The Futility Monster

He'll pointlessly derive more enjoyment out of your resources than you

We’re All In This Together… Unless You’re A Business

Posted by The Futility Monster on June 23, 2010 @ 09:31

Aren't they a happy lot?

We’ve had many pro-business budgets in the past, but this one truly went out of its way to suck it up to them. After all, when was the last time you heard the CBI gush with such force about a government:

The Chancellor has achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer-term

Oh, yes, George! And all this before anything has actually changed yet.

It’s simple. There isn’t a single thing in the Budget that would have any negative impact on the business community. What’s that about VAT, you say? But most businesses, certainly the ones that employ people, claim back all input VAT anyway. And giving them till next January to plan for it eases the burden even further.

It’s those businesses that are more than one-man bands that are going to revel most in the plan to cut small companies’ corporation tax to 20%. And those medium and bigger businesses will also benefit from the year on year falls in corporation tax.

Then there is the changes to NI, which included a minor change to the thresholds, a reversing of Labour’s planned NI rise on employers, and an incentive scheme to encourage businesses to employ people outside the South East and London by reducing employers’ NI to zero on the first ten employees.

Meanwhile, the Capital Gains Tax rise on those who enjoy these kind of things was much less than it should have been, and George Osborne greatly improved an allowance for “entrepreneurs”, now allowing them to dispose of businesses at a very generous CGT rate of 10% below £5m.

Yes, banks are being hit… but even they didn’t seem too bothered. Very small ones will be exempted, and to them it may be a small price worth paying for the fact that they wouldn’t be in existence today but for the government. Furthermore, many of them are likely to play ball, keeping their powder dry for the bigger battle regarding breaking them up into smaller entities.

In other words, the totality of this package is the coalition saying to the private sector: we’ve done our bit, now get us out of this mess.

The question really is whether private sector growth is going to come roaring back to such an extent that it will make up for the withdrawal of 25% of the budget in all departments bar health and international development. It is also whether those cuts, which will affect public sector jobs, public sector wages and many private sector contracted-out jobs which rely on the public sector, will affect people’s spending and consumption. Coupled with the VAT rise, it simply has to.

George Osborne’s gamble appears to be that the public and private sector are in a zero-sum game. That’s a big enough risk on its own, without even considering the fact that the private sector is really not ready, willing or even able to prop up this stagnant economy.

Hold onto your hats…


6 Responses to “We’re All In This Together… Unless You’re A Business”

  1. Neil Craig said

    Cutting corporation tax to 24%, at a rate of 1% a year, not to 20%. Wish it was 20% since Ireland’s cut of CT to 12.5%, together with cutting back government regulation, was the driver of 20 years of 7% annual growth.

    The productive economy is entirely in the private sector – tha state economy (currently about 53% of the total) having a strong negative economic effect. If you want a growing economy, as all liberals acknowledge, you must encourage those who create it.

  2. Neil Craig said

    The vast majority of CT will be paid at the 24% rate so it is the one that matters.

    There are parts of the state sector that have some secondary economic productivity, much which has non-economic social benefits & even a bit like the Post Office which have primary productivity but the fact is that taken overall the state sector is not only non-productive economically but very heavily destructive. I have also written on this, even using arithmetic rather than assertion. It would be amusing, if it were not tragic, how much the parasites cost society.

    • Yes Neil, but you’re on the right, and so implacably opposed to bits of regulation that I think are important to ensure the market doesn’t trample all over the individual. Things may well be cheaper under such a system, but good luck to the large number of people who would suffer as a consequence.

  3. Neil Craig said

    I’m glad you acknowledge that this state regulation is indeed impoverishing everybody. By definition any individual gain is less than the net loss to society. If there are enough such then almost everybody loses since while they may gain on 1 piece of state redistribution they will lose on the others. If personal income could average 4 times higher with economic freedom it must be clear we are all in that all losers now situation.

    So your priority is very far from wanting us to be “all in it together2 to fix the economy.

    Of course a society in which the state controls everything & decides who to redistribute to is the antithesis of liberal. Since the economic freedom I support leads to the greatest wealth of the greatest number you could also say that those opposing it also represent the antithesis of socialism. Indeed the only entity coming out ahead is the ever expanding state itself.

    I dispute that I am on the “right” or indeed that it is a meaningful term today. By that definition I am economically well to the “right” of Cameron but in my objection to war crimes & organlegging very far indeed to the “left” of any member of your party. However if you check your history you will find that the “right” in the French Assembly where the term originates, were the statists & the “left” the supporters of economic & social freedom (from which the term liberal derives).

    I’m not sure how dissecting Serbs while alive to steal their body organs is compatible with not trampling on the rights of the individual though.

  4. Neil Craig said

    I must admit I was wrong to think the LDs had insisted on some cuts. This from Dan Hannan’s site

    “The Liberal Democrats wanted 100 per cent spending cuts and 0 per cent tax rises. While the Lib Dem position was plainly preferable, coalitions involve compromises”

    In which case those leading the party were absolutely right even if the official position is that wanting to improve the economy by cutting taxes is “illiberal”, “incompatible with party membership” & “to right wing” to discuss.

    I wonder how many of the party faithful are aware of the about face?

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