The pound in your pocket is not worth what it was. And sterling will fall even harder if UK finance minister Alistair Darling follows Ireland by raising taxes in the midst of a severe slowdown.
Gor Blimey’s poodle is planning two new bands at GBP 100k and 140k.
As the UK Budget approaches, it's clear the government is desperate to screw the taxpayer, but lacks the courage. "James Brown, senior research economist at the IFS, said: "Alistair Darling's income tax increases for the rich will significantly complicate the tax system, and may well raise little revenue.
"A simpler and smaller increase in tax rates across a broader range of high-income taxpayers would raise the money the Treasury is looking for more efficiently, especially if combined with measures to make income tax harder to avoid."
We’re talking about a rich tax that will raise £3.2 Bln at the Treasury’s most optimistic guess. It’s a drop in the ocean. The previously estimated deficit of £118bn for 2009-10 will be closer to £150bn.
So like the Irish, Darling faces the choice of cutting spending dramatically, or raising tax revenue today at the cost of future growth.
Hmm, what would these politicians opt for? Elections are due by the middle of next year.
Form would suggest:
No significant assault on the public sector (voters)
No big tax rises now (voters)
Perhaps the announcement now of something that kicks in after the election, plus a few stealth taxes if Darling is very brave.
A headline-grabbing soak-the-rich tax that, more importantly, fails to address the government’s revenue problems.
This, it turns out, is the view promoted more sophistry at the FT:
"This wait-and-see approach, Mr Darling is likely to argue, will give a future government more time to restore prudence to the public finances without killing any economic recovery. The Treasury believes that economic uncertainty is so great at the moment that it makes no sense to set a detailed strategy for deficit reduction when any such plans might need to be ripped up in a month’s time."
And these problems are getting much, much worse.
"Jonathan Loynes, of Capital Economics, thinks the economy will shrink by 4% this year - the weakest performance since 1945 - and will continue to contract, albeit more slowly, next year. Borrowing will peak at £230bn (around 15% of GDP)."
Don’t listen to the green shoots talk from vested interests, politicians and media flunkeys.
The big issue, that is barely discussed by MPs, and was not discussed the G20 summit in London – is the failing banks.
The solvency of UK or Irish banks is no better than that of US banks – and the biggest are effectively insolvent.