Gordon Clown .Com

Gordon Brown will clock up a century later this week in his budget speech as he announces his 100th tax increase since coming to office.  Gordon has already put up taxes 99 times as chancellor to pay for his public sector spending splurge, but more is likely to be on the way on Wednesday.

George Osborne, the shadow chancellor, said that on past form there would be “stealth tax rise number 100″ in the Budget, even though Britain already had the highest tax burden in its history.

“These 99 stealth tax rises have made our economy less competitive and hit family incomes hard,” he said.

“They are part of the reason people are feeling the pinch as our real living standards fall. Even more depressing is that so many people look at the state of our public services and ask: where has all my money gone?'’

The tax burden in britain is now 42.7% of GDP, up from 39.5% 10 years ago, one of the biggest increases in the western world, and yet our standard of living has barely improved.  The next big question is: can Gordon do as much damage from number 10 as he has done in number 11?

It appears that when Gordon vacates number 11 later this year, he will leave behind a legacy of tax-and-spend that sees the Government’s spending as the largest share of national income for nearly a quarter of a century. But it’s all alright for him, as when the house of cards collapses he can simply blame it on whichever sucker steps up to take his place. It seems as though Brown is planning to use Jack Straw, one of the biggest suckers around, as his sacrificial lamb. This Sunday’s Telgraph says:

Gordon Brown’s 10th - and final - budget is on March 21. In the run-up to his swansong, it is increasingly clear that the Chancellor has driven Britain onto the fiscal rocks.

New official figures suggest that this will be the seventh successive budget in which Brown is forced to revise his borrowing figures upwards.

Between April 2006 and January 2007, the central government current budget deficit - tax revenues minus day-to-day spending - was £11.6bn. That’s almost £1bn more than the comparable figure last year, despite Brown’s insistence that the deficit would shrink.

These numbers add to a growing sense that the Chancellor has spent too much taxpayers’ money, without securing a compensating improvement in public services.

Richard Jeffrey, the economist, calculates that government spending under Brown has risen by 98 per cent in cash terms, while the economy overall has grown by 69 per cent. That’s why government spending last year claimed its biggest share of national income since 1983.

The International Monetary Fund, the world’s most important financial watchdog, is now raising concerns about Brown’s “credibility”.

In its latest report on the British economy, published last week, the IMF said the Chancellor faced a “critical test” and called on him to rein in public spending after years of largesse.

Brown’s actions have led to “a sharp deterioration in the fiscal balance and rising net public debt”, said the IMF, while predicting that government borrowing would spiral beyond the Treasury’s forecasts.

And next week business leaders too will indicate how worried they are that this high-spending chancellor is undermining Britain’s ability to compete.

“We are at a fork in the road,” says Miles Templeman, the director-general of the Institute of Directors, in the IoD’s forthcoming Budget submission.

“There is nothing inevitable about a rising burden of taxation - since 1993 public spending in Spain has fallen by almost 11 per cent,” he says. “Perhaps the UK needs some Spanish lessons, as the current size of our state is not globally competitive.”

The IoD document highlights how “fiscally exposed” we are in the event of a sharp downturn. “There is no buffer in the public finances to absorb the impact of such an event,” says Templeman.

That’s true - even Brown’s repeatedly rigged “golden rule” shows a surplus of just 0.1 per cent of national income.

The Chancellor knows the fiscal crunch is coming. That is why he has deferred the tough decisions until the second Comprehensive Spending Review (which has itself been postponed from the summer to the autumn).

By then, of course, he will be ensconced in No 10. Brown can then blame the fallout on his successor as chancellor - his new friend, Jack Straw.

When the IMF starts sending out the warning signals, you know things are getting serious.

The media over the past few years, in reporting inflation and rumours about it’s true levels, has worked on the general principle that rises in the prices of essential commodities are a bad thing, and that the government and Gordon Brown are cleverly trying to hide them from us by sleight of hand.  There is one basic necessity commodity, however, that has always escaped this consensus, that commodity of course is housing.  As evidenced by various sensationalist headlines, like the one seen on Friday in the Daily Express shown here, it seems that  continuing inflation in the price of homes is news to be “toasted” and “celebrated” by Britons, and this can only be a good thing for the country.  It certainly helps Gordon appear to be doing a bang up job anyway.  Or does it?

A similar headline appeared in the Telegraph on Friday stating that rises in house prices are now outstripping earned income from regular jobs for many people.  Why work hard at your 9-5 when you are “earning” more money every day due to the inflated value of your home?  However it would seem from some of the comments left by Telegraph readers on the online edition of the newspaper, that sentiment amongst the great British public is not as clear cut as that.  Here are some edited highlights:

I’m afraid Gorden Brown is ‘guilty’ in making it appear to lucky home owners that they are quids in, when actually rising house prices makes everyone poorer (unless you sell up and move somewhere much cheaper). The government is raking it in with stamp duty and death duty and the more you have to borrow the less disposable income you have.I live in London -I know no one under 40 who owns their own home borrowing for the average home here requires 8 - 10 times the average income.  Society will eventually see mass homelessness of whole families.  Listen to Nick R, Elizabeth his comments say it all.  I am praying for a crash for the sake of my kids and my elderly mum who is worried sick about the amount of tax we will have to pay on her over inflated valued home when she dies.  A house is a home, a basic need not an investment.  When there are NO first time buyers left and that is almost so now in London, will we feel so well governed by the chancellor I doubt it!

That from Rose Konstam.  And this, from Helena Holtom:

The boom in house prices doesn’t “create wealth which is spread across a broad cross-section of our society”. It reduces average disposable income by massively increasing the proportion of income that people spend on mortgages. The fact that an individual’s home is worth more doesn’t improve their living standards, and the equity can only be released if they don’t want to own a house any more. Yes, ‘ordinary’ people can now become property investors through buy-to-let, but every person making money out of a second property has reduced supply, and hence pushed up prices, for the ‘have-nots’, ie first-time buyers.

And from Toby Barnett:

I can’t believe someone thinks Gordon Brown should be congratulated. He is certainly responsible for the ridiculous house prices - huge stamp duty costs mean people only move when they absolutely have to, cutting supply and fuelling price rises - and he should never have allowed the multiples of income that lenders are offering. What could possibly be more iinflationary than that?

I live in a dull London suburb where prices for a 30s semi are now topping £500,000. It can only be a matter of time before essential workers are forced out of the capital. Armageddon awaits.

This from Urel:

Greed is the driver of the market along with the fear of missing out on the gravy train by first time buyers,and the estate agents & lenders gorging themselves on easy money,from the naive speculators.  If any other consumer goods rose at the rate of houses there would be an out cry.  Greed has a blinding effect.

This from Matt O’Donnell:

Gordon Brown has allowed a whole generation of people to be effectively priced-out of ever owning their own home. Luckily, the massive resentment this is causing, and will continue to cause, will result in him being voted out of government at the next available opportunity. Good.

And finally that of John Sanderson:

What a revolting cesspit confronts the avergage Briton. Like some obese child fed on a diet of greasy chips and cheap icecream Gordon Brown has shovelled his cheap credit at a lemming like nation for the past ten years.

He has bought our votes with our own money - or own debt I should say (or our childrens debt). Shame on us for being such mugs.

And faster and faster the train goes. Past the lessons from Lawsons boom, past the lesson from the japanese economy, past the crash in Sydney house prices, past the crash in American House prices and only just past the USA ’sub-prime’ loans catching up with the British banks!

What is prime about a loan on 5 times earnings for a house on the edge of manchester we may well ask ourselves?

They see all this and yet still keep stoking the fire. We are being led by reckless madmen and jelly like civil servants.

Before they slip away as the inevitable sickening thud happens could somebody please electronically tag them. Surely they must be held to account for the misery they are going to cause - its just so wrong what they have been allowed to do.

They really have no excuses - we have only just been there before re 1992.

Utterly disgusted, thats me.

Not everyone is a delighted beneficiary of Brown’s booming Britain, it would seem.

Newspapers are reporting today that the International Monetary Fund has sent a severe warning to the “Iron Chancellor”, that taxation is at breaking point and public spending must be slashed to avoid disaster for Britain’s public finances. The news will come as a blow to tax-and-spend Gordon Brown, who has in the past 10 years shown his love for all things civil service by pumping cash into the public sector.

The IMF also warned that there is a “significant chance” of a fall in house prices, an event that - if it were to happen - would surely spell disaster for an economy built on debt, perpetual house price inflation, and consumer spending funded by second mortgages. The IMF also urged the Bank of England that interest rates must be upped to 5.5%, and soon, to avoid sending the economy into an inflationary spiral.

The IMF calculated the tax burden, based on the ratio of taxation to Gross Domestic Product, is now at 38%, a level last seen in the mid 1980s. Their calculation, of course, does not take account of the fact that official government statistics consistently underestimate the level of inflation, although this is not so much taxation as institutionalised systematic confiscation of an individual’s wealth.

The Telegraph gives this news front page billing, as shown above, not a very pleasing sight for Gordon. The summary below the headline even includes the dreaded bullet point: “Property prices headed for a sharp fall”, doubtless striking fear into many of the great British public. What a mess Gordon has got us into. The treasury, of course, chose to focus on past performance, stating that “the economy has seen continuing economic growth, for a record 58 consecutive quarters”, failing to mention the obvious flaw in that argument, that Britain has been the only major economy without a recession in that time, thanks to an ever inflating debt bubble that is inevitably set to burst. The IMF had this to say about the housing market:

“In the short term, forward-looking indicators of housing market activity suggest that house price growth is likely to remain elevated.

“In light of estimates that house prices are already overvalued, this would increase the subsequent risk of an abrupt downward adjustment.”

In other bad news for Brown, the Times led with the frontpage headline “Record Tory poll lead, and it’s likely to grow”. Seems that the polls are continuing to show that Labour are well behind the Tories, and that were Brown to replace Blair, the Tory lead would be extended even further. Gordon had better enjoy the 3 or so years he is likely to get as Prime Minister, because it doesn’t look like it’s going to last much longer than that…

A couple of nasties for Gordon have hit the front pages this week. The Times and the Telegraph brought us these headlines:

First of all, the Daily Telegraph gave us the frontpage seen on the right here, with the headline Brown losing his touch on the economy, say voters. The Telegraph/YouGov poll is the second bad result in two days for Gordon, following on from the Guardian/ICM poll the day before that said he is currently completely failing to convince the country that he would make a better prime minister than David Cameron. The Telegraph gave these results in their article, also highlighting some of the problems that Gordon has run into lately:

Gordon Brown is losing his reputation for economic competence and failing to convince voters he would make a better prime minister than David Cameron, a Daily Telegraph-YouGov poll shows today.

The Conservatives are now seen as more likely than Labour to run the economy well — the most significant turnaround in the public’s view of the Tories since they were swept from power by New Labour a decade ago.

The poll is a big blow for Mr Brown on the day that:

• Michael Meacher, the veteran Left-winger, threw his hat into the ring for the leadership race;

• one of Britain’s leading businessmen said the delayed handover of power at the head of Labour was slowing efforts to cut costs and improve efficiency in the public sector;

• he announced his 11th, and almost certainly final, Budget will be delivered on Wednesday March 21.

When voters were asked which party was likely to run the economy well, 30 per cent said the Conservatives and 27 per cent Labour.

At the 2005 election, Labour had a commanding 22-point lead, with 49 per cent regarding them as economically competent compared to 27 per cent for the Tories.

While the regular survey of voting intentions gives the Conservatives a five-point lead over Labour, this jumps to nine points when voters are asked whether they would prefer a Cameron or a Brown-led government.

This last result is particularly damaging for Gordon, showing that he is even less popular than Blair even now, while Blair is being accused of dodgy dealings in the cash for honours scandal, plus all the sour tastes associated with Iraq and Afghanistan.

The Times also had this to offer on its Saturday front page: Consumers hit by credit squeeze as debt spirals. While not directly mentioning Brown, the Times article shows the ridiculousness of the situation that Gordon and his Miracle Economy have left the country in, with debt soaring and consequently bad debt costs for banks hitting unprecedented levels. Of course the next phase of the debt bubble is likely to be somewhat more painful than previous phases, as the inevitable credit crunch threatens to bring Gordon’s house of cards collapsing around his ears sooner rather than later.

Personal insolvency levels rocketed to a record 107,000 cases last year. The Financial Services Authority said last month that Britain’s huge personal debt levels — now more than £1.3 trillion including mortgages — were one of the biggest risks to financial stability.

It added that, although most people were managing, a rise in unemployment or interest rates could tip many households into real difficulty.

Up to 2 million households are estimated to be “permanently indebted” — able to meet minimum interest payments but with no real prospect of ever paying off their debts. Total unsecured borrowing by households in Britain has doubled to £212 billion in the past nine years.

It won’t be much fun when the music stops.

This week the Circus is in town and the new Ringmaster opened proceedings today with a predictable speech, going down like meat in a butcher’s shop. Familiar promises on issues from education to the economy were trotted out, to an audiance of virtually unanimous favour. In a familiar mixture of magic, illusion and religion, Gordon set out a safe-bet plan which demonstrated that very little is likely to change under his leadership, and that the mistakes of the past have not been learned from and are highly liable to be repeated, let alone corrected. Fiddled figures on unemployment, recently pulled apart in the press, were bare facedly reiterated for the umpteenth time.

It has not been the best of times recently for Gordon, since the happy events of a few weeks ago that saw his predecessor virtually decapitated by his own party. Today’s speech may have gone some way to repairing the damage of press comments of the past few days, but how permanent the patching-up exercise will prove is yet to be seen. The press swipes continued this weekend with particularly savage poll ratings reported in the Scotsman:

A Populus poll for the BBC yesterday showed that 60 per cent of people think Mr Brown has failed to make himself appear more “likeable, charismatic and in touch with ordinary people” over the course of the last year, compared to 33 per cent who said his image had improved.

Even more interestingly, the Observer carried the results of a poll in which voters have demonstrated that they are apparently so unhappy with the succession of Gordon Brown over Tony Blair, that they wish for an instant general election to be conducted to allow them to demonstrate their mistrust and dislike of Brown and his party:

A new opinion poll reveals 56 per cent of the public want the chance to have their say on the new leader of the Labour party, whoever it is, within the first six months. Voters are not content to leave the question of the next Prime Minister to the party and want him or her to earn the right to govern. The GFK/NOP poll found huge support for a genuine leadership battle rather than a coronation, with 81 per cent supporting a contest.

In an article that spans no less than seven pages in its online form, the Telegraph rips Gordon’s past record to shreds and reveals what switched-on observers will already no doubt be aware of, the fact that Gordon’s management of Britain’s finances has made the situations of most people worse overall:

In 1997, this “tax burden” stood at 37.3 per cent of national income (GDP). It has now reached 39.7 per cent and, on the Treasury’s own figures, will top 41 per cent in 2010.

In 2002, Brown unveiled a £8bn increase in National Insurance – a tax rise in all but name. He has also made an art form of “fiscal drag” – raising thresholds only in line with prices, which go up slower than earnings, so dragging more and more people into higher tax brackets.

This “stealth tax” technique has, in particular, hit the middle classes. There are now more than 4m top-rate taxpayers in the UK – up from 2.1m in 1997. So, increasing numbers of not-all-that-rich people are paying tax at 40 per cent.

Lastly, in a welcome diversion to the collapsing credibility surrounding Brown, the Independant runs a brief glimpse into the mind of Ed Balls, Gordon’s economic advisor and potential candidate to succeed him as Chancellor. Sadly though, as is often the case with these interviews, the questions posed by the general public are far more telling than the non-answers offered by the interviewee.

Recent political events make it look very likely that Gordon will get his greatest wish within the next 12 months and accede to the throne of Number 10 Downing Street. Like most new Prime Ministers before him, Gordon will doubtless be expecting the privilege of a honeymoon period, in which the press lays off their customary day-by-day attacks on the incumbent PM for at least a few months while he gets his feet under the desk.

Evidence is steadily mounting, however, that this may not be the case for Gordon. In fact, now that it appears that the toppling of Blair is fully complete, the press seem to have already declared open season on our dear chancellor, racing to get the early punches in to soften him up. This recent Observer article, for example, can be summed up with the following verdicts on Gordon’s performance:

Tax and benefits: Good if you are on a low income or have children. Bad if you are on a high income or are childless.

Homes and Inheritance: Bad for homeowners, who are not necessarily used to buying tax advice, but whose property values are dragging them into the IHT net.

Pensions: Generally disastrous.

Meanwhile the chances of Gordon reuniting a divided Labour party, and sweeping under the carpet his record as chancellor are looking slim. The following are the latest Betfair odds for Gordon to be worried about:

Betfair Odds for Gordon as Next Labour Leader: 1.45 (slightly lengthened from 1.42).
Betfair Odds for Next General Election: Labour 2.22 (lengthened from 2.1), Conservatives 1.83 (shortened from 1.93).

Against all odds, the various corners of the press continue to come out of the woodwork with various comments and views on the 0.25% rate rise. Surely this is old news by now? A week after his deputy suggested that the bank’s rate rises could continue further than expected, and are designed to shock the markets, David Smith (economics editor of the Murdoch-owned Times newspaper) has come out with soothing comforting talk that rates will never go over 5%. Incidentally this is the same David Smith who has been predicting for the past year that the next move in interest rates will definitely definitely be down, so it’s probably best to take his predictions of a 5% absolute cap with a pinch of salt. Elsewhere, the Independent takes a more precautionary and sensible approach, warning borrowers that the August rise will probably not be the last, given the recent rumblings from Mervyn and Co. Interestingly they point out that a 0.25% rise is not the only option available to the Bank, something many commentators appear to have forgotten recently.

Roger Bootle in the Telegraph suggests that the US economy is in for a tough 2007, due to the US housing market (the “leading support for consumer spending”) hitting the rocks, but of course the same situation replicated over here would not apply to Britain in the same way would it? Apparently a couple more interest rate rises could see Britain following the US where housing is concerned, but I’m sure Gordon must have thought of this.

The Sunday Herald add an interesting wrinkle to the whole interest rates debate by correctly pointing out that around half of consumer and business debt is actually lent out on a fixed-rate deal basis at the moment. Presumably this means that the Bank will need to raise IR even higher before it starts to have the desired effect? The Telegraph asks numerous “city experts” to comment on whether interest rates have peaked at 4.75% and comes to the conclusion that they almost definitely have not.
Perhaps most surprisingly of all, the BBC have reported today that even though CPI has just fallen by 0.1 whole percent, to 2.4%, this may not save us from more IR rises. Shocking really, as the BBC would usually use such news to persuade us all into thinking that rates must be about to go down again!

On a separate issue, Channel 4’s Dispatches programme have shown themselves to once again be the true masters of stating the bleeding obvious by revealing that apparently the various Private Finance Initiative projects that have been dreamt up by Brown and Blair since 1997 have all been huge rip-offs and terrible value for the taxpayer. Given that the Government effectively has the ability to borrow as much money as it likes at the lowest interest rates known to man, it seems flabbergasting that so much of the running of the country has been handed over to the private sector, at many many times the overall cost as in the pre PFI days. Brown’s famous promise that he would “only borrow to invest over the economic cycle”, despite a couple of tweaks by redefining the length of said cycle, redefining the definition of “invest” and the definition of “borrow”, would still be met even if the PFI deals had been done entirely within the public sector, as surely these works would have come under the “invest” column. Then again, borrowing all the extra money may have rung alarm bells in some areas, and the Government already obviously need plenty of it to pay for all their wars etc. Once Brown and Blair dream up the idea of using PFI to pay for wars, then maybe they will really be onto something.

On a lighter note, aside from all the doom and gloom of impending rate rises that is floating around at the moment, the Telegraph gives us a fascinating glimpse into the psyche and inner frustrations of the Iron Chancellor by revealing that he has decorated the treasury with, amongst other paintings, Graham Sutherland’s “Expulsion and Killing of an Enemy”. Something for Tony to ponder, perhaps?

Seems like the popular pastime of piss-taking isn’t restricted to blogs and forums any longer as far as Gordon Brown is concerned. Mark Gilbert of Bloomberg has an amusing parody of what the possible letter from Mervyn King to Gordon concerning spiralling inflation might look like. Here are a few edited highlights:

Frankly, it’s your own fault. If you’d let ME pick all of the economists for the Monetary Policy Committee, the external members wouldn’t have been able to gang up on us in 2005 and get their way with that ridiculous interest-rate cut. Heaven knows how they persuaded Charlie Bean to agree; we’re still making him sit alone in the canteen as punishment.

“Merv” later moves onto more fighting talk:

I have to warn you though, Gordon, there’s more to come from me. I’m looking at a 5 percent interest rate by the end of the year. The banks won’t like it. Barclays Bank Plc raised its bad- debt provisions by 50 percent in the first half of the year, and the others all saw problems in their loan books. Hopefully they’ll learn to be a bit more prudent in future.

But alas the order of seniority is affirmed at the end, in what is probably likely to prove the most authentic paragraph:

Finally, might I take this opportunity to broach the subject of my salary? As you know, the tradition for several years now has been for the governor’s pay to increase by 2.5 percent per year. Now that inflation has exceeded 3 percent, I wonder if we might review this arrangement.

Can Merv win the war? Next week we have the delights of the MPC meeting minutes to look forward to, an administrative anomaly which still only serves to confuse people, and spread the “shock” out over an even longer period.