UK Budget 2009.

Sorry for the delay but by an amazing co-incidence this home help person was scheduled to turn up 30 minutes after the Budget speech and was late, but more of that later.

There isn't much to analyse in this year's Chancellor's speech because it was less of a budget and more of a reading of a roll-call of the dead. Alistair Darling began by announcing that the predictions he made in November's pre-budget report were inaccurate to the point of being delusional. He went on to predict that the UK economy will shrink by an unprecedented 3.5% which is worse then even I expected. He also announced that national debt will rise to £175bn or 60% of GDP. Assuming that this prediction itself is not overly optimistic then it means that Britain has one of, if not the worst levels of national debt in the developed world. Following an announcement like that it was impossible to announce anything other then a budget of managed decline. This began with some quite dramatic cuts including;

• 0.4% cut in public spending which is the equivalent of around £15bn and will come mainly from health and education.

• £9bn in "efficiency savings" from the civil service. Although some of this will come from the stopping of buying new equipment it is mainly a diplomatic way of saying that most of the civil service's pet project will now be stopped.

• Crucially no cuts were made to the bloated public sector pension scheme.

These cuts were followed up with equally dramatic tax increases including;

• A 10% increase in the higher rate of income tax.

• A reduction in pension tax breaks for those earning over £150,00.

Combined these spending cuts and tax increases are predicted to save around £28bn and allowed for some small new spending plans including;

• £2bn to help get the unemployed back into work. The idea of this is to further reducing spending by getting people of benefits and back into paying tax. While the former will certainly happen the latter will only be possible if there are jobs there for them to go into.

• £500million for house builders and £80million for house buyers. This close to an election these measures make the budget look like an anointment of the Conservative Party to form the next government

There have also been the standard increases of tax on alcohol, tobacco and fuel but the most interesting part of the budget gives you a clear idea of who really wrote it. Amid all these cuts an extra £50million has been found to spend on the military. That will keep the men at arms happy and shows that the UK economy is under military control until at least the next General Election.

This makes it a good time for me to explain to these military types the principle of opportunity cost. This very basic principle of economics states that the success or failure of an activity can only be judged after it has been weighed against the cost of not taking another path. In my case this means that the £30,000 the government has saved needs to be weighed against the £15bn it has spent. To put it another way, from this point forwards not only can Britain not win there is nothing they can do to break even. That's a shame because it doesn't need to be this way.