Brown's fiscal stimulus has failed

Is the title of this post premature? I don't think so.

The centrepiece of Brown's fiscal stimulus was his £13 billion VAT cut, reducing VAT from 17.5 percent to 15 percent. Cameron has called the temporary tax cut an "unbelievable and expensive failure," and I see no reason to disagree. Why on earth Brown thought a meagre, regressive tax cut would help stimulate the British economy is beyond me.

With stores offering discounts of anything between 20 and 75 percent as the norm, a poxy cut of 2.5 percent is not going to entice me or any body else to whip out the plastic and go on a Brown-esque spending splurge. Instead, people have been spending as they were before the VAT cut was introduced and just pocketing the savings - however small. How is this a stimulus?

This of course favours the wealthier more than the poorer as it will be the wealthier buying the higher end luxury goods where 2.5 percent actually will equate to savings in pounds rather than pence. So much for Labour being the party of the poor, hey Gordon?

But what criteria should we be judging the fiscal stimulus by?

Helpfully, the answer was provided by the Chancellor of the Exchequer, Alistair Darling on the 24 November 2008 when he announced his Pre-Budget Report to the House of Commons. Darling said:

"... output will continue to fall in the UK for the first two quarters of next year. But then, because of decisions taken in this pre-Budget report, I expect it to start to recover and GDP growth for 2009 is forecast to be between minus 3/4 per cent. and minus 1-1/4 per cent."

So there we have it, from Eyebrows himself, "decisions taken in this pre-Budget report," such as the fiscal stimulus, will ensure that the British recession is shorter and shallower than it otherwise would have been and thus the British economy will recover in the third quarter of 2009. This is the criteria we must use to judge whether Brown has been the Saviour of Britain (never mind the world).

But hang on a minute, didn't Brown acknowledge at the weekend to Andrew Marr that the recession could last as long as two years? Yes he did.

And didn't Eyebrows himself insinuate, in an interview today with the FT, that his growth forecasts delivered last November were too optimistic and will thus have to be revised in this year's Budget? Yes he did. Darling said those projections were “based on the evidence we had at the time.”

Evidence we had at the time? Let me give him the evidence of this time... the government has gambled billions of pounds on a worthless, temporary fiscal stimulus that has failed to work based on Brown and Darling's own criteria for success - a short, shallow recession - and now Joe Public is screwed as we will be faced with higher taxes to pay for Labour's 1970s, big state, failed solutions. Brown's "doing something" equates to nothing short of an economic cock-up.

Not content with pouring billions of pounds down the drain in 2008, there have been reports that Brown is considering a second bailout and a second fiscal stimulus.

That is just what we need. The prospect of a second failure and even higher taxes to follow (on top of those already announced) to pay for Brown's desperate gamble to cling to power at whatever cost to Britain's economic recovery!

We need a general election before Brown does even more damage.