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Less Tax, Less Spend

In Economy, Home Affairs on March 21, 2012 at 9:55 am

By polarii for The Daily Soapbox –@polar_ii

Today is Budget Day. All Westminster is on tenterhooks, looking forward to a relatively dry state from George Osborne about the state of the nation’s finances and his plans for the next few years. Anyone who’s been vaguely following the political news, whether in newspapers, in blogs or on TV will know the key issues in this Budget. Should Osborne cut the 50% upper rate of income tax (more specifically, can Osborne survive the political backlash by pointing to more revenues)? Should we introduce a new sort of wealth tax, either directly on wealth or on property? Should the income tax threshold be raised, and by how much?

I’m going to leave most of the economic arguments to one side and look at three political shifts since the last Budget.

1) The Liberal Democrats no longer have much influence at the Treasury

This year, the Liberal Democrats decided to make their positions on the Budget public. Essentially, they conducted Budget negotiations in full view. This has turned out to be a poor move. By tabling proposals for a mansion tax before anyone else had proposed anything, they had plenty of time to be savaged. The wisdom was once that the Lib Dems would not permit Osborne to remove the 50% tax rate without a huge concession like a mansion tax. Now, all it looks like Osborne will do is promise to close some tax loopholes on first homes (something he has promised to do before). Although Nick Clegg and Danny Alexander make up half the ‘Quad’ that negotiates the Budget, they have been comprehensively out-manoeuvred by Osborne and Cameron. The Conservatives are much closer to owning the idea of income tax threshold rises. They’ve avoided a mansion or property tax. The ‘Green Agenda’ has almost vanished from view. Unless Osborne surprises us today, there will be very little the Lib Dems can claim as their handiwork in the Budget.

2) VAT is off the table

Remember the heady days of 2010? The UK had its first Coalition government, Clegg and Cameron were making happy love in Downing Street’s Rose Garden, and George Osborne presented his emergency budget. In it, of course, he raised VAT to 20%, much to the consternation of the Labour party. Labour still want to reverse it, but only temporarily (at least, this is what they’re five-point plan says). Given that VAT is a regressive tax (the poor pay a greater share of their income in VAT than the rich) and it’s a tax on consumption (i.e. buying things), you would have thought that there would be widespread consensus against it becoming higher with a stagnant economy. However, someone has clearly won the argument for it – whether it’s the extra revenue it brings in for comparatively little impact on people’s pockets or the need to rebalance the economy away from consumption and towards production – and now Labour backs, in the long term, the 20% rate. It’s a U-turn they have managed with considerable deftness. But no-one is seriously suggesting cuts in VAT. Osborne’s won the major tax policy battle of the 2010 Budget with comparative ease. Perhaps this has emboldened him with the 50% tax rate?

3) No-one wants to talk about the cuts

As we know, this government is cutting. There are arguments about whether it is cutting too much or not enough, too fast or not fast enough, whether its cutting in the wrong place etc. George Osborne enjoyed a surplus of about £5bn since his last budget, meaning he has cash to throw around. And everyone seems to want him to throw it at tax cuts of one sort or another. Admittedly, in the grand scheme of things, £5bn is not a huge amount of money. It’s 1% of government expenditure, worth about somewhere between a half and a third of the international aid budget or maybe 1 in every 40 pounds spent on welfare. But there are certainly things Osborne could do with it. He could reverse the planned 20% cut to the non-means-tested disability benefit DLA (a cut which, incidentally, there is absolutely no evidence to suggest is desirable or sustainable) – this is planned to save just under £2.2bn. Admittedly, Osborne cannot do much with regard to reversing his cuts. But he could use the option to do something totemic but relatively inexpensive. Such as preserving the DLA budget as benefits for disabled people are reformed. But again, no-one is making the case for public spending cuts to be reversed over tax cuts. Maybe this is because people enjoy the idea of a tax cut more than they enjoy the idea of disabled people having enough money to live on, but this is perhaps too cynical a view. More likely is that everyone sees Osborne’s mandate is now so closely tied to the cuts set out in 2010’s Comprehensive Spending Review that going back on one element, no matter how good the arguments for going back, will fatally undermine his credibility.

What we can see then is this: Osborne’s Budget 2010 has shaped today’s political landscape. The direction he took in that Budget meant that any discussion about any other Budget before the 2015 election would be about tax and not spending. The Conservatives, as a low-tax party, will always enjoy the advantage over Labour and the Liberal Democrats when it comes to cutting taxes; just as Labour, a high-spend party, will always have the advantage when talking about spending. Perhaps this is why Miliband and Balls feel so out-of-place this year, with the Shadow Treasury Team reportedly having no comeback to Osborne despite practically knowing  his Budget in advance: Osborne has simply moved the debate onto territory with which they are completely unfamiliar and profoundly uncomfortable, and they cannot wrest the narrative away from tax cuts to spending cuts. 

In the long term, of course, Osborne’s reputation is tied to whether Budget 2010 works in the long term. But there are so many factors beyond his control in that consideration that there will be plenty of wiggle room if it doesn’t work. The strategic victory Osborne has brought about is actually to move the debate away from where New Labour had it (i.e. on what do we spend more money) and towards where the Conservatives want it (i.e. what taxes do we cut). If the tax cuts in Budget 2012 are well-chosen, Osborne can entrench this attitude. And that entrenched attitude will be the greatest asset for the Conservative party come election time in 2015.

Miliband Wordsearch

In Economy, Events, Home Affairs, Ideology, Party politics on January 10, 2012 at 2:56 pm

By polarii for The Daily Soapbox – @polar_ii

Here’s a ‘wordgram’ from Guido Fawkes of Ed Miliband’s set piece on the economy. The bigger the word, the more times Miliband said it. What words are missing that should be there?

1) Squeezed Middle

Yes, Miliband’s definition of ‘middle’, which encompasses 95% of the population, is probably a bit off. But the idea has legs. Most people (unsurprisingly) consider themselves average in terms of income, so talking about ‘the squeezed middle’ enables a large number of people to identify with Labour’s message. Since most people (according to polling) think the cuts are unfair, this idea is one that Labour can make easy headway in pursuing. Miliband has particular reason to pursue it because it was his initial idea.

2) Producer v Predator

Again, a Miliband theme which has some potential. People are clearly in favour of companies that ‘contribute’ to the economy and against those that ‘strip’ it. Again, let’s ignore difficulties in defining which companies are goodies and which baddies; it’s an idea that people makes people say “Ed’s on my side” and “Ed want an economically and morally healthy economy”. No gold in this speech however, as ‘Kremlinology’ (one mention during Q&A) gets a look in ahead of ‘predator’ (no mentions).

3) Vision

The word doesn’t need to be ‘vision’; it could equally be ‘goal’ or ‘future’ or ‘plan’ or even ‘hope’. Miliband does have some good points on the ‘fairness’ theme, but these will ultimately not carry home when the public thinks the cuts are necessary (see link above) and Labour is not really offering a detailed plan, nor offering a vision of where the future of the country lies. The lack of vision is the most important factor, I think, in why the Labour party seems so ethereal. It is concerned more about the future of Labour than the future of the country. This is particularly brought home by a recent BBC headline: Miliband has ‘a clear plan for the Labour Party‘ – he is focussed on the party not on the country. It’s not an inspiring or winning strategy.

Miliband needs to risk something beyond the bland, managerial pitch (the words here are certainly managerially bland) and go for a full-on idealistic vision. At this stage, it doesn’t matter that the rhetoric – whether on Squeezed Middle, Producer v Predator or a vision statement – doesn’t quite correlate with specific policies or even reality. Ed Miliband needs to do more than capture our attention. He needs to capture our imagination.

A Collection of Thoughts

In Economy, Europe, Events, Foreign Affairs, Home Affairs, Party politics, The Media, Uncategorized on December 17, 2011 at 7:14 pm

By polarii for the Daily Soapbox – @polar_ii

So here’s time for a big apology to any regular readers – between us all at the Daily Soapbox, we haven’t had any time to put down some ideas for a blog post. That’s not for want of things to say (and how much we have wanted to say!), but for lack of time. So it’s our fault for not finding time. Sorry.

If you want the blog to be fuller, and you enjoy what you read, and maybe even reckon you could do better, why not join us? Email: dingdongalistic@gmail.com and we’ll set you up as the latest Soapbox contributor.

So to kick us back off, here’s a couple of thoughts from my ice cave in the Arctic… or Germany, as everyone outside the BBC calls it.

Euroscepticism

Why has everyone forgotten Cameron is a bona fide Eurosceptic in his own right? Sure, he doesn’t foam at the mouth with quite the aplomb of Daniel Hannan, but this is a good thing. In the Conservative leadership election (in the heady days of 2005), he was elected on and later delivered a promise to take the Conservative party out of the EPP and form a soft-eurosceptic bloc, which was further than David Davis (who is more ‘right-wing’) was prepared to go. While ConHome and others have been whingeing about the lack of a referendum, Cameron has managed to a) move the European issue to a more central stage while b) uniting his historically divided party behind a moderate Eurosceptic stance and c) not banging on about it. Clever or what?

A further thought: Labour wouldn’t have signed up to these agreements either, but that’s not half the fun of it. These agreements will enforce a statutory deficit-limit stricter than the ones in the Maastricht Treaties. The Maastricht Limit is 3% of GDP, so presumably the Merkozy limit will be 2% or 2.5%. But Labour’s ‘Darling Plan’, even on their own (overly optimistic) reckoning, will only halve the deficit over four years. Our deficit is currently about 10% of GDP. In the event that Britain was bound by the Maastricht or Merkozy Treaties, Labour would have no plan to bring the deficit within the legal limits. Brussels would throw Labour’s budget back in their faces, impose hefty fines, and tell them to follow Osborne’s plan. Now who thinks Merkozy’s scheme is in our national interest?

Euro

The charge levelled against Cameron is that he has left Britain without allies. This is, of course, untrue, because most every country outside the EU is taking a position very similar to Britain’s, especially the United States.

But even within Europe, he isn’t as isolated as some claim. Mads Persson correctly notes that the Irish, French, Swedes, Finns, Czechs, Hungarians and Poles all have not insignificant problems with the agreement as posed (see also this surprisingly excellent Indy graphic). But then, let’s look at some other countries, particularly Italy and Greece. There have been close votes in both parliaments on European issues, and it is not an unreasonable parliamentarian who, having been subjected to EU budget targets for the next ten years, objects to handing over control of their country’s budgets over to the EU for the rest of history. Rebellious parliaments can rebel again, and it’s hard not to imagine Eurosceptic parties like LAOS (Greece) and Lega Nord (Italy) doing quite well in upcoming elections. Of course, I could be completely wrong. But I wouldn’t write anything off either.

BBC

In case you missed the gratuitous sideswipe at the BBC in the preamble, it’s coming again. If you didn’t miss it in the preamble, I am actually going to make a point. The BBC is getting into the habit of presenting things out of context. I’m normally annoyed that the BBC displays institutional (but not conscious) bias against Conservatives and Christians, but others complain about biases in other directions, which I assume means the BBC is doing a decent job (since it’s clearly not doing an atrocious one).

However, there were two glaring errors in this week’s programming. The first was coverage of Cameron’s veto. The one report suggested that the EU was suggesting the UK was separate and even inferior because Cameron was the last to sign Croatia’s accession agreement. The context: all countries sign in alphabetical order. The United Kingdom, being the last country alphabetically in the EU, signed it last. Snub? Hardly.

The other error caused me less apoplexy, but the public more. David Attenborough juxtaposed an Arctic female polar bear making an ice-den (in which polar bears give birth to their cubs) with some polar bear cubs in a den in a zoo in Germany. The seamless transition implied to many people that the BBC was actually filming wild polar bear births. Which is stupid because the cameraman would certainly have his head bitten off if that were the case. Nonetheless, in both cases, the BBC failed to properly explain the context of what was going on, and in each case, their coverage suffered because of it. The BBC is slowly metamorphosing into an institution that doesn’t care about the truth, rather sensationalism.

Leveson

Did you know who Neville Thurlbeck was before the Leveson inquiry? If you did, you read the News of the World regularly. Shame on you (unless you were his colleague or his relative).

On a serious note though, I’ve come to the conclusion that the public doesn’t care. This was evident because, although Ed Miliband made hay with it during the summer, the polls didn’t budge. And neither BBC Parliament nor Sky News is broadcasting Leveson live. It’s a Westminster Village thing.

Miliband

Ed Miliband is a completely unsuitable leader of the Labour party. Everyone who wasn’t in the Labour party knew this as soon as he was elected, yet only now have the socialists collectivised their brain cells enough to realise it. Read around, with people like Dan Hodges getting incredibly close to calling for him to go, if you still think Milibland is cutting the mustard.

However, who is going to run against him? If Ed Balls runs, everyone will laugh. If Yvette Cooper (aka Mrs Balls) runs, she cannot dispose of Labour’s least helpful asset, her husband. If David Miliband runs, Cameron can drag out the feuding brother story indefinitely – a back-to-backstab if you like. The only plausible candidate is Jim Murphy. “Who?” I hear you cry. “Precisely”, say I. Labour don’t have the talent or the policies to win the next election.

Osborne

So now let’s do the same for the Tories. Boris will win London 2012 (somehow), and will step down in 2016. He will win a by-election by 2017, which will give him time enough to be well positioned enough when Cameron goes sometime between 2019-2022. After a term and a half of Boris (for all I admire him, I don’t think he has a sufficiently grand vision to drive the country), the natural choice is Jeremy Hunt, a man of such impeccable composure that it is truly inconceivable he should never be leader of the Conservative Party. For all they seem worlds apart, both BoJo and Hunt are suitably amicably placed with George Osborne and William Hague to mean that they can come in without wholesale change of the top table. Osborne’s best bet is not to run himself, but pick the winner, keep the political strategy as a sideline, and go down in history as the kingmaker and the chancellor who fixed Gordon Brown’s mess.

Unemployment

Once again, I find myself in a statistical quandary. ONS says unemployment went up 128.000 people in November. Yet it says only 3,000 people signed on to Jobseekers’ Allowance. Which gap have those 125,000 people fallen into? They are either a) retiring early, b) decided not to work for the next few years and make home instead, c) in receipt of a sufficiently generous redundancy package to make claiming JSA unnecessary, or d) moving their labour into the ‘black market’ – taking cash payment and not declaring it to the Exchequer. Now, most people won’t be doing a) given how poorly pensions pots are performing. The general move of our culture has been away from b) for some time; there can’t be too many people who worked for long enough at a high enough wage to be in position c), so thousands of people are in position d). Really? Or are the unemployment figures inflated by people who otherwise wouldn’t be reckoned as part of the workforce (e.g. students) taking part-time jobs and then losing them?

I’ve come to the conclusion that the more important figure is the JSA claimant count, which is about 1.60 million. So hardly as bad as the 2.64 million Labour like to moan about. Incidentally, in 1992, pretty much everyone who was unemployed according to the statistics was also a JSA/Unemployment benefit claimant. By 2001, the gap between unemployed and claimants was 0.5 million, and now it is now over 1 million. I’ve had no brainwaves about why this gap is increasing so quickly. Any ideas?

The Big Society, the market, and society: why deficit reduction might actually be a good thing

In Economy, Events, Ideology on July 28, 2011 at 2:07 pm

David Weber

I must admit that I originally intended this to be a full response to James Bartholomeusz’s recent article on working class politics and welfare reform. However, while reflecting on his various arguments, my response to his comment underneath the article quickly became feature length, and an article in its own right:

The problem is, [the Big Society] dovetails a little too nicely with the market fundamentalism that got us into this mess, and the tough deficit reduction plan which has ostensibly been forced upon the government against its will. [emphasis added] Read the rest of this entry »