No one is safe

You’d be forgiven for being thoroughly sick of dire economic news. If you’re a factory worker, you’ll soon be working a four or even three day week.

If you work in retail, there’s no guaranteeing the future of your company, no matter how large or seemingly iconic it may be. And we all feel concerned for you if you work in the financial services sector.

Almost all private sector jobs are going to be reviewed in the next 18 months as companies, faced with plummeting turnovers, seek to drastically cut costs and remain economically viable. But jobs in the public sector have always been viewed with a certain amount of dewy-eyed dependability.

Councils are primarily centrally funded and topped up through precept (council) taxes. They are not required to make a profit, indeed, several have been running at a loss for many years. The news this week  that local authorities plan to cut almost 7000 jobs in the coming months is therefore cause for serious concern. It will cause many civil servants to shudder.

With fewer people in work, more people on benefits and the public spending less on the high street, coupled with the now universally derided VAT cut will lead to a sharp fall in government revenue generated by income tax. This drop trickles through to county and borough councils, leaving them with challenging funding cuts.

Although councils are above the free-market motivations of quick profits and big risk-taking, their funds are not. They need to keep their money somewhere before it’s spent on relaying the B316 for the third time in a year. Many lost a lot of money in the Icelandic banking collapse.

It seems unthinkable, but it’s inevitable: less income tax = less funding, less funding = layoffs. It doesn’t matter what the sector, nothing matches up to the latest hopeful phrase “recession proof”.

Perhaps the treasury will decide they can no longer afford to keep Gordon Brown.

Lower duty on whiskey? I’ll drink to that

In the first of what could be many PBR u-turns, Alistair darling has been forced to renege on a pledge to increase alcohol duty. Proposed rises in duty have been halved to 4 percent. He got his sums wrong, honest mistake?

Well, no. Duty rises are permanent, VAT reductions are only set to last for the next 13 months. This covert tax rise had not gone down well with Scotch Whiskey producers, claiming that an extra 29p a bottle would have been added in order to cover duty rises. And that would mean Scottish people couldn’t afford to get drunk.

Darling, ever the Scottish sympathiser, has acted swiftly, and this should be applauded. But his covert tax hike in fuel and alcohol duty should not.

An increase in the highest band of income tax to 45% has been treated by many papers as the end of New Labour policy forbidding tax rises. This is absurd. It is merely the first time they have been explicit about it.

The spin coming from Labour is that this budget is designed to help the worse off and tax the super rich. Aside from the fact that if you tax the rich people of the City, they will leave, this budget will affect people on middle incomes a lot more than the Government is letting on. National insurance increases will see to this.

Labour’s pledge to help poor people seems to be based on their ability to create a lot more of them.

What won’t happen in the Pre-Budget Report

Tomorrow Alistair Darling will announce his pre-budget report – hailed by many as the most important in a generation. It will certainly be the most significant of his career.

It’s not the best kept secret that Mr. Darling will move to temporarily cut VAT to 15% as part of the Government’s £25bn tax relief plan. We can expect radical action from Labour and all-round head shaking from the newly-nasty Tories.

There are calls for one-off tax credits for the poorest off, a reduction in corporation tax and greater stick type incentives for the long-term unemployed.

Apart from that, the content of the announcement is pretty much  any one’s guess. Here’s what won’t happen:

• Alistair Darling and Gordon Brown read out a joint statement sincerely apologising for the way they have destroyed the economy. “We got us into this mess with an unsustainable culture of easy debt and endless borrowing. But, trust us, more of the same is just what we need to fix it.” To reiterate his sincerity, Brown attaches a lie-detector machine to his temples, which immediately explodes.
• After stunned silence reverberates through the chamber, David Cameron leads the clapping which slowly turns into rapturous, adoring applause.
• Mr. Darling holds up his red briefcase for the cameras which falls open, exposing its contents as no more than an apple core and a Mr. Men book.
• Cameron and Brown agree to ‘forget our differences’ before embracing in compassionate man hug, sobbing.
• Mr. Darling criticises the EU directive keeping VAT at a minimum of 15%, calling EU commissioners “garlic-munching spoil sports”.
• Nick Clegg puts forward an authoritative and exhaustively researched financial rescue plan that will allow Britain to avoid recession and reduce taxes whilst increasing public spending and employment levels. The plan is universally acclaimed.
• George Osbourne sings the MPs out with a rendition of Chas and Dave’s “Ain’t No Pleasing You”.