You’ve probably guessed by now that I’m no economist. When I listen to the conflicting stream of drivel so many of them spout, I’m proud of that. However, I am a thinking voter and like to judge for myself in as far as I can with out a BSc. I’ve also learned to think of Paul Daniels whenever the British Treasury tries to tell me something. It’s amazing how they make things appear and disappear at will while wearing a fixed smile.
Today we’re told for example that the SNP plan of cutting corporation tax will take money out of the national account and will lead to tax increases or cuts to services. (Take your eyes off Debbie. She’s the distraction). That seems plausible enough…cut the tax rate and get less cash in. Our other glamorous assistant, Danny helps to convince us by saying the same methodology that led to this deduction was used by the Treasury, so it must be British copper-bottomed, fair and accurate.
But here’s where they pull the silk cloth away and, hey presto, what you thought was true isn’t.
It’s only two weeks ago that the Chief Magician Osborne pulled his magical stroke by declaring that he had put in place a quiet revolution by systematically cutting corporation tax to one of the lowest in the western world, from 28p to 23p, next to 21p and down to 20p over the next two years. But surely, you ask, the Treasury says to Scotland that cutting this tax rate will lead to budget cuts and loss of services, so why doesn’t that principle apply to London’s Magic Circle, too?
The answer is that it originally did. Analysis by HMRC only considered the direct effect on the public purse without taking into account the wider economic impact.
When they were factored in it was realized that the cut led to higher investment, economic growth and wage rises, according to the Chancellor. So he told HMRC to change its methodology to suit him. Asked why he ordered HMRC to change its methods at this time, Mr Osborne said he “wanted to begin a quiet revolution in how people think about these things” and they would apply the same principle in future to other measures like raising personal allowances and scrapping fuel duty rises. He calls it “dynamic modelling”.
It’s what the rest of us call “common sense”. There is a consequential effect which compensates for the cut. If you are a retailer, you cut the price in order to sell more. Simple.
So it’s sleight of hand for the same Treasury not to apply this so-called dynamic modeling to Scotland’s tax cutting plans while using it for their own. But that would be mature and intelligent and aid the debate and we can’t have that when the game is to lie, lie and lie again to keep Scotland in the British state. How I’d love us to pull a rabbit out of the hat next September.by