As usual, there was mass coverage of the budget in all the mainstream media yesterday, very little of which was positive for Chancellor Rachel Reeves or the government. The financial markets at least seemed reassured; Sterling rose slightly, and long-term gilt yields fell. Predictably, opposition politicians lined up to slam the government for incompetence, and the right-wing press was withering in their criticisms. The irony of it all is that many, if not all, of these voices were instrumental in persuading the public to vote for Brexit, the root cause of much of Ms Reeves’ problems. She, like all recent chancellors, has been hemmed in by a lack of adequate growth, following Britain's exit from the EU single market.
You might think that we would have got used to recent budgets notably lacking any good news. Government benches cheer like trained seals no matter what, but there has been little for ordinary taxpayers to celebrate over the last ten years. I don’t believe that any party’s policies would have made much of a difference.
The BBC's headline was: Millions to pay more in tax as Reeves says Budget is tackling cost of living. Badenoch, in her response, said Reeves has been the worst chancellor ever, which leads me to think the disastrous 38-day tenure of Kwasi Kwarteng must have conveniently slipped her mind.
The growth forecast for the next few years has been reduced to 1.5% and I wouldn’t be surprised if we failed to reach even that modest figure. It’s also suggested that the tax take has now reached a post-war record as a percentage of GDP, while public services, already at rock bottom after years of austerity, continue to be squeezed for more savings. The welfare state is taking up more and more of government revenues.
Who could have foreseen it? Well, the Treasury actually.
The sorry truth is that the only people who might draw some comfort from the gloomy details of Reeves’ 2025 budget are the officials and economists at The Treasury who prepared the paper on the long-term impact of Brexit published in April 2016. They must feel completely vindicated. Widely dismissed at the time by both the Leave campaigns, it was one of the few documents that was balanced, fair and accurate.
Let me quote from the foreword by then Chancellor George Osborne:
"The conclusions of this document are clear: none of the alternatives support trade and provide influence on the world stage in the same way as continued membership of a reformed EU; and all of them come with serious economic costs that would affect businesses, jobs, living standards and our public finances for decades to come. To put it simply, families would be substantially worse off if Britain leaves the EU."
Inside, on page 8, there is what looks now like masterful prescience:
"The negative impact on GDP would also result in substantially weaker tax receipts. This would significantly outweigh any potential gain from reduced financial contributions to the EU. The result would be higher government borrowing and debt, large tax rises or major cuts in public spending."
It was suggested that on the basis of a bilateral trade agreement being negotiated with the EU (as it was), by 2030, tax receipts would be lower by £36 billion a year, "even with savings from reduced contributions to the EU."
Osborne claimed that Treasury estimates showed GDP would be 6.2% lower and families would be £4,300 worse off each year. Needless to say, Boris Johnson, then Mayor of London and in charge of the Vote Leave campaign, rubbished the paper. He dismissed it as "more propaganda" and a "hoax".
Johnson said the forecasts were "just not credible" and he accused the government of "misusing its power and misusing the civil service" to present a biased, "unfair" picture that only focused on the downsides of leaving.
Nigel Farage, attacked Cameron and Osborne for feeding the public "a constant diet of lies" in their arguments for staying in the EU, and claimed the two men were "using the whole apparatus of state in a way that, frankly, is pretty close to cheating".
"But this isn't about economics. I can tell you we will be better off out, he'll tell you we'll be better off in. Ultimately, this referendum is not about trade, it's not about money - it's about political union."
He, Johnson, Gove, Davis, et al, were completely wrong, and the Treasury was right. As the rate of GDP growth fell, so did tax receipts, and so, to maintain public services and the welfare state as we had become accustomed to, it was necessary to increase borrowing, raise taxes and cut services, precisely as Osborne predicted.
All those leave voters, and current Farage supporters who have been claiming they would sooner be reduced to penury rather than rejoin the EU are getting what they wished for. Unfortunately, everybody else is too.
The fact is that Britain has become a poorer country, and Brexit can be blamed for much of that. The NEBR report a few days ago, suggests the Treasury's April 2016 forecast, if anything, was not pessimistic enough. They now estimate the negative impact of Brexit is more than twice the Treasury forecast and has come five years earlier.
The moral is to always read the small print and ignore the pushy salesmen.
Farage and racism
Nigel Farage and his defenders have offered the excuse that his racist and anti-Semitic outbursts while at Dulwich College were simply a bit of youthful exuberance. He seemed to claim the incidents reported by The Guardian over the last few days involving about twenty of his contemporaries took place when he was thirteen. I think he was at least seventeen and possibly eighteen at the time.
It’s not unknown for teenagers to say things that are inappropriate and even offensive, but there has been no evidence that Farage has ever apologised or repudiated the views he held in the late seventies and early eighties.
The Guardian in May 2014 were reporting Farage saying similar things as late as 1997 when he was 33 and already a senior figure in UKIP. According to Alan Sked, then UKIP leader, Farage wanted a former member of the BNP to stand as a UKIP candidate. Sked objected, thinking it would depress the black and ethnic vote, and Farage pushed back:
“There's no need to worry about the n****r vote. The n*g-n**s will never vote for us.” Sked was shocked, as anybody would be. Others who heard the comment thought Farage was trying to be funny.
In my experience, people in 1997 who casually dropped the ‘n’ word didn’t just lack empathy but were probably out-and-out racists.
