The current government has done a lot of stupid things in its time.
Doing stupid things is what governments around the world and throughout history have always specialised in, so we shouldn't be surprised.
But the latest stupid thing really takes the biscuit. Having decided to scrap the 10p tax band, Chancellor Alistair Darling has now announced that anyone who loses out will get their money back.
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Let's get that straight. "I'm going to raise taxes, but if it costs you, you'll get a refund."
Actually, now that I think about it, I quite like the sound of that...
The Government has promised those who lose out from the scrapping of the 10p tax band that they'll get their money back.
It sounds daft, but if they decided to roll it out across the entire tax system, I think I could get behind it. My car tax has shot up recently can I get a refund? What about my council tax? Our pensions got hammered by the loss of the dividend tax credit can we get refunds for that too?
Sadly, I can't see the idea taking hold. After all, Labour backbenchers won't be threatening rebellion over tax in general. Tax is great as far as they're concerned the more gravy in the trough, the better. But when you nakedly turn around and rip it from the hands of the least well-off, and worse still, the papers get hold of it - well, it's just not done, is it?
Anyway. It's yet another nail in the coffin of Gordon Brown's career as Prime Minister, whether that comes to an end at the next election or before, at the hands of his own party. All of the problems that were blindingly obvious during his time as Chancellor his stubbornness, his obsession with micro-management - are now finally being recognised.
Why has it taken so long? Simple. It all boils down to that old catchphrase, "it's the economy, stupid," - probably about the most truthful thing that Bill Clinton ever said. The public, the press, and the party were willing to overlook Mr Brown's foibles for as long as the economy was apparently doing well. They were all happy to applaud him for as long as house prices were soaring, credit was cheap, and everyone felt wealthier.
Prepare for the house party hangover
Now that bubble's popped, and the lynch mob is forming. Mortgage approvals for house purchase were down by nearly 50% year-on-year in March. The British Bankers' Association said that the figure 35,417 was the lowest since it started collecting the data in 1997. Think about that for a moment. Half as many people got mortgages. That means half as many houses were sold. Or to put it another way, demand has fallen in half. That doesn't bode well at all for prices.
The mystery is why anyone was fooled in the first place, though. Let's just remind ourselves of this again. Soaring house prices are not a good thing. If rising prices were down to supply and demand (which they weren't, but let's indulge the bulls for a moment), then our apparent inability to build more houses to ease that pressure demonstrates a massive failure of governance. If you can't enable the building of enough property to house your population at a reasonable cost, then you're not much of a government are you?
Brown took credit where it wasn't due
The real reason for rising prices was of course, the free and easy availability of credit. You could pin this on the Bank of England and banks generally. But you have to remember that the BoE's inflation target was set by the Government. And let's not pretend that the Government was unhappy about over-inflated house prices. The fact that prices have risen by 180% in ten years has been cheerily cited by our leaders as evidence of a healthy economy, not as evidence of a chronically indebted and vulnerable population.
Even now, both Mr Brown and Mr Darling, keep making increasingly blatant attempts to influence the ostensibly independent BoE's decision making. Both have noted that interest rates have room to fall further, usually just before a rate-setting meeting. They know that their political survival depends on house prices not falling.
But as I've already explained this week, their attempts to shift the markets with the Bank of England's £50bn will come to nothing (see Why £50bn isn't enough to make banks cut mortgage rates). And this latest U-turn on tax has just left them looking more confused and out of control than ever.
It's a valuable lesson for all politicians. If you decide to hitch a ride on a bubble when it's on the way up, make sure you remember to bring a parachute for when it inevitably pops.
Turning to the wider markets
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The FTSE 100 gained 48 points to close at 6,083. Pharmaceutical stocks were among the risers after GlaxoSmithKline's results arrived in line with hopes.
Across the Channel, the Paris CAC-40 rose 72 points to end the day at 4,944. And in Frankfurt, the DAX-30 gained 66 points to 6,795.
On Wall Street, US stocks rallied a little as aircraft manufacturer Boeing posted a better-than-expected quarterly profit. The Dow Jones rose 42 points to end at 12,763. The broader S&P 500 closed 4 points higher at 1,379, while the tech-heavy Nasdaq gained 28 points to close at 2,405.
In Asia this morning, Japanese stocks slipped back as steelmakers were hurt by fears of rising raw material costs. The Nikkei 225 fell 38 points to 13,540.
Crude oil was trading at around $118.11 this morning. Meanwhile Brent spot was trading at $116.45.
Spot gold was had slide to trade at around $905 an ounce this morning, while silver was trading at $17.12. Platinum hovered around $2,000.
Turning to forex, sterling was trading at 1.9791 against the dollar, and at 1.2487 against the euro. The dollar was last trading at 0.6312 against the euro and 103.68 against the Japanese yen.
And this morning, Bloomberg suggests that a two-day strike at Grangemouth oil refinery looks set to go ahead this weekend after talks between the Unite union and Ineos Group broke down. It would be the first strike at a UK refinery in 73 years. Grangemouth is the UK's sixth-biggest refinery and supplies about 95% of the fuel used in central Scotland.
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Across the Channel, the Paris CAC-40 rose 72 points to end the day at 4,944. And in Frankfurt, the DAX-30 gained 66 points to 6,795.
On Wall Street, US stocks rallied a little as aircraft manufacturer Boeing posted a better-than-expected quarterly profit. The Dow Jones rose 42 points to end at 12,763. The broader S&P 500 closed 4 points higher at 1,379, while the tech-heavy Nasdaq gained 28 points to close at 2,405.
In Asia this morning, Japanese stocks slipped back as steelmakers were hurt by fears of rising raw material costs. The Nikkei 225 fell 38 points to 13,540.
Crude oil was trading at around $118.11 this morning. Meanwhile Brent spot was trading at $116.45.
Spot gold was had slide to trade at around $905 an ounce this morning, while silver was trading at $17.12. Platinum hovered around $2,000.
Turning to forex, sterling was trading at 1.9791 against the dollar, and at 1.2487 against the euro. The dollar was last trading at 0.6312 against the euro and 103.68 against the Japanese yen.
And this morning, Bloomberg suggests that a two-day strike at Grangemouth oil refinery looks set to go ahead this weekend after talks between the Unite union and Ineos Group broke down. It would be the first strike at a UK refinery in 73 years. Grangemouth is the UK's sixth-biggest refinery and supplies about 95% of the fuel used in central Scotland.
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The UK will be in recession by next year
- Growth in the UK seems to be holding up pretty well, but all that is likely to change. Jeremy Batstone-Carr looks at the ongoing credit crisis, the mortgage market, employment and savings, corporate profits and the problems in the public sector. To find out why the UK is rapidly heading for recession, read: The UK will be in recession by next year
What to do with your money during the bear market
- According to a Merrill Lynch survey, 53% of U.S fund managers think a recession in the next 12 months is unlikely. It's this foolish optimism that is going to make the coming downturn even worse. Dr. Mark Faber predicts that the future is a bear market similar to 1974/73, where, although rallies are possible, over the long-term we are heading in one direction: down. To find out what he suggests you do with your money during this period, click here: What to do with your money during the bear market
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