This is a guest post by Ben
I’m a bit late to the party on the national insurance furore as I’ve been out of the country for the last couple of weeks and haven’t been particularly inclined to spend time thinking about the intriguing prospect of Gideon Osbourne as Chancellor, but as far as I’ve gleaned, matters are as follows:
a) as part of a largely neutral budget Alistair Darling proposes the introduction of a one per cent rise in employer national insurance contributions;
b) Gideon Osbourne spies an opportunity to make political hay, junks rhetoric about apocalyptic debt levels and circulates round-robin letter to be signed by as many business leaders as possible arguing against the tax rise and for “efficiency savings”;
c) cue pile-on on nasty NuLab who now want to condemn us to the spectre of mass unemployment in addition to all the other ghastly things they’ve done under cover of the dark, oppressive midnight of these thirteen long years.
Some observations are in order.
Firstly, the initial apocalyptic Tory rhetoric about debt was entirely inappropriate. Not only is debt not enormously high by historic standards (circa 60% of GDP now, 150% – 200% for most of the period between 1920 and 1940) but we are doing fine by comparison with the rest of the G7.
Secondly, whilst I would hesitate to echo the frankly rather class war-redolent noises of everyone’s favourite impotent economic commentator and snow flake’s chance in hell chancellor-candidate, Vince “Steel” Cable, even Tesco have found Tory economic illiteracy and opportunism sticking in their craw. It doesn’t require much reading between the lines to see an almighty slap in the face for Gideon from the country’s largest national insurance contributor. And “efficiency savings” are the cop-out of a clever man who’s more interested in the politics of his latest whiz than he is about the economics of a £6bn hole.
Thirdly, the pointed Tesco intervention raises questions about the entire Tory offering. There are many reasons to vote Labour, some better than others. But in essence there is only one reason to vote Conservative – they are the party of business. The party with an eye for the bottom line, for the needs of UK plc beyond the flim-flam of the other parties. So self-satisfied Tories tell us, in any case. But is a party prepared to introduce a unilateral levy on banks in order to fund a £150 tax break to incentivise marriage a party that is rationally and dispassionately considering the needs of the UK economy?
Financial services will continue to be a large and crucial sector of economic activity in the post-crunch landscape. Indeed, this is an area where the UK enjoys a major comparative advantage. Alistair Darling has resisted the urge to engage in cheap populism and instead continues to work towards international action on remuneration structures, capital requirements and the harmonising of macro-prudential regulation. This important yet unglamorous work will yield dividends. Osbourne, by contrast, once again employs his flair for the eye-catching initiative. But the Conservatives’ continuing 11th hour attempt to “seal the deal” with the electorate is not concomitant with the national interest. Far from it, as those dangerous radicals at Tesco and the Lord Mayor of the City of London remind us.
