I’m not going to waste your time echoing the same sentiments expressed elsewhere except in exhaustive depth – I’ll keep this brief:
Scorched Earth Election Budget.
Plans depending on growth of 3.5% in 2011? A joke – and an insult. It’s a figure plucked out of the air to make the sums ‘add up’. Who seriously believes that we will experience this level of growth in an environment of ever increasing public debt, taxation and an ever bigger public sector?
I mean, it’s a joke right? Scorched Earth.
£2000 bung per new car sold for the Car Industry? Pure unadulterated protectionism.
For starters it creates a nice market in buying old cars and relisting them at £1,500 – it’s worth buying an old banger for that if it knocks you another £500 off the price of a new car. It also means, if you don’t already have an old car, you pay £2000 more than everyone else for new cars (unless you buy a second hand one… and of course all the ones under about £1500 will be bought up). In addition it reduces the total supply of cars, further increasing the value of second hand ones. In addition it encourages people with 8 and 9 year old cars that don’t even work to hang onto them for that little bit longer. Expect lots of bangers that never move cluttering up streets while their owners wait for their little investment to pay off.
I do not approve.
Welcome to the new mantra: Tough on Wealth. Tough on the Causes of Wealth.
UPDATE: Nick Robinson’s picked up on the end of the stealth tax culture – and importantly points out that they’ll raise more from increases to fuel duty than they will from the new 50% rate. Hammer the Rich. And the Poor. And everyone. Who exactly is supposed to benefit? Who’s all this serving?
Martin said...
22 Apr 09 at 3:11 pm
Spread the word.
It’ll save time, they’re planning to rip the shirts off our backs anyway.
Plato said...
22 Apr 09 at 3:36 pm
Welcome to Life on Mars land.
Ten grand ‘invested’ since I started typing this sentence.
Plato said...
22 Apr 09 at 3:40 pm
I forgot to point this out too.
A very knowledgeable poster gave me this little snippet to my post.
Anton Howes said...
22 Apr 09 at 4:00 pm
I’ve written out the full actual effects – went through the document in detail.
It’s even more disappointing than you think!
http://soc-liberal-party.blogspot.com/2009/04/budget-09-let-down.html
Anton Howes said...
22 Apr 09 at 4:12 pm
…and by the way, only 50% of that £2000 pledge actually comes from the government, the rest being from the industry.
wayne said...
22 Apr 09 at 4:22 pm
“Plans depending on growth of 3.5% in 2011? A joke – and an insult.”
I went through the exact same mirth-rage continuum. I laughed out loud at first, then shouted at the TV, startling the wife and the dog.
Tom James said...
22 Apr 09 at 4:32 pm
Well it just goes to show you can’t be too careful!
Also: what would your ideal (but politically feasible) budget look like?
I’d go with a shiny new ministerial red box for a start – the one Darling uses looks pretty past it.
Roger Thornhill said...
22 Apr 09 at 4:46 pm
The £2000 is not even protectionism, for it basically helps car dealers, who are not under threat from French or Chinese car dealers.
It is pure unadulterated pork.
The 50% rate is the politics of envy and will send wealth creators away.
Bunny Smedley said...
22 Apr 09 at 5:55 pm
The 50% rate is the politics of envy and will send wealth creators away.
It’s also not great news for anyone who’s involved in providing goods and services, especially the more discretionary ones, for the higher earners. Aside from any of the more serious Laffer Curve stuff, it’s a witless policy as regards its impact on plenty of other people, too.
MatGB said...
22 Apr 09 at 5:58 pm
Dealers and importers (the docks at Bristol are a sight to behold when times are good, now they’ve run out of space to put em all.
But I agree—I’ve never bought a car for more’n £2K, and have no desire to do so, my current car cost us £900, more than that would be completely unaffordable as it is.
This will increase the value of our car to be traded in as scrap, but it’ll also mean that the sort of car we want to buy is pretty much unattainable.
Gordo is supposed to understand economics, it’s supposedly one of his strengths. I wonder if he means to massively increase inflation in the secondary market to the disadvantage of those of us that like small engine 2nd hand cars?
Tom James said...
22 Apr 09 at 6:13 pm
The 50% rate is the politics of envy and will send wealth creators away.
You’re just envious of all those poor people and their smaller tax liabilities!
Anton Howes said...
22 Apr 09 at 6:17 pm
What’s really tragic is that they’re investing an extra 780m into propping up the housing market, only 50m of which (6.4%) is going into capital investment to improve the substandard housing of our armed forces!
Joe Otten said...
22 Apr 09 at 6:18 pm
Yeah the £2000 car bung isn’t even protectionism. The whole motor industry is foreign owned anyway.
I’m hoping that they cynically did some maths and worked out that few people would be able to take it up anyway. Which would make it an expensive soundbite, but not as expensive as it might be. Who, after all, runs a 10 year old car, but doesn’t buy second hand? This is if they are smart enough to stop the secondary market, using DVLA records. But I doubt it.
Oh and it does nothing for the environment, but we know that right?
Darrell said...
22 Apr 09 at 6:30 pm
As you may be unsurprised to learn, although it is probably right to say it will earn little revenue, I have no problem with the 50p band. It is rendered impotent by the piecemeal reform of the tax system and there is no follow-through on reducing taxes where we have rightly said they should be reduced but nonetheless I would support it.
Right, moving on from the bit where we obviously disagree to where I actually agree with you. 3.5% is stupidly optimistic and its optimistic for precisely the reasons stated above that the tax cuts havent come and as a consequences of us seeing the increased consumer spending needed to provide that sort of growth are zip-de-do-dah….
The thing about scrappage is that you are probably right but it’s in there as a political sop because the Treasuary cant afford a proper stimulus which the motor industry probably needs….
Ian B said...
22 Apr 09 at 6:46 pm
I was thinking, this is like watching a car crash in slow motion. Then I thought, well, I can collect up the bits and sell them for two grand, anyway.
NB. said...
22 Apr 09 at 7:11 pm
I bought a ten year old BMW 528i six months ago. Metallic Black, beige leather, tiptronic, 90k miles, full BMW service history, the works. Absolutely perfect basically, good as new, fast as hell, and these cars regularly last 300k.
Two points:
-How, the hell, with cars as good as this hitting ten years (and I’ve had 16 years old cars that were just as great), and all the technological advancements they have taken to make them this good, can it be HUMANLY possible for people to regard them as scrap. Even averaging 20mpg (lots of small distances and a lead foot) there is no way on earth that it is ‘more sustainable’ to destroy these things and buy new ones.
-However, I paid 2 grand for it. Good to hear that I can keep it for another 200 thousand miles and still get 2 grand for it…
NB. said...
22 Apr 09 at 7:12 pm
Having re-read my last post, I realise that I forgot to consider Keynesians.
NB. said...
22 Apr 09 at 7:15 pm
Or environmentalists.
asquith said...
22 Apr 09 at 9:34 pm
I oppose 50%. But it is very clever politics indeed. It will go down extremely well not only with Labour voters teetering on the edge of the BNP, but also residents in marginal seats, extremely few of whom earn above the threshold but who nurture a vague anger towards very high earners, want to strike a blow against them & don’t particularly care about how it’s done.
You have also got the fact that Cameron will either have to repeal it (sending out the wrong messages politically, however right it may be economically) or keep it (conceding a kind of victory to Labour).
Now you may well say that it won’t work & if anything further pain will be felt by low earners. But most low & medium earners will not take such a long-term view.
Do not be at all surprised if the Daily Mail etc support rich-bashing. They are interested in what sells, & lower-middle-class tossers have never been friends to high earners. No one would care what is right.
As usual with this government it is politics not statesmanship. So even if this policy turns out to be utter shite, they are celebrating at the fact that they’ve wrongfooted the Tories & any harm they do will not be attributed to them as most voters do not have a long enough attention span to do any such thing.
The statements by Philip Hammond on behalf of Camoron is worthy of note re: this.
“We are not going to make a commitment to repeal the 50p tax rate,” he said, adding the Tories would instead seek to reduce the tax burden for those on middle and lower incomes.
“We are going to focus on the taxes for the many.”
Tristan said...
22 Apr 09 at 9:43 pm
The car mess is a sop to Unite, who fund Labour to a huge amount.
Workers in car manufacturing have been very restless (understandably) with quite a bit of unofficial action, the union leaders will not like this – it challenges their power.
As for who this is to benefit – the ruling classes. They are seeking to keep the current economic system going through yet another crisis.
They also cannot cut state run services for political reasons, and keeping things going at the same level needs an ever increasing amount of money.
I can’t help but feel that something’s got to give, and its not going to be pleasant for some people when it does…
Joe Otten said...
22 Apr 09 at 10:51 pm
According to the BBC, the government is only paying half the £2000, and industry is expected to find the rest!
http://news.bbc.co.uk/1/hi/uk_politics/8011882.stm
That’s what the car industry needs an extra £1000 banger scrappage tax. Or something to muck up its pricing strategy.
Unfortunately the Mondeo is only 9 years old come March 2010. I will have to hang on to it in the hope the scheme is extended.
FHAgov said...
9 Jun 10 at 5:18 pm
Nice post… Does anyone have any updates on Obama’s plans for FHA in 2010? I heard they were supposed to be making changes.