Wednesday, 12 October 2011

Smoke and Mirrors

Over the past few weeks, there seem to have been a lot of government announcements, where the headline doesn’t match the reality.

Last week, Iain Duncan Smith announced that he had secured another £300m to support changes to his proposals for Universal Benefit which he said would be good news for working families. Sounds great, doesn’t it? However, closer examination of the detail showed that working families who claim the childcare element of working tax credit will lose £884 a year if they claim for one child and £1560 a year for two children. If that is good news, I hate to think what the bad news looks like.

Then, Eric Pickles announced that he would provide funds to councils so that council tax wouldn’t need to increase next year. Let’s just forget for a moment that this intervention runs totally contrary to his Localism policy, it sounds good doesn’t it? Unfortunately, when councils looked at the detail, they discovered that the additional funds were for one year only and, therefore, that would mean an automatic 5% increase in 2013 in addition to any other inflation. Not so good, eh?

And then, George Osborne welcomed the Bank of England’s announcement that it was going to pump another £75bn into the UK economy through quantitative easing – this is basically lending money to the banks so that they can lend it to businesses. This was clear recognition that the government’s policy of cutting spending and raising taxes too far and too fast is just not working, as the latest economic growth – or, rather, non-growth – figures show.

George Osborne’s welcome to this was a little surprising to those who remember his earlier statements where he had described quantitative easing as ‘the last resort of desperate governments’ and ‘carelessly irresponsible’ and ‘quantitative easing is an admission of failure and carries considerable risk”.

Smoke and mirrors?