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Wednesday, June 23, 2010 

"A budget we can be proud of".

As noted before, most budgets tend to start falling apart the next day. There is almost always something hiding in the details that isn't noticed at first. Not widely realised yesterday was that public sector pensions were also being linked to the consumer prices index rather than the retail prices index, along with most other benefits. Also hidden was that it isn't just those earning more than £40,000 a year who will no longer be eligible for tax credits, but from 2012 those with one child earning more than £30,000 will also no longer be getting money back from the exchequer. Families with one child earning more than £25,000, or just £1,000 over the average will also have their entitlement cut. As Next Left points out, this is contrary to a promise made by Theresa May back in February in which she lambasted Labour "lies" about the Tories' plans.

Compared to the whopping porkies told by George Osborne yesterday, May is a veritable bastion of honesty. He told us this was a progressive budget that protected the most vulnerable. The Institute for Fiscal Studies has crunched the numbers (PDF) and come up with this as the most stinging of ripostes for the impact of yesterday's budget come 2014-15. The government's own distributional analysis model in the red book only went up to 2012-13, which is before most of the changes on welfare take effect. The IFS's model also doesn't take into consideration the reforms to housing benefit, which are going to be brutal, the disability living allowance assessment changes or the in-year changes to tax credits. Nonetheless, this is still the result:

The pre-announced were Labour's plans, which are the model of progression, based on the ability to contribute. Osborne hasn't just soaked the poor, as the Guardian described it, he's brutally anally raped them. The IFS, even though it minces its words in the usual fashion, concludes "[S]o likely that overall impact of yesterday's measures was regressive".

We were always going to get this from the Tories. How though can the Liberal Democrats possibly continue to defend a budget which has such a impact on the very poorest? How can Vince Cable possibly call this a "budget we can be proud of"? Not a single one of their contributions to the overall package makes up for what the end result will be. This was not the "unavoidable" budget. This was the relaunching of the most vicious of class wars, and the Liberal Democrats are doing the equivalent of delivering the kick to the head once the victim is already on the floor.

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A possible scenario. I have no idea how plausible it is, but there's an elephant in the room that everyone's forgotten about. Banks are still weak, and our house prices are still ridiculously overvalued. Currently they're rising, but that's in a (historically) tiny market, so is probably not representative of normal laws and supply/demand. So why haven't they fallen. Well so far unemployment has been fairly low and interest rates have also been low, while the government borrowed lots of money to bail them out.

But there's no more money, and George Osbourne is about to throw 800,000 people onto the scrap heap, and squeeze many more. Being conservative that's at least a million unemployed, I'd guess considerably more.

So what's that going to do to house prices? And if house prices start to fall, then the whole rotten edifice might come down with it.

I'm not sure if they're insane, stupid, or just so blinded by their insatiable desire to make Britain safe for inbred aristo fucks.

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