The politics of the budget

I feel entirely unqualified to argue with a man who includes a book about econometrics in a list headed "books that mean a lot to me" but with all due respect to Chris Dillow, he is completely wrong to suggest that 'the most important budget number' is $12.5 trillion.

He's talking about global savings and makes the point that government borrowing does not push up long-term interest rates in the way it did in the past because of the globalised nature of financial markets. I'm not disagreeing with this. Allow me to qualify: he is wrong politically. No-one will remember the figure he cites. Hardly anyone is aware of it now. I'm thinking there's only one figure people will remember and that's the new top rate of income tax now set at 50%.

That the Guardianistas are enthusiastic about this, and the ranting Tories are aghast, should ring alarm bells - the ones that tell us that we're into the politics of pure symbolism here. It is the sort of politics we also see whenever the value of the currency is discussed - as if this were a symbol of national virility, rather than the more mundane business of it being a price.

What I mean is this: numerous media outlets that I assume you've read already are suggesting that this is a return to 'class war'. Ian Dale, for example, was by his own admission 'fizzing'. What made him 'fizz', apparently, was this gratuitous display of class envy as evident in this 50% tax band. How he felt under the first nine years of Thatcherism where hard-pressed entrepreneurs laboured under the oppressive burden of a 60% tax band we are not told.

Then Mandeslon's quote about New Labour being relaxed about people becoming 'filthy rich' is juxta-posed against this new budget - as if a 50% tax band is going to abolish this or something.

You see my point? It's all a bit silly. Guardianistas like Jackie Ashley are going all moist, asking whether the 50p "gamble" will pay off? It's not a gamble and it won't pay off. I appreciate some Labour supporters think this is an opportunity to draw a red line in the sand but my own view is that this would be foolish in the extreme. I would have thought even the stupid party would find challenges based on taxation and spending fairly easy to deflect given the state of the public finances. There's quite a few Tories who are behaving as if nothing has changed - as if their cant about rewards for 'risk-taking' hadn't been thoroughly discredited. I'm not going to take up space on this blog dispensing advice to them.

But the left needs to wake up. Any semi-intelligent scrutiny of fiscal policy is going to show that higher tax does not mean better public services - it's just an inevitable consequence of servicing our enormous public debt. In this context we can only hope that the Tories show themselves to be as ignorant of economic history as they have done already in the past. Not only is this not the 1930s - the evidence that we have already is showing that this contraction is not on a par with the one experienced in the eighties. Yet we have the most serious fiscal deterioration ever seen in peacetime. My concern is that the compact between government and voter will be even more broken down than before, with the electorate - perhaps for a decade or more - seeing absolutely no relationship between levels of taxation and the provision of public services.

What we should do in the short-run, I can't say - save dropping this pathetic idea that the timid and conservative 50% tax band has something to do with socialism. What we should address ourselves to is the fact that the next election is surely lost? Gordon Brown may go down in history as the most hapless Prime Minister in a hundred years. The present economic debacle, while obviously not entirely his fault, is Brown's domestic equivalent of Blair failing to find WMD in Iraq. For him it is a catastrophe that he can't possibly recover from. My thinking is all realistic leftists should concentrate their attention on what to do in a post-New Labour Britain. I'll eschew my default rejection of political prophecy and state that to imagine any other future is pure fantasy.