If you’re at all interested in film, you’ll probably know what a MacGuffin is.
For those who don’t, it’s an item that serves as a plot device. It’s the statue in The Maltese Falcon. It’s the briefcase in Pulp Fiction. It’s just about every single semi-inanimate object in the incredibly noisy Pirates of the Caribbean films that my kids have been watching for the umpteenth time.
The point is that the specific object itself doesn’t matter. It could be anything. It’s just a thing – a MacGuffin, as Alfred Hitchcock called it – that gets everyone in the film motivated to get up and do stuff.
I think we need to come up with a name for the same sort of thing in politics – a policy change or group of taxpayers who will somehow fund every bribe that a party wants to make.
Stick your suggestions in the comments below – meanwhile, I’ll get to the point…
Shock horror – the parties won’t tell us the truth about spending
The Institute for Fiscal Studies (IFS) is a think tank that most acknowledge as being pretty politically neutral. When it analyses the parties’ financial plans, people listen respectfully and then add their own political spin afterwards.
It’s taken a look at the manifestos of the Conservatives, Labour, the LibDems and the SNP, to see if their spending plans match up to what they’re saying. The IFS’ starting point is that while annual borrowing (the deficit) has fallen, “whoever forms the next government still faces the task of finishing the job of reducing borrowing back to sustainable levels”.
Labour and the SNP plan to reduce the debt least rapidly. They have pretty much the same target. The LibDems want to cut it a little faster. And the Conservatives want to cut the fastest. The benefit of reducing debt, notes the IFS, is that “higher debt entails higher debt interest payments, and would potentially leave the government less well placed to deal with future adverse events”.
Trouble is, says the IFS, is that none of the parties “has managed to be completely specific about how much they want to reduce borrowing [by], or exactly how they would do it”. So the IFS has been forced to make a lot of assumptions.
And this is where the political MacGuffins start to come in. The parties have promises to make, but no idea how to pay for them. So they’ve just come up with a range of target groups that can raise whatever money they like – or bear the brunt of ‘the cuts’.
The Tories will raise money from tax avoiders, while making unspecified ‘cuts’ to departments they haven’t already protected (such as defence, transport, and law and order).
Labours’ MacGuffins include non-doms, mansion taxes, tax avoidance and high earners. The LibDems fall heavily on tax avoiders as well – they reckon they can raise twice as much from them as the Tories do, which shows just how flexible the definition of tax avoidance can be.
As for the SNP, their MacGuffin basically boils down to ‘independence’ – their budget figures imply the same debt reduction as Labour, but “their tax takeaways appear to be offset by their tax giveaways, while they would increase the generosity of the social security system”. In short, “their stated plans do not necessarily match their anti-austerity rhetoric”.
In all, “the electorate is, at best, armed with only an incomplete picture of what they can expect from any of these four parties”.
Here’s what this election really boils down to
Pretty dispiriting, isn’t it? You might think there’s no real difference here. But you’d be wrong.
If any of the parties stick tightly to their pre-election promises, and if their spending or tax-raising plans come anywhere near meeting their forecasts, it might be the first time it’s happened in history. What matters is the direction of travel.
Remember when the coalition was elected? I think it’s fair to say that the 2010 election rattled the horses. Sterling was moving inversely to Gordon Brown’s political popularity – rising when it looked like he’d lose, sliding when it looked as though he might cling on.
Bill Gross declared that gilts were resting “on a bed of nitro-glycerine”. The man might now be a full-blown card-carrying eccentric elder statesman of finance, but that was a big, eye-catching call.
Then the Tories and the LibDems got in. And they said they’d sort out the public finances. When they laid out their plans, there were plenty of blood-curdling warnings about what it all meant – the equivalent of shutting down the armed forces, the worst cuts since the 1920s, etc etc.
Of course, cuts that extreme could never happen. And so they didn’t. But the PR campaign did the trick. The coalition managed to get itself tagged as the party of ruthless austerity and fiscal responsibility – perhaps not the best long-term electoral strategy, but one that certainly kept our borrowing costs in check.
So the question isn’t – how fast do we want the deficit cut? It’s more a question of do we want a bigger government, or a smaller one?
Maybe that’s a bit hopeful. No party at the moment really stands for smaller government – they all want to stick their oars in somewhere.
But philosophically at least, Tories don’t see more public spending as the solution to every problem. And to be fair to the LibDems, they’ve driven through the pension reforms that put far more power and responsibility into the hands of individual investors.
In short, forgetting Europe, forgetting Scotland, and forgetting the political MacGuffins, that’s your choice. I tend towards preferring smaller government, and I imagine many of you do too.
We’ll be looking at the parties’ plans in a lot more detail in the next issue of MoneyWeek magazine. And next week, we’ll also be letting you know more about our special project to keep MoneyWeek subscribers informed of exactly what the result means for their finances. More details coming soon – but if you’re not already a subscriber, now’s a good time to get in.
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