As a self-confessed Gordon-sceptic this may seem odd, but I am still occasionally able – nay, willing – to defend Gordon’s handling of the economic crisis, and his general record of Chancellor.
My view, for the record, is simply that Gordon – for all that he has done for Labour over the past 25 years – simply isn’t the right leader to take us forward once the recession is over.
This all becomes particularly embarassing when even members of my own family start to put the boot in to the ol’ Gord. I worry sometimes that I’ll beginning to sympathize with the poor man.
Obviously thinking that his poor Labour activist son needed cheering up, poppa VoteRedGoGreen – a Labour man, but no fan of the Gord – sent me this list of Gordon’s “10 greatest financial gaffes” via email today, with the subject line “Another nail in the coffin…”
Cheers Dad. I notice you waited till after Father’s Day before deciding to send this particular piece of political cheer to your first born.
Anyway, feeling in a contrary mood, and being 200 miles away and thus robbed of the opportunity of skulking off to my bedroom and slamming shut the door, I formulated the following list of responses to the 10 “gaffes”.
1. Taxing dividend payments
Pensions aren’t really my strong suit, to be honest, and I’m sure that pops knows a bit more than I do – nevertheless, I’m happy to stand up for Labour’s record for pensioners. Minimum Income Guarantee anyone? Or the Winter Fuel Allowance? Pensioners, especially the poorest, are a lot better off, and pensions are set to be index linked once again.
2. Selling our gold
Duncan has said it far better than I have. Selling the gold was a move to diversify Britain’s reserve stocks, and (as Duncan rightly points out) pales into insignificance when set against Thatcher’s £450bn oil revenue spree in the 1980s.
3. Tripartite financial regulation
I’ve expounded on this myself. The tripartite system was sensible, given that the Bank of England was taking over control of Monetary Policy, and was far more stringent than any previous system. It’s also unarguable that every regulartory system in Europe failed – begging the question, was it possible to construct a regulatory system that would withstand the recession?
4. Tax credits
The Times seems to suggest that the overpayment problem means that tax credits have simply been a complete failure. Nonsense. The OECD says that inequality and poverty have dropped quicker in the UK than in any other country, and tax credits have been a big part of Labour’s determined strategy to make this the case.
5. The £10,000 corporation tax threshold
The Times seems to be complaining that Brown made taxes lower, and then put right his error as soon as it became clear. Curious. The new sliding scale is working well, though. It’s certainly no “smoking gun” on a Brown Chancellorship or Premiership.
6. Abolition of the 10p tax rate
OK, I’ll give you that one. Next!
7. Failing to spot the housing bubble
Well, yeah but no but – what? It’s not that the housing bubble wasn’t spotted that is the problem, it’s that there was precious little the government could actually do about it. Fundamentally, it’s lack of supply that has caused massive inflation in house prices in the past decade, and only huge numbers of new housing units could hope to have even a slight impact.
Of course, I’d support this, but Middle England (Peace Be Upon It) just loves forming groups of Nimby residents to oppose new housing developments – mostly, I suspect, because they think that poor people might live in them. They can use current planning law to impose costly holdups on developments. When the government tries to change planning law, there’s an outcry. Nobody said it was easy, did they?
8. 50 per cent tax rate
This one is based on a quote from one Robert Chote, Director of the Institute for Fiscal Studies and, it would appear, a complete muppet:
“If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it.”
This is Laffer Curve theory at its daftest. Once again, a slam dunk for our favourite blogging leftie economist – empirical evidence strongly suggests that, among OECD countries, all but Sweden have marginal tax rates below the point at which maximum revenue can be collected. There’s also no evidence to speak of that the 50% rate will lose Britain any significant output or business – Denmark’s tax regime is far harder, and yet it is apparently the best country in which to do business.
9. Cutting VAT
They’re really scraping the barrel here. All this item quotes is an unnamed “tax accountant”.
And there’s no actual evidence in the item to back up its assertion that “shopkeepers, not shoppers, felt the benefit”. The retail output figures for the last 6 months saw a considerable increase, AND it’s one of the reasons why Tesco has a 7% supermarket market share in Ireland when it doesn’t have any stores in the Republic – Irish shoppers crossed the border into the North to shop.
It was the only way that a tax cut could be guaranteed to go straight where it needed, into the consumption side of the economy, and as far as it goes, it worked.
10. Public-sector borrowing
UK net borrowing is still a lot lower than in the USA, Japan, France and Germany. Duncan’s not worried, and nor is Chris Dillow. An aggressive pursuit of government budget balance during the recession, as in Ireland, would be disastrous.
So all in, I’m not convinced. Poor old Dad’s going to have to try harder.
Note to Dad: don’t worry, I love you really. And your card really is in the post.