Brown’s ‘Optimistic’ Budget Ignores Reality

IN HIS budget Chancellor Gordon Brown looked at the poor performance of the capitalist economy in Britain and the rest of the world and cut his forecast for growth for 2003-04 down to 2%-2.5%. He admitted that he would have to borrow £27 billion this year.

But Brown was looking on the bright side of life when he predicted a strong economic recovery (3-3.5% a year growth) from 2004 onwards.

Ernst & Young’s Item Club, a big business forecasting group that works on the same model of the economy as the Treasury, thinks “Gordon Brown is in denial”. They think he should have made it clear that taxes would have to rise from next year to rein in the imminent budget deficit.

Brown’s figures are criticised because they assume the economy performs well, stock markets reach for the sky once again and big City banks make so much money that they pay their taxes with a smile. Quite a few of these assumptions could go wrong!

For example, the British Retail Consortium monitor of sales in High Street shops confirms that retail sales are still declining. Like-for-like retail sales dropped 0.6% in March compared to a year ago.

Economic caution

The economic gloom, with household debts, mortgages and rents spiralling up, makes most people far more cautious about purchases. A recent survey from the CBI suggested sales were at their lowest level since July 1992.

HSBC bank warn that Britain’s economy could grow by as little as 1.5% this year. All agree that the ‘crunch time’ will come next year or in 2005.

One of Brown’s proposals may get welcomed by working-class people at first. That is the child trust fund or “baby bonds”. From 2005 the government will open a trust fund for new babies of £250 rising to £500 for children from low-income families.

They may top up the fund with up to £100 at key stages (as can better-off parents, grandparents and friends by up to £1,000 a year). When they reach 18, the government say young people will get thousands of pounds.

Brown is obviously going for votes from young families, particularly those bringing up children in poverty. Yet New Labour have widened the wealth gap, increased the numbers living in poverty, cut benefits and made young people pay through the nose for tuition fees.

One of the main reasons that the child trust fund has been introduced is to help families pay these tuition fees – which by the 2020s may have reached astronomical proportions. Gimmicks such as baby bonds imply that it’s down to individual families to protect their own future living standards.

What about jobs on a decent minimum wage linked to average earnings? How about ensuring a supply of good-quality homes we can afford? How about cash for a fully funded NHS, for schools and child care? All this and more failed to appear in Brown’s budget.

Clearly, stunts like child trust funds are cheaper than the welfare state which New Labour is unravelling at present.

Budget bonus for property magnates

GORDON BROWN’S budget announced tax-cutting measures to “regenerate” impoverished inner city areas. However, it won’t be working-class tenants and residents who’ll benefit but property companies and big retail outlets.

The Inland Revenue deems many of the country’s largest shopping areas “enterprise areas” and excuses them from paying stamp duty – one area includes the commercial area of Manchester where office space costs £25 a square foot to rent.

This tax relief effectively add 4% to property values overnight – a hefty £100 million windfall for British Land, Chelsfield and Peel Holdings.

Fat bankers and slick oil men

TOP CAPITALIST companies are well into their annual reporting season. The early signs are that the fattest of all fat cats in Britain at the moment are oil company directors and bank executives.

Royal Bank of Scotland directors are dominating the pay rises. Their highest paid director Lawrence Fish got £3.35 million this year, that’s 51% up on the previous year. Five other directors of that bank earned over £1 million a year, two of them more than doubling their pay.

Last autumn Lord Browne, oil giant BP’s chief executive, complained that: “If Iraq changes regime… there should be a level playing field for the selection of oil companies to go in there”. But BP have been making £1 million extra per day from oil price rises during the build-up to war.

And, bumpy playing field or not, he’s not doing badly himself. He earned £3 million last year. Sir Philip Watts of Shell increased his pay to nearly £1.8 million – an increase of 54.9% despite his company’s profits going down. Workers’ earnings have been hobbling along at just over 3% in the year to December.