Thursday, 13 November 2008

Gordon's money tree keeps on rattling

A few times each year groups of doctors write letters to the serious newspapers claiming that their speciality is underfunded. Psychiatrists state what is, for them, an obvious truth namely that mental health is at the heart of all human wellbeing. A few weeks later it is the turn of gynaecologists to tell their obvious truth, namely that all wellbeing stems from a happy birth. Then come the bone menders, the liver wobblers, the blood curdlers and all the rest of them in turn displaying a narrow and patently blinkered vision of the world. None of them ever suggests which of their colleagues should have to forgo funding to pay for the extra their department needs. No matter how much money is pumped into the Stalinist bureaucratic maze that is the National Health Service there are always calls for more as though money grows on trees.

Now we are seeing the same attitude being shouted every week from the audience of Question Time. The cry is always the same: "If they can find all that money for banks they can find it for ...". Be it schools, hospitals, social workers, army, wildlife refuges, housing, roads, railways, museums of ancient woodcraft or any other subject you can imagine, the cry is always the same. I think these people really do believe government should spend unlimited sums on every pet project or cause and that there will never be any repercussions. In a way their position is entirely logical because the government did just promise billions to banks without telling the people that any not repaid by the banks would have to be repaid by them out of taxes. Even if that message had been sent, the numbers are so vast and the money seemed to be available so quickly that the message would in all likelihood have been lost in a haze of fluttering £50 notes.

I wonder what would have happened if the government had said "we are considering bailing-out the banks and to do so we will raise income tax by 10p in the pound from next Tuesday". The answer is pretty obvious, the outcry would have been so loud and threatening that the plan would have had to have been scrapped, so instead there was no mention of taxes rising. The problem, as we are now witnessing, is that it is looked on as free money sitting on a money tree somewhere in Downing Street and there's plenty more where that came from.

It is a good example of the need to be honest so that everyone can understand what is happening and, in particular, can understand that every penny spent by government must be raised from tax. No doubt all those calling for greater spending would understand that it must come from tax if only someone sat them down and talked it through, but our politicians don't do that any more and for a decade that fundamental truth has been hidden. While the credit bubble was creating false wealth and taxes were being levied on that false wealth no one felt any real pain.

The Stamp Duty paid on an inflated house price was overtaken within a few months by the nominal increase in the value of the property. You didn't want to give the government £10,000 for the privilege of moving home but it seemed a small price to pay as you read in the newspaper that your new house is now worth £35,000 more than you paid for it. It's still a £25,000 profit in a few months and poor Gordon is "investing" the other £10,000 in public services, all is well with the world.

And so it was also with stealth taxes. They don't come in big clumps but as little bits here-and-there. Many go unnoticed, some cause a stink for a short time and are reduced a little or an increase is delayed, but then they just become part of life. You cannot evade them so you just put up with them, but all the time you have enough spending money available on the plastic or by remortgaging your house and releasing the £25,000 profit, so life is more comfortable than ever before and the additional taxes cause no pain that is not more than compensated for by a nice holiday, new electronic wizardry and a fridge with two doors.

All this time the government is spending more and more and locking ever greater on-going expenditure into the public psyche. The message is that it's "investment" and we all know investing for the future is a good thing. The message is that it's "prudent" and we all know that means there's no waste. The message is that it's "vital public services" and we all know that the opposite of vital is dead. It's all beneficial, it's all necessary it's all affordable because there is no more boom and bust. The psychological effect is pervasive, it changes the public mood and the public perception. The perception is of endless growth allowing the vital public services to expand without pain. People believe that stuff. That it is nonsense with a hat on is neither here nor there because the exercise is not about rational analysis but about persuading people that they are getting more and more from government without having to pay much more for it. Yes, you notice the extra taxes but the vast figures bandied about whenever spending on "vital public services" is announced seem so much more than the extra you are paying that you're making another profit to add to the profit on your house.

That is a very dangerous perception. It is built on layer after layer of half-truth and exaggeration from poor Gordon but examination of his veracity takes second place to the perceived profit-on-profit you are making from his time as Chancellor of the Exchequer and Prime Minister. You actually believe that he is making money from nothing because he is spending billions and billions yet you are only paying hundreds. It's the numbers game I adverted to a few days ago - when the numbers get so big we cannot comprehend them, they take on a life of their own. Before you know it you believe he has a money tree, then he tells you he has a money tree because he is finding endless billions for the banks without even hinting that you might have to pay for it, so you want some of the rich fruit for your favourite cause.

That is how people fall for the guff. That is what causes them to say "if he can find money for the banks he can find money for [insert pet subject of your choice]". It will take a long time and some harsh lessons for this absurd inversion of the truth to be removed from peoples minds. In the meantime we will continue to hear calls for the money tree to be shaken again and again. Only honesty can undo the damage and there is no prospect of the current government being honest, to do so would be to change the habits of a political lifetime.

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