MoneyWeek is not a political magazine. We aren’t much interested in who belongs to what party; we have no connections to any particular group; and we don’t care who is in government, as long as they act with a degree of competence. So the fact that we often have a go at Gordon Brown and Alistair Darling has nothing to do with how we feel about the Labour party as a whole (we feel nothing).
No, with these two it’s purely personal. We think they’re shamelessly incompetent idiots. Just look at the Pre-Budget Report. The cut in VAT is a classic. It will cut tax revenues significantly but have no effect on spending. Given that a glance online will get you 20%-40% off anything you fancy, who would get out of bed for 2.5%, let alone head to the shops?
Yet while the cut won’t raise the revenues of most businesses, it will certainly raise their costs. Imagine running a small online retailer. This week you found out that it costs around £1,000 to get your site reconfigured to take account of the VAT cut. Or imagine running a pub. The cost of most things you sell has just gone up (alcohol duty) and now you have to get your tills reprogrammed and your menus reprinted too. The total bill? Estimated at about £300m. This is panic policy made up by people who have never run real businesses, never worked for real businesses and never had real jobs. Hopeless. The only silver lining I can think of is that the fuss will remind us that income tax is just the beginning of our tax burden: every time we open our wallets we are taxed again.
We look at the pointlessness of the rest of the report in this week’s issue. But the real point to note is that none of the fiddling will make any difference to our recession. It’s well underway. GDP, house prices, confidence and mortgage approvals are all falling and unemployment is soaring. And, of course, everyone’s terrified of losing their jobs, pensions and houses. Labour likes to say it has no choice but to “do something”. We can’t, says Peter Mandelson, just “stand by and let events take their course”. But why on earth not? Events will take their course anyway. Letting them do so would at least mean that the national debt wouldn’t be headed for £120bn (minimum) next year.
So what do we do about all this? First, ignore all requests from Darling to spend more. Spending got us into this mess in the first place. Second, save what you can to pay the new taxes on the way. Third, use your vote to make sure Brown’s gang of dream-destroyers and meddlers don’t get any more chances to ‘fix’ the economic mess they created. And finally, don’t give up on gold. Conditions might not look ideal for it, in that no one is fussing about inflation any more, but times aren’t getting any less troubled and it is still the only real safe haven – and hedge against sterling collapse – there is.