rises and changes, one of Browns most famous, his tax on Pension funds, including mine. As you can see above, New Labour have very much been open about a need to increase VAT, probably for the reason that taking money direct from peoples pay packets is political suicide. Although they did increase National Insurance and i’m surprised the new government has also followed that.
I can’t defend a VAT increase and i’m not going to try. But just saying it’s wrong, Spud, you need to do better than that and not the same ‘it only affects the poor’ line. Brown’s tax changes over the past 13 years hit everybody in the UK, including the poor, yet comparable to NZ, the rich got richer under New Labour.
Certain things in the UK have been exempt from VAT, childrens clothing and some fresh produce, not sure if that’s the same here…anyone?
DC, I don’t think he did. He made a lot of promises but he’s not got the chance to put it into action. He did strip the defense budget though, a saving there, not giving the troops the equipment they need.
My point re pension funds (close to my heart as I used to work in that area) is that lots of people in the UK have personal pensions, rich, poor, self employed, unemployed etc…. New Labour did not support their core voters, people like you Spud.
@Simon, alright you make some good points about Gawdy
True, yes I am a core voter
Milliband says “George Osborne’s measures are driven by ideology not economic reality”. Really?
If Labour in UK (and here) think it is just ideology in action think again. It is what it is, and it has a real purpose for the backers of those driving this budget. It is a deliberate well thought out plan to transfer costs to the populace whilst maximising the upward flow of wealth. You cant mess with this as “ideology”, or do the “lite” version. So Labour NZ, take a good hard look and see the plan for what it is from the same people locally.
@DC, Brown’s annouced spending cuts amounted to about 1% of the existing budget as far as I can tell from reading a few articles before the election, not exactly what I would call massive when they are running an NZD $600,000,000,000 deficit…
IMHO Gordon Brown will be remembered as England’s Robert Muldoon, an economic ignoramous whose mismanagement forced radical economic reform on a country…
@ JMH 11.21: Ouch!
pdm et al: repeating “the financial mess inherited from the last Labour government” does not make it true. The mess was created by the bankers and their pals, now they want the workers to pay. The main result of the Con-Dem slash and burn budget is the risk of an even deeper recession – but that’s Tories for you.
thanks spud
loota read the post on telling us about yourself.
some lefties were calling themselves righties and vice versa.
Putting labels on people is silly
JMH said:
Why are you using NZD to measure the UK deficit? It does make the problem look bigger, but they are not paying back the deficit in NZD you know.
In Brown’s last Budget (2009) he made big cuts. According to wikipedia the shortfall between revenue and expenditure was £175B. At a current exchange rate of 0.46 that is a deficit of $380,000,000,000.
Yes still very large but your $600B number is a 58% overstatement by my calcs.
Now, Brown planned cuts that by 2014 would reach £44B p.a.
http://www.independent.co.uk/news/uk/politics/the-true-meaning-of-the-chancellors-emergency-budget-2007806.html
That is, the culmination of his cuts would be about 1/4 of the current deficit.
Therefore your 1% figure while accurate actually understates how severe and deep most commentators saw his cuts as being, especially since special projects like Trident replacement nuclear submarines were protected against the cuts so other areas – like community spending – were slashed far deeper than the bland average indicates.
Cameron’s cuts actually add ‘only’ another 0.4% on to the 1% figure you produced but in reality it is a massive deepening of already massive cuts.
By the way, unlike you I am not a young economists, but I do like getting a ball park feel for the right numbers.
mark m – fair enough.
@dorothy, the banker’s bailout part of the current UK budget is 3% of total spending… It’s about 3% too much IMO but hardly the cause of the problem…
@Loota, fair enough, I didn’t check the conversation rate and did a rough conversion in my head… Not exactly the high standard required for an internet blog…
I’ve been back from the UK three years also, people were over Labour (Blair), well before last the election. No Lib Dems of significance and Cameron hadn’t found the right spin , at the election before last, so Labour scrapped in.
UKs problems go back longer than Brown, there failure to ring fence North Sea income, drove the pound sky high and destroyed manufacturing in the UK. I saw the last of Rover 06-07 I think.
One of Brown’s biggest failure was not to regulate, he worked to protect London’s position as the financial hub instead. It was a race to the bottom in terms of regulation. He won that; I bet he wishes he hadn’t now.
The size of the public service there is farcical, I had a friend working as a Management Consultant, it was only suppose to be a 3 month gig, he is still there as a contracted consultant 6 years later!
Simon – where were you living, while I was there it was a great place, plenty of work, money to be made hand over fist. I had a kid there couldn’t fault the health system.
@Tracey – politics is not real work? what? none of the 80+ hours a week?
I will put Phil Goff and David Parker’s speeches up as notes on my Facebook page – just go on and search David Cunliffe/profile/notes.
JMH said:
A 3% mis-spend by any govt is probably enough to tip an economy into recession in the current climate thanks. No big deal?
In the UK its actually about £19B
No big deal? Don’t sweat about it? Strangely enough that’s slightly more than the final target for Cameron’s benefits cuts. Ironic
What school of economics are you following by the way…
pdm @ 4:12am (omg – that is sleep time) – very well said.
Loota re “I cannot believe this Government is borrowing to fund tax cuts for the rich: it makes me ill in the guts.”…….YAWN.
Usual thread with usual responses.
C’mon Labour – when are you going to prove to NZ you are a credible alternative government?
Clearly your policies have not been working yet you oppose anything the NACTs come up with.
So when’s this grand plan going to be unveiled….or will we all die waiting (after voting in the NACTs for another term)….
@Loota, well did you read the part where I said 3% too much in my opinion..?
That 3% is being used to provide cheap credit and stimulate false demand and economic growth, some kind of warped Keynesianism, hardly what pushes an economy into recession – now…
The UK is misspending much, much more in other areas… I do find it interesting that my every post seems to lead to outrage and accusations of stupidity…
You’re not sick at the thought of borrowing for tax cuts Rebecca ?
I think my main point was that the taxes from 1.8 million Britons i.e. 19B GBP, is non-inconsequential in terms of the UK’s deficit problems.
Whereas you seemed to state that the UK banking crisis and the subsequent bail out is not a major contributor to their current fiscal issues.