The Tea Party is gazing lovingly across the Atlantic, with saliva drooling across its chin, at David Cameron's massive program of state-slashing -- bringing the biggest cuts here since the 1920s. But yesterday, there was a moment when his finance minister George Osborne was unveiling his annual budget yesterday when it seemed, for a second, as though he had glimpsed where he has been going so badly wrong -- and why, every time he announces his policies, Britain's growth rate collapses further. He held up Ireland as a warning-country, an example of a nation descended into disaster.
Could it be...? Had he learned...? Until now, Osborne had held up Ireland as the "shining example" that he wanted Britain to emulate. Before the Great Crash of 2008, he said we should copy its model of tossing regulation for the rich onto a bonfire and reducing taxes on corporations so dramatically the country was classed by some as a tax haven. "Look and learn from across the Irish Sea," he boomed.
And his admiration didn't end there. After this model collapsed into rubble, instead of becoming wary, he held up Ireland's response to the recession as his next great lodestar. The Irish government responded to the Crash by making slashing their debt their first, second and third priority. They massively cut public spending, at the same time as increasing taxes on the middle and the poor. The result? Ireland is now enduring the worst economic collapse of any developed country since the Second World War.
But as the budget speech went on, it hit me. Osborne can note Ireland's collapse with sadness -- but he is still religiously following their example, as if it all worked out beautifully over there. Osborne's budget was an enthusiastic mash-up of pre-Crash and post-Crash Irish policies. From before the Crash, he took the idea of dramatically slashing restrictions on corporations and the super-rich, in the belief that this unleashes the magical power of the market, rather than implosion. From after the Crash, he took the idea of making a panic-payoff of our debt his over-riding purpose. (Never mind that Britain's national debt has been higher as a proportion of GDP for 200 of the past 250 years). We don't need to guess where this leads. We can simply, as Osborne recommended once, "look and learn from across the Irish Sea."
The primary effect of this budget will be to dramatically redistribute wealth. That sounds good, until you realize the wealth is being taken from the middle class and the poor, and handed to the only people Osborne has ever really known: the super-rich. This trend has been going on for a long time. Since the election of Margaret Thatcher, the value of wages has declined from 65% of GDP to 55%. (A similar trend has occurred as the US has been Reaganized). Where did it go? The rate of corporate profit -- given to wealthy shareholders -- has increased from 13% to 21%. The money has gone from people like teachers and small business owners, to people like George Osborne, who own big companies, and has millions of inherited and unearned pounds stashed off-shore.
Yesterday, that process of redistribution away from the middle class was supercharged by the Tea Party's poster-boys. The budget was "fiscally neutral", meaning the overall level of tax in the economy remained the same. But money was reshuffled -- from one class to another. The huge cuts to corporation tax are being paid for by ordinary Brits, in higher VAT, and worse public services. The middle pays more, so Tesco and Sainsbury's and huge corporations can take more. This isn't about attracting inward investment - countries with higher corporation taxes than us attract more, by having highly trained and skilled workforces. No: it's about an inward transfer of wealth.
I doubt there was a single person who woke up on Wednesday morning, looked out across Britain, and thought: "I know what's wrong with this country. Vodafone pays too much tax." But George Osborne has acted on this belief all the same -- in part because he genuinely seems to have no idea what life in Britain is like. He said recently that his school, St. Paul's (annual fees: $60,000 a year) was "incredibly liberal. It didn't matter who your parents were. Your mother could be the head of a giant corporation -- or a solicitor in Kew." (Kew is a wealthy part of London: it'd be like claiming a school in Manhattan was liberal because it had kids from the Upper East Side.) That's his internal vision of the social spectrum in Britain, with those pauper solicitors in Kew begging at the bottom. No wonder he doesn't understand that (say) slashing rent subsidies will turn 200,000 poor people out of their homes in London alone. He thinks they can take it: the rich need more.
Osborne tried to mask this naked class interest with a few distraction-baubles. Private jets will have to pay tax on their fuel -- a cost so small the super-rich who own them will barely notice. Mega-rich non-doms who have been here for 12 years will have to pay £50,000 -- a rate of tax far lower than their secretaries. Hilariously, Osborne then started talking about charity and said "we will encourage the rich to give more." As the journalist Caitlin Moran tweeted: "I know a brilliant way to do that -- taxation."
The rest of the budget was marked by naked dishonesty. David Cameron promised to lead "the most family-friendly government in Europe", but he has jacked up the cost of childcare, stripped tax credits from a million families, and now taken away the right to even request flexible working. He promised "the greenest government ever", but he just made it even easier to run the most polluting cars today, while his Green Investment Bank can't act until 2015. Osborne promised a crackdown on tax avoidance, but in reality he is sacking 25% of our tax inspectors - even though each inspector on £50,000 a year brings in £1.5m for the British people.
Through it all, the Liberal Democrat leader Nick Clegg -- who put the Conservative sin power by forming a coalition with them -- sat there like James Caan in the film Misery, awakening from unconsciousness to find his legs are broken and he is held captive by an axe-wielding maniac.
This was a budget that abandoned everything we have learned about economics since the Great Depression of the 1930s. We discovered then that in a recession, consumers -- quite rightly -- cut back their spending and save more. But if the government does the same thing at the same time, then nobody is spending, and the recession only gets worse. George Osborne is cheerfully doing just that, while humming a rare old Irish mountain tune. Can you hear that terrible sound? It's John Maynard Keynes, spinning and howling in his grave.
Johann Hari is a writer for the Independent. To read more of his articles, click here or here. You can email him at j.hari [at] independent.co.uk
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