George Osborne’s ‘Emergency Budget’ on June 22nd 2010 quite impressed me at first.  We can earn another £1,000 before paying Income Tax, food and children’s clothes remain exempt from VAT and so are outside the coming hike from 17.5% to 20%, and the state pension will not be cut. The rise in Capital Gains Tax from 18% to 28% will apply only to those who pay Income Tax above the basic rate, i.e. a small minority.

After chewing it over for a few days, I am less and less convinced. The idea is to force the UK economy into a dramatic shift, away from dependence on consumer spending and towards a shiny, high-tech exporting economy on the German model. The unanswered questions include:

What are we going to make??

The World Trade Organisation allows us (big of them) to protect industries vital to national security. That means arms. We have protected our arms industries, which are modern and efficient. Are we going to ramp up arms exports? That will make the world a safer place!

Who is going to buy our exports??

Dictators anxious to bolster their armed forces to stay in power?

The whole of the Eurozone is suffering from the financial wobbles caused by Greece, Spain, Ireland and, probably quite soon, Italy.  Eurozone countries are not going to import more stuff from the UK. The Chinese government is awash with dollars, but while it may be interested in highly specialised exports, China will not want mass freight from the British Isles. Your ideas are welcome.

Who is going to finance the re-industrialisation of the UK?

The banks aren’t interested, as opportunities for big profits would be slim. If the government had a mind to make Royal Bank of Scotland (RBS), which it controls, serve primarily the national interest, it might be a different story. But the plan is to sell the state’s holdings in RBS, Lloyds Banking Group and Northern Rock back to the private sector, when the time seems right.

Are taxpayers going to stump up the cash? No chance, our higher taxes are destined to help plug the chasm between our government’s income and its expenditure.

Are we expecting transnational corporations to build new factories here? Why should they, when Vietnam, Brazil et.al. look more enticing, and have cheaper workers.

Of course, the mass unemployment likely to result from the coming slash and burn approach to public spending would force wages down, and thus Income Tax revenues would suffer too. The phased reduction in Corporation Tax announced in the Budget, from 28% to 24% over four years, and intended to attract businesses, will create long-term jobs only if there is an expanded market for the UK’s products and services (and let’s not stake our future on casino banking).

It looks to me as though this could be a disastrously Thatcherite budget, not that surprising as George Osborne is a Tory chancellor, although I think the sops to the Liberal Democrat coalition partners have, to an extent, disguised the coming pain. This ‘Emergency Budget’ had scarcely anything to say about mitigating climate change, or encouraging co-operative and not-for-profit ventures to help local people meet their own needs,  or facing up to Peak Oil and the inevitable limits to growth.

Bad luck, LibDems. You recognise these issues, but your voice was not strong enough.

‘I haven’t had the time…..’ An excuse that tends to be seen as a lie, even if a white lie. There are 168 hours in a week, full-time work is supposed to take 40 hours or so, sleep maybe 45. Mmm, 83 hours left.

I haven’t had the time to work on ‘Empty Plates Tomorrow’ recently, which probably doesn’t matter to anyone who happens to read this, but it feels a failure to me. Well perhaps I should have had the time. Yesterday I went riding for an hour, today we had lunch in the pub. The issue may not be raw time, but uninterrupted time. I do not have uninterrupted time, except when asleep, and the 3am nightly visit of my father’s domiciliary carers interrupts that, not that I mind because he needs their attention.

Life as a main carer for my parents, both in their 90s, is no doubt similar to that of nearly six million people in the UK, 1.2 million of whom care for an elderly, ill or disabled person for more than 50 hours a week. One in five of the 45-64 age group is, like me, a carer (figures from Key Facts at www.carers.org). Millions of frail and incapacitated people need care, showing that rising longevity is not the same as a longer healthy life. I think the consequences of the rising need for care need to be considered in greater depth.

Public spending has to be slashed because of the UK’s debt mountain. There will be less money to care for the elderly and infirm, and this will increase the need for friends and family to devote time to caring. The alternative is for vulnerable people to go without care, to be forgotten, and to suffer. Strangely enough, as I write this, ‘Election Uncovered’ on Channel 4 is considering this very issue: less public money for care is indisputably possible.

Family and friends who care will have to cut out one or several aspects of their lives. First, discretionary time: fewer hours for holidays, meals out, sports, hobbies, leisure.

Next, caring time cannot also be used for paid work, so carers’ incomes decline. This means lower tax revenues, further damaging public finances. Welfare benefits for non-working carers and for the people they look after could be reduced, giving further force to the downward spiral. For those like me who can work at home a lot, the frequent interruptions mean that each task takes longer and longer to complete. Phone calls and visits from health professionals, the chiropodist, the mobile hairdresser, prescriptions to collect, medical supplies to order, pills to give, meals, drinks, entertainment, company, a care rota and back-up rota to organise, to ensure that a carer is present 24 hours a day, seven days a week. This is not a complaint, just an observation that people who are carers have to cut their other activities.

Why not rely on residential institutions? Standards of care are already woefully low in too many homes (remember the Gerry Robinson TV programmes on deficient dementia care?). Slashed public finances will mean worse care homes, except for the very few individuals who can afford to pay for private, personalised care. The decision whether to send an infirm person into an institution, or to support them at home, may exact a high price – from those admitted into institutional care, if standards are low, or from their carers if they have to stop work, stop pension contributions, and neglect their friends and other members of their family.

People who are recently retired have, for decades, been invaluable as volunteers in community organisations, also as elected councillors and as selected representatives on QUANGOs (definitions vary, but ‘quasi autonomous non governmental organisation’ is a popular one). A bonfire of QUANGOs might not have a detrimental impact on government, but community volunteers and councillors are extremely important to our nation. As more and more of the fit retired, as well as people under retirement age, need to care for ailing family members and friends, the pool of potential volunteers and representatives will shrink.

It may sound bigoted to the guardians of political correctness, but might it be a mistake to protect the NHS from cuts and to prune harder elsewhere to compensate? This policy could prolong the lives of people like me, but if we need long-term care as a result, who would benefit? Should the artificial extension of life be unquestioned as a top priority? It doesn’t appear to be a question that is asked in government, but I reckon that it needs to be both asked and seriously debated.

Hello to the long haul, or please cough up £71,700

Have you been trying to keep track of the government debt bubble, which has succeeded the dot.com bubble and the property bubble? The word ‘bubble’ sounds pretty, a vision of children blowing rainbow-coloured soap bubbles into a blue sky. We need another word, but the debt ‘bubble’ is so huge, so threatening, that few words suggest themselves as candidates. Poisonous cloud? Giant asteroid? Fatal avalanche?

At my last estimate, the UK’s national debt was accelerating towards £1.5 trillion. The announcements this last week that the government’s insurance scheme for banks’ dud assets, false assets, could be £500bn instead of the £200bn previously announced, takes the likely total to £1.8 trillion. The £200 billion, it quickly emerged, is nowhere near enough. The Royal Bank of Scotland has proposed ‘insuring’ up to £325 billion of ‘assets’ that are really liabilities, leaving only £175 billion of the £500 billion for Lloyds Banking Group, which harbours the stricken HBOS. Royal Bank of Scotland cannot afford to pay the ‘premium’ to take part in the insurance scheme and so will ‘sell’ to the state £6.5bn-worth of preference shares that, if converted in future to ordinary shares, would give the state some 85% of the bank. Meanwhile, government – taxpayers – are effectively lending Royal Bank of Scotland enough money to take part in the insurance scheme that government – taxpayers – are funding. Why bother with all this pretence of independence? Royal Bank of Scotland should be fully nationalised, restructured, downsized and simplified.

Back to the £1.8 trillion. How long would it take us taxpayers to repay this staggering sum? The median income tax paid in 2006-07, the latest year for which Her Majesty’s Revenue and Customs have this data, was £2,330. If I paid £2,330 a year to pay off the National Debt, how long would it take? The answer is 772.5 million years, or more exactly, 772,532,188.8 years. And this is if every penny went to repay the National Debt, meaning that there would be nothing at all to keep public services going.

Let’s look at the number of households in the UK, about 25.11 million. If they all paid £2,330 a year to repay the National Debt, how long are we talking about? The answer is 30.77 years. The prospects for every household in the UK stumping up £2,330 a year in National Debt repayments are exceedingly dim. Of course some households could afford to pay a lot more than this, and income tax is just one stream of government revenue, but these sums are still grim.

The £1.8 trillion is a near quadrupling of the £513 billion National Debt when Gordon Brown became prime minister in June 2007,  a burden that cannot be borne without either slashing public services, increasing taxation to penal levels, or increasing the money supply thus causing inflation that, in theory, would make the real value of the debt diminish.

All three options carry toxic effects:
•    Taking the axe to public services would make unemployment balloon, imposing new costs in welfare benefits. Cutting welfare benefits in response would lead to social breakdown.
•    The option of piling on more taxes would damage consumer spending, in turn leading to greater unemployment, with consequent pressure on the welfare budget and on social stability.
•    Increasing the money supply is notoriously hard to control and could lead to a terminal collapse of confidence in sterling, as overseas lenders to the UK government worry that their loans will be repaid in worthless paper. At home, devaluation of the £ resulting from ‘quantitative easing’ or boosting the money supply would sharply increase the cost of the imports on which we now rely.

The alarming position in which we find ourselves calls for acceptance of lower material prosperity, indefinitely. Economic growth is not the way out. There is not enough oil or gas to power it, and in any case the looming dangers of climate change require us to cut back our burning of fossil fuels. In the UK, we have to bring public spending down into balance with income. Public spending in 2007-08 was £501.626 billion. The government’s total receipts were £472.005 billion, so spending was 6.28% more than income. We also have to increase taxation for the specific purpose of repaying the National Debt. The debt stands at nearly £71,700 per household. Repaying this at £250 per household per year would take almost 287 years, assuming for the sake of the calculation that the number of households stayed the same. Even at £500 per household per year, we are talking about 143 years.

The chancellor, Alistair Darling, has already announced some tax rises from April 2011: a 45% band for tax on incomes above £150,000 a year, an extra 0.5 of a percentage point on national insurance for earnings between £20,000 and £44,000, and 1.5 percentage points more on earnings above £44,000. These increases won’t be enough: we are in for a long haul of high taxes.

There’s no point piling all the blame on reckless and avaricious bankers. Shareholders, including life insurance and pension funds, demanded ever-increasing profits and so can be accused of refusing to learn the lessons of history, one of them being that no boom continues indefinitely. Don’t let’s forget the politicians: they started the destructive tsunami of deregulation back in the 1980s. Politicians, shareholders and bankers have been complicit in an attempt to destroy the economy of the United Kingdom, an attempt that is perilously close to success.

Pay Gap, Debt Cliff

Bankers and their suitcases stuffed with cash! HBOS – the bank that resulted from the merger between Halifax and Bank of Scotland – had 15 directors in 2007, and they sure took a lot of profits as ‘remuneration’. The directors shared a pot of £17.690 million, which if it had been distributed evenly, would have worked out at £1,179,333 each. The bank’s employees received an average of £31,584. Not a bad income, well over the national average – but each director got, on average, 37.3 times more. That is quite a gap.

We know now that HBOS was floundering. Government ‘rescued’ it by engineering a merger with Lloyds TSB to form Lloyds Banking Group, which opened its doors in January 2009. The government – us taxpayers, in the end – had to chip in a few billions of £s here and there to keep the whole show on the road.

Barclays’ directors raked in even more than their HBOS counterparts, a total of £29.273 million in 2007, a mean of £1,721,941. Barclays wasn’t treating the 17 directors at all meanly! Lots of the workers did quite well too, as their mean income was £54,251, but the directors were taking home 31.7 times more.

One of the more abstemious banks in 2007 was Northern Rock. Well, there was a run on it during the year and it was nationalised in February 2008, so it had to show a little restraint. The 13 directors received £3.376 million between them, an average of £259,692. The bank’s staff were not nearly so well paid as their fellows in Barclays, or HSBC, or even HBOS. Their average income was just £20,145 (well, it’s a northern bank, and everyone knows that northerners can live quite happily on scraps thrown from the London table). Northern Rock was verging on the egalitarian, though, as the gap between directors’ and workers’ income was only 12.9 times!

The UK government almost controls Lloyds Banking Group. It does control Royal Bank of Scotland Group, and it owns Northern Rock and the mortgage business of Bradford & Bingley. These banks were deemed too big to be allowed to fail. Their executives (OK, a few have moved on) remain very well paid.

Banks, and bankers, were allowed to get out of hand because government saw its job, its only real job, as helping the economy to get bigger and bigger. Society became the servant of the economy. Who was it who said that ‘Divitiae bona ancilla, pessima domina’ (Riches are a good handmaid, but the worst mistress)? Oh yes, it was the philosopher and scientist Sir Francis Bacon, 1561 to 1626, who died owing £22,000.

We owe rather a lot more than that now, as taxpayers. The UK’s national debt was £513 billion in June 2007. In just 18 months to January 2009 the national debt has quite possibly trebled to over £1,500 billion, or £1.5 trillion. We can’t put a definite figure on it because we don’t know exactly how much the bank bailouts and other economic ‘stimulae’ are going to cost us. In round figures, though, £1.5 trillion is £25,000 for every man, women and child in the UK.

Mission impossible?