The main headline from New Labour’s budget has been the decision to raise the income tax rate to 50% on anyone earning more than £150 000 a year, a move that will distress many of this site’s readers. This will add between £2,000-£4,000 to most of your tax bills. The Financial Times argues that a “clear division between the main political parties over how to share the pain of getting public finances into shape” and Lenin’s Tomb reports that Paul Mason, a well regarded economics journalist for the BBC, feels that “the idea that social democracy is dead has been disproven”.
My understanding that good social democracy is about delivering reforms that benefit working people. Things like free healthcare, universal access to education, pension provision and all those things that make Harold Wilson appear such a pleasant contrast to Tony Blair.
The Financial Times sets out some of the implications of Alistair Darling’s budget. The first of these is that “a fierce and sustained squeeze on public services is on the way after the general election”. In fact it will be a return to Thatcher era levels of public spending and the government is anticipating expenditure to rise by only 0.7 per cent a year. Those covert subversives at the Institute for Fiscal Studies (IFS) say that public spending is likely to fall by 0.1% annually in real terms from 2011 to 2014. It’s easy to predict that Darling’s axe will fall in pretty much the same places as his Tory counterpart George Osborne would make cuts – transport, housing and other areas which require a lot of investment. There is an ecological price to pay for this too. Spending money on public transport infrastructure, building new homes to robust energy efficiency standards and bringing the rest of the housing stock up to scratch would both create jobs and have a positive impact on carbon emissions. Instead there are untested plans for carbon capture power stations fuelled by coal.
Another major aspect of this budget is its lack of reality. Darling expects people to believe that an economy currently shrinking at a rate of 3.5% by this time next year will be growing at 1.25%. In some alternate reality he might be right but everyone else is laughing at this prediction.The IFS is claiming that to plug the £90bn hole in the budget the state will have to tax every family in Britain extra £2840 per year by 2017-18 or save money by cutting services.
One can quibble about the IFS’ sums but the politics of the next few years are clear. There will be a choice of two parties both hell bent on raising direct and indirect taxes with a major part of the burden falling on working wage earners. The social wage, which has already been seriously eroded over the last three decades will also be badly cut.
And I nearly forgot to mention Darling’s £16bn of asset sales in the next spending round. That’s a polite phrase for privatisation.
If social democracy isn’t dead the relatives are gathered round the bedside, the doctor is looking sombre and the patient is having serious trouble breathing.
Liam redux 
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