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WPP return a sideshow; the Plan A fundamentals leave Osborne more worried than he looked
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Post
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24 March 2011
Martin Sorrell's announcement that he will bring his WPP HQ back to the UK was a dramatic and welcome coup ... for Martin Sorrell.
To get to the top of the news was evidence of a nifty spin team, and the lack of an obvious 'Budget Day +1' talking point to get the chatterati going.
In first leaving London, and in now saying he might come back, Sir Martin has made himself more of a player than he would have been had he just sat around moaning about things. He has also attached a few strings which, George Osborne having leapt upon his announcement, the Chancellor will feel extra pressure to adhere to.
Osborne did not have a lot to play with, and his MPs clearly thought he made a good job of a bad hand. But the reality is that in the coming months, last year's austerity Budget will have more impact on people than yesterday's.
The Chancellor will have greeted every headline that focused on fuel prices, tax changes, enterprise zones or his 'fuel in the tank of the economy' closing soundbite as something of a bonus; because he is desperate to shift his economic strategy buzzword from cuts to growth. Alas of growth, there was precious little sign yesterday - the real tale of the Budget - and even less of an indication of where it is all going to come from.
Indeed, lower short-term growth, rising inflation and higher than expected medium-term borrowing were among the fundamentals that formed the backdrop to yesterday's events. All of that means the Chancellor's polished (if over political) performance will soon be forgotten and the actual impact of his emergency budget last year on jobs and services will continue to drive the economic and political debate.
He made much of not needing to add to the pain he announced last year. But he knows the actual pain of last year's announcements, for many, is yet to come. He knows too that though Martin Sorrell may have given his blessing to the corporation tax cut by announcing plans to rush back to blighty, a penny off fuel is not going to get everyone else rushing to the shops.
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Many say irony died with Henry Kissinger won the Nobel Peace Prize but I think its corpse got a good kicking again yesterday when Osborne started talking about a society being judged by the compassion of its people.
And then he serves up the same old dreary, supply side dogma – make things as cheap and easy for business as possible and everything will turn out fine. As for the people that work for them (or more to the point, don’t, given the current economic situation), well your welfare, aspirations and wellbeing aren’t really worth a mention since you are just fodder to feed the machine. Oh hang on have a net minus 2p saving on petrol, that’ll keep you quiet.
Did anyone else notice that someone appears to have cut a couple of inches of Gideon;s trousers. Cuts cuts cuts. Either that or he is wearing an old pair from whem he was growing up with Dave in Bullingdonland. At least his colleagues looked embarrassed when he said we were all in it together
Saw you striding purposefully up Whitehall yesterday. Hope you were on way to help Labour start landing blows on these people. Ed did ok yesterday, but they are still getting away with murder. At least Clegg looked out of it. One down …
Osborne doesn’t need a spin doctor … he has Nick Robinson
The economic policy of the Tory-led government has clearly failed.
Inflation is at 4.4%. Unemployment 2.5m. GDP contracted 0.6%.
Growth will be only 1.7% this year. Public sector borrowing will be £44.5bn higher across the parliament. Unemployment will be higher every year from now.
This is all because of premature retrenchment. Britain is facing years of sluggish growth.
Private sector will not be able to create as many jobs as expected. Inflation will be high. Debt will reach £1.36tr. Benefits costs will go up. Deficit will remain higher for longer.
Only over 3% growth will save Mr Osborne. But where will that come from?
Huge redistribution of wealth from the poor and middle classes to super-rich is taking place. At the same time the government is remodelling Britain against the wishes of the majority.
There is no economic need for £111bn of cuts and tax rises. As Jonathan Portes has said, the real hit to credibility comes from sticking to unsustainable policies.
Britain´s underlying growth rate has remained unchanged at about 2% for a century or more. Larry Elliott wrote in the Guardian that it is hard to imagine Osborne´s plan working.
A combination of public sector job cuts, pay freezes, inflation and tax increases mean low consumer confidence.
According to recent IPPR paper 1.5% growth or below is the point at which the Treasury should draw back from deficit reduction.
In the midst of oil price shock, eurozone debt and crisis in Japan, austerity is not the right tonic for the UK economy. It will only make a bad situation even harder.
For growth, we need smart government and modern industrial policy.
George Osborne is taking unnecessary risk with his neo-Thatcherite approach. He is cutting too far and too fast. A plan B is needed.
The cuts will come with huge economic and social cost.
But there will, of course, always be David Cameron´s Big Society to take care of those hit hardest..?
Ps. One more thing. George Osborne claimed on Tuesday that Labour placed all bets on the financial sector. This is not true. The financial sector brings in only 11.2% of the UK´s total tax take. Banking sector takes up 10% of GDP, manufacturing 14%.
‘Sat around moaning about things..’ Sounds familiar.
I see that winter fuel allowance for pensioners is being cut, although it was not announced in the Budget.
What happened to “Watch my lips” Dave’s promises before the election, and his denouncement of Labour’s “lies” that the allowance was not safe in Tory hands.
No wonder it wasn’t spoken about in Parliament. One for PMQ’s, maybe.
Thanks to Rosie for drawing attention to the cut in Winter Fuel Payments. Having checked it out, I see that my 98 year old father will lose a massive £100 from his Winter Fuel Payment.
So far they’ve succeeded in keeping this quiet but it should be widely publicised and it’s something to write/email your Tory or LibDem MP about.
Strange how Sir Martin Sorrell said nothing more than WPP would “look” at moving back to the UK subject to (1) board of director and (2) shareholder approval and (3) enactment of legislation. Pretty much nothing binding had been said at all. You would not think so from the attention it has received around the media.
Stranger still then that some savvy tweeters had all come to the conclusion that WPP had already signed a lease in Canary Wharf and used similar words to tweet as much all unconfined by what Sir Martin had actually said. Then George Osborne flies in to the Today Programme chirping the same mangled WPP song. Sadly the BBC helpfully joined in this dawn chorus with some undeservedly harmonic reporting based on a slightly over- optimistic assessment of the facts.
It may well be that WPP will move its HQ back to the UK. Recent Corporation Tax changes will mean that it will only pay UK tax on about 10% of its worldwide earnings and will benefit more than most UK companies from them. If WPP does return that is also good for the UK as we need them. Lower tax rates can give greater tax yields, but there are unlikely to be many more WPP birds out there in the subsidised Irish tax bush. At best the CT and other Budget changes will be a slow-burn incentive to inward investment in the UK and they are unlikely to stimulate any much-needed real growth spurt.
What really sticks in the craw, though, is the discordant pro-Government post-Budget propaganda wrung from a heavily qualified and apparently premature announcement of WPP’s return to the UK nest. It may have enabled the Chancellor to big-up the effect of his Budget on as yet unknown other business organisations which may include some that had already signed up to the Tory manifesto before the Election. It has, however, obviously taken its toll on George Osborne’s larynx and has left him struggling to hit any really convincing Budget high notes.
*(Not) Tagged: “tweeters” “tweeting” “dawn chorus” “budget” “for the birds”*
What a complete load of tosh! You say “the government is remodelling Britain against the wishes of the majority” and yet say nothing about the social engineering undertaken by Labour. 3 million immigrants without schools, hospitals, education facilities plus all of the staff. Labour has managed to put the appropriate ‘controls’ into place to completely ruin the economy; Brown has put so many poisoned pills there it will take years to work them out of the system.
The public sector hasn’t seen the pain of cuts yet, they have been trimming around the edges and somehow have managed to not cut all the quangos as promised.
I was greatly pleased that there was nothing for the chatterati on Budget Day + 1. This was indeed a “nothing” Budget and excellent for that. After Brown’s pointless micromanagement it’s great to have a government trying to keep out of people’s daily lives.
As usual Chris I’m not sure whether, behind the cheap Gordon Brown insult, a valid point is being made or not. Are you saying that the best kind of Budget is no Budget? Are you also saying that this government is keeping out of people’s daily lives by, for example, making a drastic cut in the winter fuel allowance which it promised, pre-election, not to touch? And when you talk about the chatterati do you include people like yourself who use this blog? No doubt you’ll elaborate and back up your argument with lots of facts. Otherwise people like me might be wondering what exactly you are saying.