Review not 'cuts'
You say 'tomato' I say 'tomato'. Doesn't work on the page does it? But the words review and cuts certainly sound different although you would have to posess the hearing of a bat to have picked up the frequency on which the word 'review' was being broadcast.
Urban myths, such as the one which says a policeman must offer you his cape if you wish to urinate in public, abound but it seems that myths in public life can grow just as quickly if people don't seek out the truth or at least read the source material.
The June Budget sets out the fiscal policy of this current Government. When those figures are viewed in conjuction with the data supporting the recent spending review shows exactly what the Government are hoping to achieve between now and the financial year 2015-16. Annual expenditure is planned to increase at 9% between now and then, there will be an increase in social security and tax credits of around 15%, the deficit will be cut to around 1.1% of GDP, that will make us the proud owners of the lowest level of debt among all G20 countries.
This of course sounds wonderful, too good to be true, well that's because it is. To finance this the Government needs to either borrow money or increase its tax revenue. Now at the moment Tax Revenues are not only down but as the impact of the recession catches up with the submission of 2010 Tax Returns the Government are actually having to repay tax that taxpayers have previously paid on account of their 2009-10 liabilities. The Governments own projections, their own financial policy states that each household will see an increase in its tax liability of £7,000 between now and April 2016. The whole spending review is based upon the premise that total tax receipts over the next five tax years will increase by 34%.
When the last Government left office, and to be fair during its residence, it was constantly repeated, almost ad nauseum, by those on the right that every household, all our children, grandchildren and anybody who had come into contact with us, would be £40,000 in debt as a result of Labour's mismanagement of the economy. The mismanagement was the correct phrase but the endless headlines about the level of debt were, as I pointed out at the time, meaningless. Nobody was going to come round and ask for that mythical £40,000. The impact would be felt in cuts (not review, cuts) and this is what we are seeing now. What of course none of the parties would disclose in the run-up to the election was how large these 'cuts' would be and how the Government who were elected in May would actually finance any future growth or support the economy.
The Coalition of course did announce it, in the appendices to the June budget. There along with the expected increase in income from raised VAT are the figures. Not hidden, not concealed, in plain sight. Unfortunately of course beyond economists, tax professionals and accountants nobody reads the appendices. This is not new news, I have pointed this out before, the 10% tax rate fiasco being the classic example of all party agreement without anybody actually realising what was happening. Having professional politicians, of whatever colour or political flavour, is the equivalent of card tricks on the radio. You have to invest a lot of faith and just hope they aren't lying.