Osborne has shown, yet again, that he has no creativity nor ability to foresee the consequences of his actions.
While the UK desperately needs to be investing in it's infra-structure, all he can come up with is to try and hi-jack the Milliband election manisfesto pledge on building and infra-structure development.
While this is indeed needed, the concept was flawed from inception.
To use the Local Authority pension funds as a vehicle for funding these projects, is overlooking the need for pension funds to earn a return on their investments, otherwise they will not be able to pay the promised pensions on maturity. Common wisdom in the pension industry is that they must generate a return on their investments of 3% real after taxes. In other words Inflation plus 3% plus taxes.
Therefore we need to ask the question is the government going to compensate the pension funds adequately to prevent the future taxpayer from having to subsidise those pensions? This would imply the State paying higher interest than if they simply borrowed the money in the market.
Remember that whether I borrow from a pension fund or the market generally I am still borrowing. Perhaps it is easier to decree that local authority pension funds use their funds for these projects, than try and raise it in the open market? Are you ignoring the consequences or are you sneakily trying to change Pension contributions from a saving to a tax?
We saw how Gordon Brown failed to get the OPEC nations to invest in UK nuclear energy … we see how you are trying to get China to do the investing now, the French not being willing even after a guarantee of an index linked price of electricity double our current price! One of the consequences of this guarantee is to create a new hidden tax on the public!
Every country, simply to stand still, should be investing at least 2% of GDP in infrastructure, in order to cater for natural population growth and minimal growth of the economy. Infrastructure encompasses roads, communications, utilities, hospitals schools and houses.
This is why the EU allows countries to run a deficit no greater than 3% as it is considered reasonable to use borrowing to invest in infra-structure, and countries should on an ongoing basis be investing in infrastructure.
George your policy over tax credits is a mess, our whole benefits system needs overhauling so that it is contribution based. Yes there would be a period while the historical situation is worked through the system, but, changing the future is possible. If it were done there would be no problem with so called 'Benefits Tourism' or 'Economic Migration'.
Simply cutting tax credits has consequences that you are not seeing, and as 1.4 million people (ONS figure) are on zero hours contracts which means that government has to subsidise wages. (Zero hours contracts generally mean they work for 30 hours or less per week on minimum wages so that the employer is not liable for NI contributions).
Your tax policy is a mess. You managed to cut Corporate tax from 28% to 20% in the hopes that Corporations would move their headquarters to the UK. However, as soon as that threatened to happen the USA decreed that Corporations would need to pay tax in the USA on income earned in the USA, so you ended up with no gain. Can't you see the consequences of trying to steal a competitive advantage over other countries results in a reaction from them?
By the by, the USA Corporate Tax is over 40% once you include state taxes) You have done nothing to sort out the Google or Amazon tax situation. In any event OECD is saying all countries must modify their tax basis to collect tax from corporations where they earn their income, rather than where their headquarters are located.
You have persisted with Gordon Brown's PFI's for financing capital development in schools and the NHS … this has more than doubled the annual cost to the NHS and Local authorities on those projects … and even once they have paid they continue paying as the building is being leased to them, they do not benefit in the value appreciation from inflation. You don't realise that one of the consequences of your policy is helping to dig the deep hole that the NHS is in!
By Jove George! For all your so called prudence, you have outborrowed Gordon Brown, maybe you have been a bit cleverer in how you lie to the public, but time will tell.
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