Monday, December 05, 2005

Pre-Budget Report

As always, Gordo subjected us to a blizzard of numbers this afternoon. The idea- familar to us all by now- is that we glaze over and just grasp at his soundbites. Or maybe one of his easy headline grabbing "initiatives" like today's shared equity scheme for housing. The innumerate anti-capitalists at the BBC are particularly keen on such red herrings.

But let's actually look at those numbers. To start with, despite all his chat about stability etc, he's actually increased spending yet again in all years. Unsurprising, given the handouts.

What is surprising is that the increases aren't greater- less than a billion in each of the next two years. The reason of course, is that he's fiddled and fudged the numbers underlying the headline projections so they are now much closer to the wind. God knows what's happening down in the bowels, but what we can see is that he's raided the contingency reserve (about £1bn pa), he's assumed lower interest rates on government debt (about half a bill pa), and he's Enronned social security spending.

What's that last bit? Hmm.. all he says is "the upward effect on spending of higher unemployment and RPI assumptions has been more than offset by revised estimated profiles of benefit claim figures." Which is pretty well what Enron said.

Plus, he's also now making some pretty draconian assumptions about future pay deals in health and education, which he may or may not be able to deliver.

So the spending projections now incorporate even more wishful thinking than they did last time.

As for tax revenues, he did announce increases today in North Sea tax and various other stealth measures amounting to a net £3 bn pa. But despite that, projected tax revenues are down by £4 bn pa over the next couple of years, partly because of the economic slowdown, and partly because he was just too optimistic on revenues in March.

But once again, by the time of the next election in 2009-10, he reckons revenue will have miraculously recovered back to his previous forecast. We've blogged about this before, and it just ain't going to happen.

What Brown's spending plans are still saying is that unless something turns up, we can all expect plenty more tax increases before the next election.

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