Though Cowards Flinch

About the best thing one can say regarding today’s pre-budget report is that it’s not quite so bad as Ramsay MacDonald slashing unemployment benefits in order to return public finances to some ‘order’. There are some good points, such as a rise in pensions, the continuation of the inheritance tax, the rise in NI contribution thresholds to £20k and assorted measures related to support for those on benefits, plus continuation of the scheme whereby the state will help people out with their mortgage if they are unemployed.

I’m also delighted with the improvements announced to the Warm Front scheme, which I’ve supported for some time. This is the scheme which pays for homes to make themselves energy efficient, reducing the long-term costs of heating – something absolutely vital so we don’t have repeats of the Tory years of shockingly high numbers of winter deaths among the old and poor.

Yet the cost for these measures is not falling where it should, the limited ‘bonus’ levy notwithstanding, it is falling instead on the shoulders of the several million people who keep public services moving. Thus, state contributions for the pensions of health workers, teachers, local government workers and so on are to be capped, which will raise £1bn according to treasury estimates. Or the 1% cap on wage rises for the public sector fron 2011, while inflation is set to rise by 3% early next year and who knows what beyond that. This is a real-terms pay cut.

Similarly one of the most regressive taxes, VAT, is still going to return to 17.5%. Those people who do have to pay NI contributions will have the amount they pay increased. Regressive taxes such as the 50p duty on landlines are to be levied in order to pay for the government’s Digital Britain plans. As for the few moves there have been towards heavier taxes on corporations (e.g. a 10% tax on income UK-based patents) I can’t decide whether they’re window dressing or are designed to drive high-end research and development out of British universities.

Meanwhile, a whopping £2.5bn is being set aside for the war against Afghanistan, and the armed forces have been exempted from the 1% cap on public sector wages.

There are other measures announced as headline news which contradict what the last budget said. For example, the promise of training to anyone unemployed for six months (down from a year), the 10,000 young people from ‘poor’ backgrounds who will have internships paid for, and the Making Work Pay tax credit all seem to contradict the previous statement that the government was going to slash the youth training budget by around £300 million. If that policy has been reversed, good; but we know this government is adept at announcing one thing to cover other things.

The budget is certainly not a return to ‘old’ Labour. It is the very least this Labour government could have escaped with, without utterly dooming themselves even in their core areas. It betrays, with the piffling Strategic Investment Fund, the same old ‘hands-off’ approach to state intervention in the economy. It dumps a lot of responsibility for the recovery on to people who don’t deserve it. If there are positive measures, we should acknowledge them, but this is no season change in Labour – and still the wrong people are paying for capitalist recovery.

The very best we can say is that the Tories, and that twit George Osborne, have shown themselves to be much worse.

NB: This is an early view of the PBR – more will be forthcoming as I discover more about it.