I have rarely come across such a sense of impending doom. Chatting to people on the streets, engaging with residents locally, all seem resigned to a dismal future. And the cause of it? The impending budget in a couple of weeks’ time.
The chancellor, in her manifesto pledge, guaranteed not to raise VAT, income tax or national insurance. So, in her first budget, she taxed employers’ national insurance instead. The result? 160,000 fewer jobs, and this affecting younger people starting out in life the most.
But, after that, she absolutely guaranteed that she would not come back for more. Guaranteed it. Many, many times. Now she is preparing us to pay more tax. And the reason? Because she messed up so badly on the first budget. She has flatlined the economy (that was growing at 0.5% before the election). And increased inflation (because of higher employment costs delivered by her). And delivered higher mortgage rates (bond market nervousness means bond yields are higher than the 1990s). She has failed miserably to cut welfare costs – there are 1 million more people on universal credit than a year ago. So, she is going to hit working people and wealth creators with a raid on their rewards for hard work and their savings.
No wonder there is talk, in the press this week, of a possible bid to oust the useless Keir Starmer and replace him with someone else.
The economist behind the growth in western economies in the 1980s – Arthur Laffer – has been commenting on all this recently. He is an old man, but he has a lot of practical experience.
He makes complicated things simple. He is not always agreed with, but his logic is reasonable. He points out that if it is easier to claim benefits, and you get taxed more when you work, the state incentivises you to stop working (and pay tax) and start collecting benefits. Not working is rewarded; working is penalised.
This logic goes through all areas. This government wants to remove the two-child benefit cap. If you are a taxpayer, you look at your family finances and work out how many children you can afford. If you are on benefits, you are financially incentivised to have more children (unless there is a two child cap). It doesn’t make sense.
I fear this sense of gloom getting worse, not better, after the budget. But I hope to be proved wrong.
