Saturday, November 29, 2008

Labour's VAT Cut didn't work

As predicted, the public didn't buy the governments mortgaging of our childrens' futures in order to cling onto power. The latest poll with fieldwork done after the PBR has the Conservative lead increasing to 15 points.

I wish the recession would end tomorrow, but the sad fact is that it won't. That being the case, what will the government's poll numbers look like as the state of the economy takes its inevitable toll on individual British families? Politically, the PBR narrative had to stick, and it didn't.

Still, there's always the police ready to arrest Labour's opponents.

Slow Slide to Fascism

I have always held off on some of the more vitriolic styles of criticism of the Labour government. My view has always been that these are people who believe in basic British democratic values and that I disagree with them on many matters of public policy there was always that basic bedrock of agreement on the kind of country we are and should be. Epithets such as ZaNuLabour always seemed to me to be overblown and to miss the point that honourable men and women can disagree about matters of great importance while still agreeing on the principles within which the discussion is held.

It seems that I was wrong.

The arrest of a Conservative Front-bench spokesman by 9 anti-terror police for no crime other than being in receipt of leaked information from the Home Office is nothing short of the use of the official power of the Executive to suppress political dissent. Weasel words from the Home Secretary and the Prime Minister about not being aware of the arrest are denials of knowledge of only of the specifics of the police operation. They have not denied instigating the investigation or even authorising the arrest of an opposition MP, and if their carefully chosen words do not rule that out then there is a reason. There is no way on God's green earth that the Metropolitain Police would have acted in the way that they did unless they had discussed and agreed their approach at the highest level. If they hadn't then the Home Secretary would have been calling for their heads right now. She isn't, so therefore she is implicated.

Labour have brought in three times more criminal law then the comparible period of Conservative government. Much of it is under the banner of anti-terrorism legislation. Yet it is an open secret in the legal community that government departments have used such legilsation as a vehicle to put things onto the statute book that would otherwise stand no change of becoming law. A high-priced city lawyer who has worked for the government put that to me just the other day. This is why somone heckling at Labour party conference can be ejected under anti-terror laws. This is why local councils can conduct surveillance operations against litter-droppers under anti-terror laws. This is why an Member of Parliament can be arrested and held for hours and all of their records confiscated under anti-terror laws. Except that in none of these cases was there a terrorist, or any connection to terrorists.

There will be an accounting for this; a political price and maybe a personal price for many of the principal actors as the affair unravels. The government's actions have been condemned from Left to Right. No newspaper has supported Labour repression, and even broadcast journalists are finding it difficult to stay neutral. The Labour government is in a place where the only support it has on this issue are unthinking partisans. Many of their own members, judging from the chat on LabourHome, are recoiling in horror. Labour's poll numbers are going to be hit, and coming after the failure of the PBR in political terms Brown's bounce is well and truly over. So, they have a choice, the same choice faced by Robert Mugabe when his political grip began to weaken, democracy or repression. Do they step away from the road to the police state or do they pick up the pace?

By the way, if you think that I am giving into hyperbolae here then remember that the last time the executive cracked down on an oppositon MP in this sort of way was hundreds of years ago, and it started a war.

Sunday, November 23, 2008

Labour's VAT cut won't work

It is rumoured that Labour will be proposing a 2.5% VAT cut tomorrow. This will no doubt lead to nice soundbites, but will it work to help the economy? Well, the general problem with fiscal stimulus, as with any measures that affect a system the size and complexity of the UK economy, is the lag between action and effect. It is known, for example, that interest rate changes take at least 3 months before they have any discernible effect, and up to 18 months to have their full effect on the economy. So, we are actually still living with the Bank of England's policy as it was over the last two years, and their recent handbrake turn is something for mid-2009, not today. It is similar with changes to taxation as they take time to work through people's incomes and affect their confidence and economic decision-making. So, a key factor in choosing taxation changes to stave off or ameliorate recession is how quickly the change inserts itself into the decision cycle. Reducing VAT is a bad choice simply because it does not immediately connect with the consumer. Prices may come down, but not in any uniform and easily discernible way, and it will be some time before people feel that they have any more money in their pockets to spend, which is the point. Reducing VAT also does nothing to affect employee retention, which was the Conservative proposal.

What the government should have done is reduce the tax burden on small business, remember that a rise in Corporation Tax for small business is still planned though there are rumours that at least may be postponed. What they really should have done is reduce income tax, because that is an unequivocal rise in personal income that the consumer would immediately notice, and so the lag effect would be reduced.

Tax cuts should have been matched by savings of course, but, hey, this is a Labour government.

New Labour Bombshell

This sums it up very nicely: