Osborne must know he can't tell the oil companies how to behave

This is economics at its most basic: the burden of tax can be shifted.

Apparently, the Chancellor is going to be "watching like a hawk to make sure that motorists get the benefit of the Budget changes and make sure that there's no funny business". Sorry, but I don't believe a word of it.

George Osborne is going to be watching like a dove: perhaps even a pigeon. What is he going to do? Give the oil companies a big ticking off if they raise prices? What information does he have about their costs? We learned many years ago that prices policies don't work.

This is economics at its most basic. It's what we teach in the very first class -- that the burden of a tax can be shifted. Consumers will inevitably end up paying at least some proportion of the tax increase because they have no alternative to petrol. And Slasher Osborne is powerless to do anything about it.

It reminds me of the announcement that he made when he was shadow chancellor, that he would go after banker's bonuses. It was just political rhetoric: he had no intention of following through in office, as it would have amounted to a private-sector incomes policy. We know that incomes policies don't work in the private sector: there are too many ways to get around them. You can promote people into made up positions, for example.

Meanwhile, the incomes policy in the public sector, as is currently being implemented with a wage freeze for higher-paid workers, will inevitably lower the quality of public-sector services. That may well be his intention: freezing wages in the public sector makes jobs in the private sector more attractive.

The tax on the oil and gas sector will have another likely effect -- the industry will lower its investment. This will be bad for growth, given that the Office for Budget Responsibility (OBR) is forecasting that business investment is a major driver of growth going forward. Indeed, the OBR is forecasting that investment will grow by 6.7 per cent in 2011; 8.9 per cent in 2012 and over 10 per cent in 2013 and 2014, which seems overly optimistic. Can it be that Osborne doesn't care that this tax will drive the oil and gas industry overseas to countries that are more pro-business? Surely not.

All this on the same day that Moody's, the credit rating agency, suggested that the UK's AAA credit rating was in doubt because Slasher's policies are likely to lower growth. Here's what it had to say:

Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK's sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a AAA rating.

Interesting.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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