Reflections on the PBR

If pre-budget reports generate this type of interest then god knows what will happen with next spring's budget. Will set 3 PSHE (year 8) bring it up in lesson; will my most challenging pupils question the government's fiscal stimulus?

Apart from being a rather amusing euphemism, the 'fiscal stimulus' announced by Darling today (no 'Blackadder' jokes please) and the whole PBR are significant on any number of levels.

Of course, we're in the middle of the gravest financial crisis since the end of the Second World War (when Mr. Keynes went to Washington and the country was nearly declared bankrupt). However, that said, the proposals outlined today are very interesting in ideological terms and have ensured that the battle lines are well and truly laid for the next General Election (whenever that may be).

Ideologically the most striking element of the report is the creation of a new 45% tax bracket for those earning over £150,000. For 11 years in power, New Labour has been reluctant to use Old Labour ideas re: the redistribution of wealth. Blair and co. have followed Thatcher's mantra on that one - you work hard, your earn your wage and you deserve to keep it. However, what Darling has done today is introduce some old fashioned socialism - the taxes of the rich will be redistributed to the less well off. This token gesture will do little to alleviate the inequalities of welath that have developed over the past three Labour governments. Politically, however, the Chancellor may have found the golden bullet for victory at the next Election. Old reds will, of course, say that he had hitherto failed to see the wood for the trees...either way the left is winning the argument hands down.

Most analyists agree that today Darling has taken a huge gamble. For the first time in years there is clear blue water between the two major parties. They differ on traditional policies of tax and spend and will present two very different manifestos to the public in 2009/10. The Chancellor will be praying that his prediction for an upturn in the economy (supposedly next year) actually happens, otherwise George Osborne will be sending out the bills.

The Tories have reverted to old fiscal conservative ideas - a major threat to Cameron's compassionate conservative public relations bandwagon (Est. 2005). The trouble is, conservatives can't bring themselves to stomach the projected levels of public debt that Labour plans will have generated by 2010. They have therefore shrunk from standing 'shoulder to shoulder' with the government and Brown now derides them as being perhaps the only major political party in the world which opposes the bail out plan offered by himself and other western governments. The Tories' big problem is that they fail to recognise that it isn't necessarily a disaster to run a deficit-based economy (even if those deficits, admittedly, are projected to reach £100 bn). Yes, long term, this will mean an increase in taxes - however, the Tories fail to see short term problems (that's why they're called the nasty party) - help the poor now, in part by a redistribution of wealth, allow everyone to get rich again and the economy to improve and then pay for it when 'the sun is shining' (with measured tax increases, rather than a 'bombshell' - that's old fashioned scarmongering and playing politics...)

If you think about it - 'social progress' or whatever you want to call it, requires considerable debt. You need to spend more so people will become 'better producers' and economic growth results. If you spend roughly the same amount in as you receive in tax receipts then there is a very clear danger of stagnation. Where's the incentive for growth? This is the very essence of progressive politics.

Was Brown too easy with the cash last year and the year before when the sun was shining? Maybe. That doesn't mean that present difficulties are not being solved in a sensible way.

Hurrah for socialism - back on the agenda!