Russell Lynch: Bojonomics does not add up — this wannabe PM would drown under a gigantic deficitComments Off on Russell Lynch: Bojonomics does not add up — this wannabe PM would drown under a gigantic deficit
When Tony Blair was in office, his Brownite rivals in the Treasury would say, only half-jokingly: “Tony wants to tax less, spend more and borrow less. Our job is to make it add up for him.”
Boris Johnson — the former foreign secretary lustfully coveting Theresa May’s crown — appears to have taken that strategy to heart. Like it or not, when someone so nakedly desires the levers of power, we at least have to attempt to take what they say seriously. But his latest ejaculation, presumably dashed out with his mind elsewhere and the paparazzi camped out nearby, would set us on a path of fiscal incontinence the likes of which the UK has never seen.
He writes that it “takes an awful lot to put me off a major infrastructure project” and reels off a shopping list of them including the ill-fated Boris Island hub airport, Crossrail 2 and clean power stations. There’s also the endorsement of the extra £20 billion May has promised for the NHS, and “stepping up our investments” in the police and schools.
So how is he going to pay? Not through taxation, it appears: “We should say that tax henceforth should not go up”. Nor rates either — and I assume here he’s talking about business rates rather than interest rates, which are the territory of the Bank of England. Cutting taxes such as income tax and capital gains tax are the order of the day, although these are two of the “big three” which make up 55% of HMRC’s revenues, to build a “happy and dynamic” post-Brexit economy. The “f*** business” Brexiteer is now their friend and wants an economy that “fosters enterprise” to boot.
How does he magically square the circle? By falling on that Right-wing myth of ages, the Laffer curve. Arthur Laffer’s questionable hypothesis — that by cutting some taxes you can boost overall revenues — has never been proved, although that hasn’t stopped it being taken to heart by headbangers on both sides of the Atlantic. Nobel prize winner Paul Krugman delivered the most convincing take-down, pointing out that Bill Clinton’s tax hikes for the 1% were accompanied by a boom which outstripped that of Ronald Reagan’s “morning in America” in the Eighties. Between the Forties and the Seventies, when top-rate taxes were much higher, wages, productivity and consumption all leapt forward.
Once we’ve cut taxes to pay for all this infrastructure what do we do? In need of an idea (“Cripes!”) BoJo pulls out another old saw for short-term savings from our “bloated public procurement system”. Those dastardly OJEU rules for public-sector contracts favouring “established companies and their complacent approach” are ripe for savings.
Really? He might not have noticed but the past few years haven’t exactly been milk and honey for outsourcers. Carillion is gone, Interserve and Capita have had to raise cash and companies such as Serco are thinking very carefully about whether to bother bidding for public work at all amid a relentless Whitehall price squeeze.
According to the Institute for Government, we spent £277 billion on procurement of works and services in 2016/17, from PFI to medicines to delivery of adult social care by private contractors. Of this, around £63 billion was spent on capital procurement — the stuff BoJo wants — because funnily enough the Government doesn’t have the capacity to build its own roads, bridges, schools and the like. Extracting more savings might be possible as the Crown Commercial Service boasts of saving £600 million last year. But it won’t be short term, and it certainly won’t be generating the sums needed to pay for things such as Crossrail 2.
More likely the Boris “programme” — if this succession of economic and fiscal non-sequiturs can be described as such — will result in hundreds of billions in extra borrowing, soaring interest rates and emergency raids on the welfare budget. It’s even less credible than Jeremy Corbyn’s election manifesto last year, and that’s saying something. But it’s the kind of slapdash stuff — on top of the “suicide vest” rhetoric — which will delight the Conservative members and Ukip entryists who might even send him all the way to No 10. Bookies Coral have him down as a 4/1 favourite to be our next prime minister. It’s baffling — and terrifying — in equal measure.