The curious week of chancellor Darling
July 8, 2009 Leave a comment
Alistair Darling wants to cut the £175bn black hole in the public accounts by £50bn. So what’s he going to do about it?
In the midst of hard, cold economic misery, the chancellor threatens to freeze public sector pay. Even from supporting voices, such as Andrew Hutson from the Adam Smith Institute, its accepted that such a manoeuvre will save £5bn. A small price for such a deal, that affects people who, not only have done nothing to create the financial mess, but, are the most affected by it.
It has spurred on hardcore free-marketeers, who by and large support the move, as seen on the ASI website, to use this measure to their own advantage, seeing it as a way of shouting a huge told-you-so on the so-called lack of wealth creation in the public sector. For them, the public sector should stump up money since it doesn’t create as much money, and, as they will point out, is quite happy just to receive it.
Or, as Hutson states, “A freeze in pay would send out messages that the public sector needs to really earn our money rather than automatically receiving it.”
But this should stick uncomfortably in the throats of people who remember how much was provided by the government to bail out banks (which I can say with some certainty is most of us).
This brings us on to what Darling will not be doing. As the Guardian reports tonight “He (Darling) made no mention of capping bankers’ pay despite telling MPs that “irresponsible pay practices made banks take too much risk”.” And as Vince Cable said: “This [white] paper will be greeted with a sigh of relief in the City since it marks a return to ‘business as usual’.”
Another matter that Darling will not be seeing to is some severe cases of tax evasion. As Michael Meacher MP noted tonight his attempt to start a debate on tax avoidance of the super-rich was turned away by the speaker on the grounds that “the effect of the new clause would be to increase taxation”.
As Meacher further notes;
“The totality of tax avoided by super-rich individuals and big corporations has been estimated by independent research at some £25bn a year, and even by the Treasury at up to £13bn a year.”
That liberal estimate, and even the conservative one, is a substantial amount more than the £5bn that Darling wants to cut from public sector pay.
So Darling’s proposals will be celebrated by free-marketeers and bankers who will laugh off the possibility of a mere new Council for Financial Stability, and who always felt that public sector workers were getting let off anyway.
And, as Dan Roberts pointed out today;
“Appeasing the vested interests of the City will only lead to a repeat of past cycles of financial boom and bust. What is odd is it took a Tory shadow chancellor to realise this.”