Thursday, November 12, 2015 

Cameron has always been the PR man. Osborne isn't.

The much commented on, if not as widely reported exchange of letters between David Cameron and Oxfordshire council leader Ian Hudspeth is unquestionably brilliant.  It's not often a prime minister is treated like an especially boneheaded teenager might be by an exasperated teacher, with Hudspeth having to explain one more time exactly why it is that he cannot follow the "best practice" of other Conservative councils as Dave suggests.  Oxfordshire has already made back office savings, dispensed with "surplus assets", cut everything other than social care.  Spending has not increased, Hudspeth makes clear, and the council has not cut only a mere £242m so far.  £242m was not a cumulative figure, as Dave wrote, the cumulative figure in fact being £626m.

As Rick says, the prime minister's advice is the equivalent of a quack applying more leeches to a dying patient.  He seems to believe the same solutions as were proposed back in 2010 are still valid now.  He's far from alone in this of course, with Theresa May crowing about how the cuts to the police have proved once and for all that more can be done with less, at the same time as forces consider sponsorship deals to bring in cash and as residents in rural areas are employing private security to patrol.  Just today the sports minister Tracey Crouch advised people having difficulties making ends meet to cancel their Sky subscriptions.  Some doubtless would regard giving up Sky as a breach of their fundamental human rights, but the idea many living on the breadline, relying on food banks or worrying about cuts to their tax credits are paying their dues to Rupert Murdoch doesn't fly.  Many of those people would be in an even worse position if they couldn't access the internet, something satellite and cable providers also happen to provide.

While some in the government might be oblivious or ignorant as to exactly what it is they're asking of both their colleagues at the local level and of the very people they've been elected to represent, there's also those who are very much aware.  George Osborne for instance, who earlier in the week celebrated those departments that have already outlined the amount they can save two weeks ahead of his comprehensive spending review.  Should his attempt to cut tax credits be scuppered or the amount due to be saved fall in the effort to soften the blow, that money will have to be found elsewhere.  With the triple-lock on pensions, all the ring-fenced departments and tax rises verboten, although not as a result of the public being opposed as Ken Clarke claims, rather due to politicians refusing to make the political case for doing so, the only areas left to target are those cut to the bone already.

Indeed, the "impossible constraints" Clarke talked about are entirely of Osborne's own devising.  Running a surplus is a choice, rather than an imperative central to our economic security as the chancellor claims.  As the Guardian's leader today argues, it's true Osborne is not the crude neo-Thatcherite as he is sometimes painted.  He has been more flexible than that, and has stolen Labour and Liberal Democrat policies when it's suited him.  He has also though presided over a hollowing out of the state, to the point where it looks to be perilously close to collapsing in on itself.  Hudspeth is far from the only council leader worrying about where it is he's going to make further savings from, not least when raising council tax above 2% requires a local referendum to be held.  Asking for cuts of 30% on top of a reduction in funding which has amounted to 37% so far, according to the National Audit Office, can mean the only place left to make savings is by cutting the frontline.  So far, in part thanks to how Labour did "fix the roof while the sun was shining", most services have held together.  You wouldn't bet on the same being the case come 2020.

Rest assured however that as the NAO report also found, the Department for Communities and Local Government is on the case.  The DCLG in their words has a "a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure" and also "does not monitor the impact of funding reductions on services in a coordinated way."  Like the prime minister, they haven't got a clue.  Still, by 2020 all things going well Osborne will be our new overlord, primed and ready to explain why absolutely nothing is his or the Tories' fault.

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11/12/2015 11:16:00 pm | |

Tuesday, July 21, 2015 

Violent sexual imagery: the only way to respond to that abstention.

There's an episode of The Thick of It where, enraged by that day's disasters, Malcolm informs Nicola and Terri that he will be using an awful lot of "violent sexual imagery" in order to make them fully understand the level of his unhappiness.

Labour at the moment needs a Malcolm.  It needs someone to set out in the most uncompromising terms just how suicidal yesterday's decision to abstain on the welfare bill was, and how incredibly, mindblowingly fucking stupid it is being in general.  Some at the very top of the party have been so mindfucked by the combination of losing the election, the glee of the right-wing press at that loss and their analysis as to why, and George Osborne's frankly pitiful efforts to "trap" them that they seem to have forgotten the very reason the party came into existence.  If Labour does not stand up for the interests of the ordinary working man, it may as well announce its dissolution.

The party leadership has no excuse then for its failure to vote against the welfare bill.  The act explicitly redistributes money from the working poor to the wealthy in order to pay for the all but abolition of inheritance tax.  It paves the way for the social cleansing of not just London but whole areas of the country, as the new lower cap on benefits makes those places unaffordable for the low paid and temporarily out of work.  It breaks Cameron's twin promises not to cut the benefits of the disabled and sick, as it reduces the payments of those in the work related activity group of ESA to the same as JSA, and to not touch child tax credits.  It makes clear that the end result of these changes will be a rise in child poverty, as the government is at the same time abandoning the target to reduce it by 2020.  It demands sacrifices only from those of working age, rather than asking any from those whom most of the social security budget is spent on, pensioners.  It makes clear the Conservatives don't wish only to play divide and rule between the unemployed and those in work, but between the working poor whom have their wages topped up by tax credits, and those in work who are lucky enough not to need to claim anything.  It says some families are worth less than others, that having a third child is always an active choice, and so it's perfectly acceptable for that child to be denied the same support their siblings received.  It is one of the most regressive, most reprehensible pieces of legislation to go through parliament in a very long time.

You might have thought yesterday's op/ed by George Osborne in the Graun would have concentrated a few minds.  Rarely is there a piece by a government minister that is quite so brazen in the number of outright lies, distortions and misleading statistics it contains.  Cutting an "unsustainable" welfare system is according to the chancellor a progressive measure, and welfare reform is not just about saving money, but transforming lives and social justice.  Let's be clear: this isn't a trap, this is one step up from the very lowest grade of trolling.  You don't respond to trolling, you ignore it.  If you must respond to it, what you most certainly don't do is accept the troll is making a legitimate argument.

And yet somehow, unconscionably, only 48 Labour MPs went through the no lobby last night.  Whatever it was Harriet Harman tried to achieve by saying Labour couldn't afford to ignore what she claimed was the will of the public in both giving the Conservatives a majority and twice rejecting her party, to act in such a cowardly, incoherent way is near to being unforgivable.  The Democratic Unionists, yes, some of the most unpleasant and antediluvian of all the MPs in the Commons, voted against it.  The SNP voted against it.  The Liberal Democrats, fresh from propping up the Tories for five years, voted against it.

Abstaining when you know precisely what a bill will do to those you were supposedly sent to Westminster to represent is a betrayal.  That's what it is.  Not only is it a betrayal of those who will suffer as a result, it's a betrayal of everyone who argued that a vote for Labour still meant something.  That Labour was a vote for a fairer, more equal society, in spite of all the snide remarks, disbelief and cynicism.  It's a betrayal of those who faced down the SNP, with all its claims of being the true progressive, radical force, or who criticised the luvvies who say Labour left them, not the other way around, and did so right at the moment the party needed them the most.

If anything was ever going to legitimise the SNP's claims of being the official opposition, prove Mhairi Black right, or drive those who have long flirted with the Greens fully into their arms, this was it.  Those currently leading the party, or rather not leading it have convinced themselves that only they have the answers, that only they are the responsible ones, and that to merely oppose for the sake of opposing is to not listen to "the very strong message sent by the electorate".  They have convinced themselves that elections are not won or lost during the last year of a parliament, but by how the opposition responds in the immediate aftermath of a defeat.  This is to completely misread what happened in the summer of 2010, as the coalition set out to prove the size of the deficit and the state of the economy were entirely the fault of Labour, rather than a global economic crisis.  This was achieved not through acts of parliament, but by how the message dominated everything the coalition did.  Labour's failure was to not respond ferociously, to fight the accusation, to debunk the lie.  Instead they accepted it.  The party leadership is repeating the mistake.

Only this time it's far more serious.  Labour has never seemed more divided between the "realists", epitomised by Chuka Umunna describing those disagreeing with his and the "modernisers" analysis as the equivalent of petulant children, and those daring to believe that Labour has to be, must be more than just the Conservatives with a kinder face.  The view that nothing can be achieved without power is spineless rubbish.  Rare is it that a government just falls apart, and even when they do it's not certain the opposition will automatically benefit: nothing more affects a government's authority than a failure to be able to pass legislation.  To give up even the pretence of opposing a government's worst excesses this early is an astonishing act of capitulation, a failure of belief that demands those responsible be held accountable.  That no one has said Harriet Harman has clearly lost the confidence of her own MPs in a matter of weeks is equally surprising.

It's not as though any of this is difficult.  The welfare bill is about making the poorest poorer, the working poor poorer, and the sick and disabled poorer.  Indeed, it's about making anyone who claims tax credits poorer.  This is not in dispute: Osborne is painting it as being fair and fixing a broken system but not denying the end result, whatever the claims made about the increase in the minimum wage.  Labour has somehow managed through sheer incompetence and the beyond moronic idea that being "sensible" at this stage will win dividends later to make the story not about the Tories doing what the Tories do, but about Labour being split over the most basic of issues.  As Flying Rodent has it, Labour is more afraid of not being shitty and vindictive enough, so convinced has it become that you only gain respect and win back votes through being "tough", than it is of going too far.  The leadership still seems to believe that it can ignore the wishes of its supporters and core voters as they have nowhere else to go.  The election results, the same ones that have apparently convinced them of the wisdom of this masochism strategy, prove the opposite is the case.

So yes, Labour needs a Malcolm to get through the otherwise most impenetrable of skulls just where such an approach will lead, and it most certainly isn't to victory.  It also though needs someone to soothe it, to reinforce that its heart is in the right place, and that it hasn't lost its values.  It needs someone like, oh, Alan Johnson, to play more of a role, to argue against the more out there ideas some on the left do have, like how an EU exit wouldn't be all that bad really.  Failing that, it's difficult to see where the party goes from here.  Under siege from all sides, some prefer surrender to carrying on the fight.

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7/21/2015 10:04:00 pm | |

Monday, July 13, 2015 

Voters are often wrong. Politicians need to tell them so.

There is, I would argue, an extremely big difference between being exceptionally cynical about almost everything, and just straight up indulging in conspiracy theories.  Would the government really for instance suddenly declare Tunisia to be a no-go area just to distract attention from how the budget was falling apart, especially when it had been received in such raptures from the press?  Would it really decide to wreck the holidays of thousands of people on completely spurious grounds, and not come up with a better explanation than saying intelligence suggested there was a very high chance of another attack, despite there err, being no specific intelligence?  Would it really send the message that in actual fact, terrorism does pay, and that already struggling countries should buck their ideas up, despite it being you know, sort of our fault Libya is now a failed state?

Probably not, but never underestimate a government's propensity for being completely and utterly stupid.  Tunisia it seems should follow our lead: hold a few more training exercises, put a few more bollards in front of buildings to prevent a truck or car bombing, despite jihadists' major problem long having been their failure to obtain explosives in any sort of quantity, and you're laughing.  There's not much you can do to prevent an attack by a lone gunman with an assault rifle and (possibly) some grenades other than putting more armed police and security guards on the streets and increasing surveillance, policies that might in fact cause more problems than they solve, but such measures are not apparently good enough for us Brits.  Fine for the French and Germans, but not us.

Was then Harriet Harman in fact being rather sneaky in her interviews yesterday, saying the party she is temporarily leading could not oppose cuts to child tax credits and the new lower benefit cap, as to do so would be to ignore the voters who have now twice rejected that party?  Again, probably not.  It has though had the twin effects of riling up the usual people on Twitter who spent plenty of time during the election campaign complaining about that mug, and has also redirected attention onto the interminable leadership election, with yet another hustings held today.  The Liberal Democrats, incidentally, are to announce whether Tim Farron or Norman Lamb is to be the party's new leader on Thursday.  The reasoning behind Labour going for a longer contest was supposedly about confronting why the party had taken such a mauling, only for all  the candidates to have concluded why within hours of the defeat.  The "debate" since has focused on repeating those positions, and predictably there's been nastiness happening behind the scenes as a result.

You can of course if you want interpret the Tories' win as being a thumbs-up for their policies as a whole, just as if you like you can believe people voted UKIP because they wanted a referendum on EU membership, or SNP because they thought Nicola Sturgeon was a fresh, inspiring leader.  Except, oh, that last one probably is something approaching the truth.  Equally, you can take Labour's defeat however you want, and if you really want to believe it was because Labour wasn't either left-wing or right-wing enough, that's fine too.  The real lesson of the election was in fact what happened to the aforementioned Lib Dems.  The party that had previously meant all things to all people, acting as both a protest vote that wasn't entirely wasted and as a leftish alternative to Labour collapsed once everyone realised there was little to no difference between them and their coalition partner.  This doesn't mean they wouldn't be making something of a difference if they were still in government, as they almost certainly would.  They wouldn't though alter the overall tenor, just as Osborne stealing the best melodies from Labour's song book can't cover up the discordant screeching of his compositions.

The most convincing overarching reason for why Labour lost is Ed Miliband was not seen as a realistic prime minister and in turn was not trusted with the economy.  It's as simple as that.  Could Ed Miliband have been seen as a realistic prime minister and trusted with the economy had the party fought harder against the caricature of spending too much, crashing the economy and leaving behind no money?  I think so.  Then again, I still think Miliband would be a better leader than any of the 4 now on offer, and that time will prove him to be another of those best prime ministers we didn't have, so you can safely ignore me.

This is not to deny there is an awful lot of seething, if not outright detestation of benefits claimants.  If there wasn't there wouldn't be those TV shows, there wouldn't be the support for the cap which takes absolutely no account of exceptional, temporary, individual circumstances, or for little things like a family having lived for generations in an area they are now told they can't afford.  All that's seen is that figure of £20,000 or £23,000, rather than how a hefty proportion of that will be going straight to a landlord rather than for the family to spend on huge screen TVs or iPads.  Those women who apparently told Harriet Harman and the others that they didn't think they could afford to have more children while those less careful just had them anyway, which is to put about the nicest possible gloss on it, seemed to be more justifying not having more children to themselves rather than making a realistic case about the state rewarding the feckless instead of the striving.  When the cuts start affecting real people though, as we've seen with the bedroom tax, or when they specifically target children, it doesn't take much for what was once seen as sensible to begin unravelling.

Politicians cannot however tell voters they are wrong, unless it involves bombing yet another Middle Eastern country.  They can tell their own parties they're wrong, but never that the public is.  It doesn't matter how wrong the public is: whether it be the obvious lesson to take from the tube strike, which is that stronger unions and collective bargaining result in higher wages, while moaning and complaining about how because you don't want to waste time with that nonsense no one should results in nothing; or in Greece, where the people want to stay in a currency that condemns them to unending, self-defeating austerity, rather than face the temporary uncertainty of a default and return to the drachma; to argue with the apparent reached consensus is a sign of madness.

Arguing against something that has become an orthodoxy is all the harder when you're faced with a media so unutterably biased against you, it's true.  When the press either swallows its pride about Osborne's further restrictions on non-domiciled status, having denounced it as leftist lunacy when suggested by Labour, or actively welcomes policies it criticised in the harshest terms mere weeks ago, it's always going to be a struggle to win back the initiative.  This doesn't mean it can't be done.  If Labour had any sense, they would be contrasting the manifest unfairness of the raising of the threshold of inheritance tax with the losses of income those on tax credits will face under Osborne's plans.  They should be making clear how companies that already do their best to avoid corporation tax are being rewarded for doing so with a further cut while the working poor are having their benefits raided to fund it.  They should be making short YouTube videos about it, hiring billboards, running poster campaigns.

Instead, the party keeps apologising, or drawing the wrong lessons.  Andy Burnham today accepted the deficit was too high in 2007; it wasn't.  Even if it was, these cuts are being made out of choice, not because they are necessary to reduce the deficit.  Not opposing the harshest budget in a generation out of the belief it's what the public voted for is nonsensical.  Osborne thinks he has Labour trapped; Harman's response is the equivalent of jumping straight into a spiked pit.  The only people who will remember in 2020 whether Labour opposed the cuts are precisely those it cannot afford to lose.  If the party truly is existentially threatened, and the lesson from the continent is traditional centre-left parties are, the worst thing it can possibly do is tell its sympathisers and supporters they're wrong.  Take on the public, not the grassroots.  It might just work.

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7/13/2015 11:02:00 pm | |

Thursday, July 09, 2015 

All hail the new Tories.

If it wasn't for how it demonstrated beyond doubt just how pointless the Labour party has made itself in such a short time, yesterday's cognitive dissonance at George Osborne's theft of large parts of the Labour manifesto would have been hysterical.  The same document only Andy Burnham and Jeremy Corbyn have seen fit to defend as everyone else, Blairites especially have all but blamed it for the defeat was used in a (futile) attempt to make up for the use of the very worst parts of the Tory manifesto.  Alistair Darling has said Labour's disarray is a result of the failure to articulate a coherent economic policy, except err, in large part Osborne took Labour's apparently incoherent economic aims and made them his own.  Ed Balls' promise was to balance the budget as soon as possible; voters might not have believed it, but that was the policy.  Osborne accordingly put back by a year his surplus plan, reduced the amount to be raised through cuts in departmental spending and also, most shockingly, is borrowing more.  An Ed Balls budget would have obviously done things much differently overall, but he would have without doubt followed the same basic themes.

Osborne's budget was not of course an even vaguely left-wing one.  Nor, however, was it an out and out Thatcherite one.  How Osborne achieved this hasn't really been acknowledged enough.  Most chancellors after all go into elections promising jam tomorrow and then clobber everyone once re-elected.  Osborne by contrast was completely open about how everyone voting Tory would end up being shafted, not expecting for a moment that he would be delivering the first sole Conservative budget in 19 years less than 4 months later.  Both the March budget and the Tory manifesto were put together in the expectation of another coalition.  They were bargaining chips, as proved by allowing the Liberal Democrats to set out what their priorities would be from the dispatch box.  Amazed to be handed a slight majority, the problem was how to not alienate those who voted Tory but had done so for reasons very much other than the contents of the manifesto.

Most in the circumstances would have blanched at going ahead with the £12bn in welfare cuts.  It was never a serious commitment, until it was decided it was, and for the opportunity it provided.  Despite not thinking it would get them a majority, the Tory electoral plan was simple: ensure those most likely to vote, i.e. pensioners and the boomers coming up to retirement age were overwhelmingly on their side by promising not to touch their perks, emphasise the risk everyone would be taking with a unreconstructed Labour party, and then hope something else would turn up.  It did, in the form of the SNP, and it just about took them over the line, thanks mainly to the utter collapse of the Lib Dems.  This targeting has duly become the party's raison d'etre: for all the talk of blue collar Conservatism, one nation and all the other rot, the Tories seem to have come to believe they can remain in power in perpetuity so long as they keep the upper middle, the wealthy, and the old on side.

Yesterday's budget was put together with this at its core.  Not for Osborne or Cameron's Tories the old Thatcherite belief in social mobility, or at least not without pulling yourself up by your bootstraps, as hardly anyone who made it truly did.  No, instead their aim is for society to remain almost completely in aspic: why else would they as Jonathan Portes notes, removed the very incentives to work and earn more that were there in the tax credit system and were already affected negatively by universal credit?  Why else would they continue to do absolutely nothing about the dire shortage of housing?  If anything, their aim seems to be further inflate the bubble; buy-to-let landlords rightly come in for much criticism, but as the IFS points out, the lack of supply is not going to be helped by reducing their tax incentives while allowing property owners to pass their estates on tax free.  Why else remove the grants for poor students?  Why else generally treat the disadvantaged young disgracefully, whether by removing their access to housing benefit, or capping child tax credit at two children for new applicants?  Potentially helping youth unemployment by not extending the "national living wage" to the under-25s doesn't even begin to make up for it.

Going on alongside this targeting and othering, as that's what it is, are disinterred Victorian notions of morality and poverty.  Tim Montgomerie, now of the Times, tweeted his support for Iain Duncan Smith's "rejection of the Left's materialistic idea of poverty for broader understanding of basis of a good life" last week in response to the moving of the goalposts on child poverty.  Rarely is so much explained about a world view in so short a sentence.  It shouldn't shock then when a close reading of the budget red book shows Treasury officials will allow rape victims made pregnant by their attacker to keep their child tax credits if they decide not to abort the baby and already have two children, as clearly in such an instance the mother is blameless.  Having a third child in any other circumstances when already not well off is clearly a choice, and a choice that has to be punished.  No other factors come into it, not least that the child itself is blameless.  To be on benefits is also a choice; ask not what you can claim, but what it is you can do.  Hence why those who cannot work currently, but might be able to shortly will from now on get the same pittance as those on JSA.  Claiming anything, even being employed by the state, is to be inferior: 1% extra a year is all such people are worth.  Don't argue this isn't still a generous safety net: the same politician yesterday pumping his fists as the rebranded minimum wage was announced says it's so.

This point couldn't have been reached thanks solely to an election victory, naturally.  We've arrived here thanks to what always happens following an economic crash: the public biting downwards, rather than up.  The poor are to be envied for the little they have, asked why it is they get something for nothing, equally fetishised and demonised.  Just this week Channel 4 brought us a new series of How to Get a Council House, where the deserving and undeserving are neatly boxed and delineated, while Channel 5 showed Benefits by the Sea: Jaywick.  The Sun, most of whose readers will be receiving tax credits and duly face losses in the region of hundreds of pounds thanks to yesterday's budget are told this is a "WELL FAIR STATE", while the Mail depicts Osborne as no less a saint than the mythical George himself, slaying dragons.  And again, the fact is a majority, albeit a slim one of those who bothered to vote, signed up for this.  You're not supposed to blame the electorate, but it's not as though the Tories hid their intentions.  Like it or not, they wanted it, they've got it.

 

Contained in the IFS's analysis of the impact of yesterday's budget reforms is the starkest of truths: the only people to gain are those in income decile group one removed from the richest.  Those right there are the people the Conservatives are governing for, the only people they imagine they need to govern for, as everyone else is either stuck with them or written off.  The poor either don't vote or vote Labour or UKIP; public sector workers vote Labour; the young either don't vote or vote Labour or Green; they're all lost causes.  Everyone else, well, why would they vote for a Labour party that only represents those people?  Such is the new Conservative way of thinking.  Such is the space a Labour party that has taken all the wrong lessons from its election defeat has left its opponent to move into.  If they won't defend their manifesto, we'll take it.  Osborne isn't a genius, he's an opportunist and a strategist.  Shrinking the state is secondary to winning.  Ideology helps to explain, but doesn't tell the full story.

All hail the new Tories.

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7/09/2015 09:19:00 pm | |

Wednesday, July 08, 2015 

The rat and the rabbit.

After all the leaks, the raid on the BBC, the talk of how this one nation Conservative party would be creating a low tax, low welfare, high wage economy, there was only one real question left to be answered by George Osborne's wholly unnecessary second budget in three months: what's the fucking rabbit going to be?

First though, if on presentation and build-up only, today's budget is difficult to fault.  Almost all the nasty stuff was briefed about in advance, from the swingeing cuts to both tax credits and child tax credits, the reduced benefit cap and the abolition of inheritance tax for all properties under £1m.  There were still some extremely devious measures that weren't announced beforehand, like the abolition of grants for the poorest students, to be replaced with loans, but in the main all the changes to welfare were expected, leaving the way open for Osborne's surprise to dominate the headlines.

This budget was then all about him.  That Osborne is an exceptionally overrated politician, and unlike some of those also lauded by the press and commentators, believes his own hype, matters little.  Despite loathing him, he is more than the heir to Gordon Brown, only unlike Brown he hopes to make a success of taking over from his predecessor.  The difference is that whereas Brown and Osborne are remarkably similar beasts in how they always put personal political advantage ahead of everything else, Brown had the nous to recognise when he had gone too far, and also to act in a crisis.  Osborne by contrast just keeps on pushing ahead regardless, covering up his mistakes as he goes along, hoping no one will notice.

That something would materialise to sugar the pill was then apparent; not even with the backing of the majority of the press, a cowed opposition and a BBC in disarray would Osborne have got away with making the poorest undeniably poorer while cutting inheritance tax and raising the 40% threshold.  That Osborne decided to steal almost directly from Ed Miliband's Labour manifesto, the one that apparently no one can defend such was its rancidity, ought to have surprised no one.  Rather than abolish non-dom status outright though, perhaps the most obvious choice, Osborne opted to filch Miliband's minimum wage rise policy instead.  Only he went even further, promising that whereas Miliband outlined a rise to £8 an hour by 2020, Osborne's new "national living wage" will be £9 an hour by then.

Except, of course, Miliband's proposed rise in the minimum wage was meant to operate alongside the living wage, with sweeteners for businesses that opted to pay the latter.  Osborne's national living wage is nothing of the kind, for a whole host of reasons.  First, the living wage in London is already calculated to be £9.15 an hour.  Second, the living wage has always taken into account tax credits; remove them entirely or cut them viciously, as Osborne has done, and it would need to be even higher.  Third, as the IFS has already pointed out, not all businesses, especially small ones, can afford to pay the living wage, or at least not without raising their prices dramatically.  The further cuts in corporation tax will not help them one jot.  Workers over 25 will either have to be replaced with younger ones still on the lower rate, or another slew of smaller retail businesses are likely to be forced to close, or break the law to survive.

The distributional analysis from the Office for Budget Responsibility lays it bare: just as with the continued rises in the personal allowance, those who will gain the most are once again the already comfortably off.  The end result is that regardless of the rise, the cuts to tax credits will mean the vast majority will still be worse off, albeit by perhaps half as much as they otherwise would have been.  The poorest in society are in effect being asked to subsidise what David Cameron described as the "most basic, human and natural instinct", i.e., to pass on what even they themselves may have received entirely tax-free, at a cost estimated at £940m by 2020.  This truly is, as Chris said, the something for nothing culture in action, and as Rick argues, sets the Conservatives out not as defenders of wealth creators, but those who buy a commodity and do nothing with it other than just watch it grow in value.

Much the same thinking is presumably behind the cutting of rents in social housing by 1%.  What looks on the surface to be about helping the low paid is more than counteracted by how the OBR points out this is likely to reduce further the building of social housing.  Combined with the government policy of extending the right to buy to housing associations, this seems destined to further inflate the housing market bubble, and indeed in turn, the housing benefit bill, despite the motive being the opposite.  The new lower benefits cap will also have an effect, and is likely to lead to more landlords rejecting housing benefit claimants outright.  That buy-to-let mortgages will only be able to be offset against the basic rate rather than higher rate of tax is also likely to lead to a race to do so before the measure kicks in in 2017, further overheating the market.

Underneath all the wounding cuts to benefits and the rise in the minimum wage is the fact this was a tax-raising, rather than a tax-cutting budget.  With the major taxes off-limits, as promised and set to be legislated upon so they cannot be touched, Osborne has resorted to the stealth taxes Gordon Brown was so pilloried over.  The big money raisers are the tax on dividends, forecast to be bringing in nearly £2bn a year by the end of this parliament, a rise in the tax on insurance premiums, which should raise £1.5bn a year, and the changes to vehicle excise duty, meant to gain the Treasury by a similar amount.  Some of this though is going straight back out the door thanks to the further, unexpected cut in corporation tax to 18%, estimated to cost almost £2.5bn by 2020.  As Aditya Chakrabortty has been setting out in the Graun, this is in spite of the estimated £93bn a year given out in corporate welfare.

Osborne has then all but abandoned the plans he set out in March, opting instead for a smoother path to his idealised surplus, coming a year later than planned.  The cuts to government departments will not be quite as severe as anticipated, almost certainly down to how there's so little meat left to cut.  £18bn will nonetheless still have to be found, and with the defence budget now also protected, that leaves one area less from where money will be taken.  This has also only been achieved thanks to overall savings in welfare of £34.9bn, the difference made up by the continued freeze on yearly increases to benefits of 1%, and changes to universal benefit before it has even been introduced.  All this is predicated on Osborne's savings and cuts being achieved: when £5bn is again meant to come in from clamping down on tax avoidance and evasion, this looks extremely dubious.  The OBR also rates the chances of most of Osborne's tax rises raising what the Treasury says they will as having a "very high" uncertainty.  Should they not, will Osborne again postpone reaching his surplus, raise the taxes he's legislated not to, or cut benefits even further?  Take a wild guess.

George Osborne's task today was relatively simple, despite all the talk of how clever he's been and the boost to his chances of taking over from David Cameron.  All he needed to do was get the pain out of the way, disguise it as best he could and hope that by 2020 what voters remember is not how he picked their pockets, but how their wages have now increased thanks to his living wage.  The fact is Osborne has been a remarkably lucky chancellor: the "omnishambles" budget would have been the downfall of other politicians, as would his abysmal failure to eliminate the deficit in a single parliament, or indeed how he cut too far and fast in the first couple of years and stalled the recovery.  Thanks to a very friendly press, a weak Labour party and the Liberal Democrats covering for him, he's still in place.  Moreover, he's only implementing what the Tory manifesto promised.  Those who voted Tory might not have expressly wanted a crueller, smaller state, where everyone who earns below the 40% threshold can essentially go hang, and the aim is to ensure the moneyed and propertied stay that way, the drawbridge permanently raised up, but that's what they've got.  The only thing that can blow Osborne off course now is another downturn, and the further suffering that would entail hardly bears thinking about.  Such is the position of strength an exceptionally weak government finds itself in.  Such has been the failure of all opposition to austerity.

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7/08/2015 10:34:00 pm | |

Wednesday, March 18, 2015 

Hubris and the wait for nemesis.

You can't help but get a sense of the way the election campaign looks set to pan out from the way the broadcasters have utterly capitulated to David Cameron and the Tories over the debates.  Thanks in part to ITV's apparent desperation to once again host the first debate, with all the bragging rights and ratings that go with it, Dave has made the extremely minor sacrifice of agreeing to one debate with 6 other party leaders at the very start of April.  While the precise format of the replacements for the other two debates haven't been finalised, they're likely to involve interviews with Paxman and a Dimbleby hosted Question Time-athon, each leader lightly grilled by the same audience separately.  Cameron has thus ensured he won't be shown up too much by Farage, while Miliband will be boxed in by both Natalie Bennett and Nicola Sturgeon during the one unwieldy session. He's avoided the ignominy of being "empty chaired", nor will he face off one on one against the "despicable, weak" upstart with two kitchens.  As was predictable, the commercial need to broadcast something, anything with the prime minister overcame the principle of refusing to bow to his demands.

Little wonder George Osborne felt able to act with such hubris in his final (God, please let it be his last) budget.  Few other politicians in his position would have with a straight face claimed living standards are higher now than in 2010, not least when the claim rests on a single cherry-picked statistic, itself reliant on the massive drop in inflation due to the oil price halving.  He insisted that, albeit a year later than planned, the debt-to-GDP ratio is falling, the second of his major economic promises made in 2010.  The Office for Budget Responsibility later pointed out this will only happen thanks to a mammoth £20bn in asset sales.  We heard once again the phrases designed to be used as soundbites, "Britain walking tall again", "the comeback country", liable to please the same little minds his previous "march of the makers" and "aspiration nation" did while washing over the rest of us.

There was not to be even the slightest nod to the all too obvious mistakes of this unbelievably overrated in every sense chancellor.  Plan A had long since been abandoned, but so also have we become inured to the prospect of a further 4 years of austerity.  With as little fanfare as he could get away with, Osborne rejigged the spending plans of the autumn statement that set out those "colossal" spending cuts, the same ones he thought wouldn't attract such attention.  He did this not by sensibly spreading out the extra money found down the back of Number 11's sofa in the past four months, loosening the squeeze up to 2018, but setting out a splurge in the final year of the next parliament, equivalent to the entire defence budget.  The ridiculous surplus of £23bn planned for 2020 is thus a slightly less fantastical £7bn.

Except of course these figures are illusionary.  Regardless of the make-up of the government at the next budget, the chance of anything like these plans being set out again is minute.  As the Institute for Fiscal Studies was quick to make clear, they're reliant on the further £12bn in welfare cuts Osborne has long talked about being found, alongside an equally difficult to believe £5bn being raised through clamping down on tax avoidance and evasion.  We're no closer to knowing where the hatchet will fall in the case of the former, no doubt precisely because there is no more fat to trim.  It's an utterly absurd way to run anything, let alone a state, to cut services as harshly as Osborne plans only then to ratchet spending back up again two years later, and he would have to be a complete moron to so much as contemplate doing so.

Osborne is many things, but a complete moron is not one of them.  For this was a budget less about giving activists something to base a case around than making things as difficult as possible for Labour.  Gone is the mess of Osborne's making, the back to the 30s jibe, to be replaced instead by a return to the day to day spending of 1964 instead.  Spent is some of the money earmarked for Labour's daft in any case reduction in tuition fees, Ed Balls saying it would be found elsewhere.  And then we had the "jokes" courtesy of Danny Finkelstein, only accompanied by fatuous policies in order to shoehorn them in, the most desperate of which had to be the non-gag about bands of brothers and Agincourt, at the cost of a million to commemorate it.

With that out of the way, all that was left were the priorities we've become used to from this government and chancellor.  A further lifting of the income tax threshold, which benefits middle earners the most; allowing pensioners to trade in annuities for cash, boosting the Treasury's coffers at the same time; a "Help to Buy" ISA the government will top up, without any further announcements on building the damn houses in the first place; and a new savings allowance, with the first £1,000 tax free, projected to cost £1bn in the first year.  As for those who can't afford to save, or who probably won't be able to reach the £1,000 figure, be glad you got away with your sweet FA.  It also makes ISAs less attractive as a whole, but seeing as the aim probably was for Osborne to be pictured on the front page of the Mail with the sun shining out of his arse, it's doubtful he'll give it a second thought.

Hubris can after all mask anxiety.  This wasn't a budget to win over voters so much as to yet again consolidate the party's core vote.  Bribe after bribe has been thrown at those most likely to turn out, and still the election remains too close to call.  By this point a Tory lead was meant to have developed, only for the polls to continue to suggest a dead heat.  With Osborne having done his bit, with there being little reason to expect a leap post-Budget bounce from what he unveiled, the onus is back on Cameron to haul the Tories over the line.  Thank goodness the broadcasters stood firm then, eh?

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3/18/2015 11:59:00 pm | |

Thursday, December 04, 2014 

You're talking hyperbollocks.

It must be awful being George Osborne.  There you are, making gags in the Commons that would frankly disgrace those £1 packs of crackers (gosh, Ed Miliband looks a bit like Wallace, how original, and rich, coming from someone whose nose more than resembles an arse), the right-wing press mostly lapping it up, and then you have to go on the BBC after Norman Smith dares to suggest that if you scratch beneath the surface you quickly find the cuts projected amount to a "book of doom".  Perhaps even Road to Wigan Pier-esque.

Hyperbolic, raves George, expressing much the same line of faux indignation as regularly voiced by Iain Duncan Smith.  Why, the BBC were saying exactly the same thing back in 2010, and has the sky fallen?  No, we're on the way back to the sunlit uplands, the public services have not collapsed, and if anything they're more highly regarded than ever.  The NHS only needs an extra £8bn a year, which no party has yet come near to explaining how they'll find, despite agreeing with Simon Stevens on how necessary it is, and well, who cares about how beds can't be found for 16-year-olds with mental health problems, instead forced to spend an entire weekend in a police cell?  As for actual lags, prison is meant to be about punishment.  If you don't want to spend 22 hours in a cell every day, don't do the crime in the first place.  Chris Grayling knows what he's doing.

Osborne and Downing Street's ire couldn't possibly be connected to how the BBC's journalists were for once bothering to do their jobs properly.  I even filched the title for yesterday's post from Nick Robinson, who himself had stolen it from elsewhere.  The harsh reality is Osborne's cuts are unachievable, as he knows all too well.  When the Institute for Fiscal Studies describes them as "colossal" and if put in place will by necessity force a "fundamental re-imagining of the state", the kind of statements the IFS simply doesn't make unless the situation is that stark, he really shouldn't have anywhere to hide.

The truth is Osborne can't be straight on just how tough the economic situation will be after the election as it would expose his deficit reduction fetish, undermine his insistence on "trapping" Labour, and worst of all, be to admit his own failure.  The best option would be to push back further the point where the structural deficit will be eliminated, as the markets show not the slightest indication of putting up borrowing costs any time soon, not least when Europe slumps once again into recession, and to bring the cuts/tax increases ratio to something approaching parity.  He can't and won't as Cameron has already insisted on promising the very opposite as soon as the magical surplus is achieved.  Labour, rather than pointing out the impossibility of Osborne's plans, continue to insist they will do things slightly fairer and in much the same time scale.  How and why they don't explain.  As for the Lib Dems, what more can be said about a party whose leader was elsewhere as the statement he agreed to was delivered?  Vince Cable meanwhile whines and moans in the same way as he's done for the past four years, while continuing to stay in government with people he considers to be economically insane.  With politicians like these, is it any wonder so many are looking at the only slightly loopier option?

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12/04/2014 08:38:00 pm | |

Wednesday, December 03, 2014 

The candour deficit.

On Monday, Gordon Brown formally announced he would not be standing for re-election next May.  It was hardly a surprise, considering he rivals George Galloway in the rarely attending Westminster stakes, not that many other former prime ministers have knuckled down to life on the backbenches either.  With Brown leaving parliament and a whole host of other New Labour figures also heading for the exit, it pretty much signals the end of an era of politics which came to be defined by spin, media management, never-ending war (so no change there then) and whisper it, continuous growth.

For one suspects that regardless of how Brown is viewed now (indicative of the general tone is how a goddamned zombie comic portrays him in about the most sympathetic light of anything), history is likely to judge him far more kindly than it will either Blair or Cameron.  Jonathan Freedland fairly sums up why, and while you could argue that Blair and Brown are inseparable, as no doubt some of the accounts to be written shall, it remains the case Blair's failures were principally his own while Brown's were collective.  No one except the odd Cassandra said banking regulation should be tightened, nor warned they were becoming too big to fail.  Yes, Brown without doubt encouraged the City to let rip, to keep expanding, was pals with Fred Goodwin and so forth, but so would any other chancellor of the exchequer been.  The Conservatives it's worth remembering wanted to pare back regulation further.

Brown's departure will nonetheless leave us with those who love to emulate his worst traits while despising his best.  Each time George Osborne comes to the dispatch box for either the budget or the autumn statement, he morphs a little more into his supposed nemesis.  Each time he manages to confound those who said the deficit was going to be up, at least until you read the small print.  Each time he succeeds in finding a gimmick of some kind or another, usually one designed specifically to appeal to the middle-class, aspirational voters the Tories need to reject both UKIP and Labour if they are to ever win a majority again.  Each time he insists none of this would have been possible without the coalition's "long-term economic plan", a plan that has been altered radically from the one he presented in his first "emergency" budget.  And each time, he seems to get away with it, helped by a media obsessed by the very things he targets, and whose bias against Labour seems to only grow.

Osborne has after all failed miserably when judged on that first budget.  He promised a single parliament of pain, after which happy days would return.  Instead he's been forced into claiming everything's coming up Osborne despite how the country now won't be in surplus until 2018.  His big mistake, frontloading cuts in spending on infrastructure, choked off the slowing recovery and gave us two years of stagnation.  Even now, with Britain judged to be growing the fastest of any G7 economy, the quality of the jobs created is so poor and wages so low it's failing to bring in the income tax receipts necessary for borrowing to come down.  By rights, and if these were usual political times, all Labour should have to ask voters is whether they are better off than 5 years ago, and then sit back and wait for the inevitable.

Only they aren't, and if the coalition has succeeded in one area, it's in blaming Labour for the recession and everything since.  It was all the "spending, borrowing and welfare" that got us into this mess, not the most serious worldwide economic crisis since the great depression.  It doesn't matter that borrowing is now higher than it was under Labour, or indeed that the welfare bill remains stubbornly large despite the coalition's attempts to slash it, demonising the most vulnerable in the bargain, as those determined to err, do exactly what Osborne has done will never be trusted with the public finances again.  We are on the road to surplus, to prosperity.

Hidden away in the Office for Budget Responsibility's report is what it thinks of the cuts Osborne is proposing to get us there.  As they put it

The implied cuts in RDEL during the next Parliament would pose a significant challenge if they were confirmed as firm policy, one that would be all the greater if existing protections were maintained. But we do not believe that it would be appropriate for us to assume, ex ante, that these cuts would be inherently unachievable and make it our central forecast that this or a future Government would breach its stated spending limits if it chose and tried to implement them. But... we might need to include an ‘allowance for overspending’ in our forecasts, similar to the ‘allowance for shortfall’ that we currently incorporate to reflect likely underspending against DEL plans.

In other words, they're a fantasy.  All the obvious fat has already been sliced off.  Already it's resulted in this sort of situation in prisons.  Day to day spending on public services is projected to fall to 12.6% of GDP by 2019/2020.  Total public spending meanwhile as a proportion of GDP will fall to its lowest in 80 years.  As Rick says, were this to happen it wouldn't mean shrinking the state, but closing sections of it down.

Clearly, this isn't going to happen.  Osborne is many things, but suicidal isn't one of them.  He most likely will look to further cut benefits, as he says, only as we've seen doing it in practice is far harder than in theory.  He could slow the pace of reduction further, except Cameron has already promised tax cuts once the surplus utopia is achieved, and Osborne is set to force a vote in the new year on whether Labour will sign up to his plans.  That leaves only raising taxes, with VAT being the most appealing to a Tory who won't countenance putting up the top rate of income tax, as demonstrated by his swift removal of the 50p rate.

That's all for after the election though, when a Tory government or led coalition can do whatever it likes.  Trapping Labour just as Gordon Brown stitched up the Conservatives is Osborne's game now, even if it costs him money as the stamp duty cut will.  Nothing is too much for the aspiring classes, boosting the housing market once again just as it looks to be cooling.  It also helps those buying to let, and could have the perverse effect of making those about to exchange contracts think again now the £250,000 mark won't see the stamp duty to be paid leap.  Ed Balls was smart enough to say this was Osborne catching up with the idea of taxing expensive property more, just that it wasn't enough, as indeed it's not.  The best option would still be a complete revaluation of the council tax bands, only the howling about the proposed mansion tax would be nothing compared to the wailing should any politician dare to suggest those who have seen their home double or triple (or more) in value since 1993 should be contributing more to local services.  It also wouldn't reach the Westminster coffers, another reason it's not going to happen.

As for what further damage this approach will cause to politics once everyone realises they've been had again is anyone's guess. Only the Lib Dems came near to being frank in the 2010 campaign over the scale of the cuts that were to come, and it could be the same again this time.  What made Gordon Brown more than just a cunning, always out for political advantage strategist was he thought long-term also.  Without the funding poured into public services the cuts imposed so far would have been truly devastating; had we joined the Euro we'd facing the same problems as the rest of the Eurozone; had Brown and Alistair Darling not recapitalised the banks the chaos doesn't bear thinking about.  Osborne and Cameron by contrast have no long-term vision despite their "long-term plan".  Their approach has been to mortgage the future and use us as collateral.

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12/03/2014 10:53:00 pm | |

Wednesday, June 04, 2014 

It's not a peak, it's a plateau.

Well, here we are once again.  Another state opening of parliament.  Another Queen's speech.  Another brick in the wall.  Somehow, quite possibly as a result of a voodoo curse, the coalition has stuck together four whole years.  If any Lib Dem MPs would like there to be a conscious uncoupling, ala Gywnnie n' Chris, then clearly Clegg and Danny Alexander aren't listening.  They must know the longer they remain bound together the less chance there is of their old supporters returning, and yet they seem determined to see it out to the bitter end.

Speaking of which, we can't have a Queen's speech post without remarking on the lunacy of the ceremony itself.  You can't help but wonder how much longer poor old Brenda is going to put up with having to don full regalia for the benefit of a bunch of sycophants and royalist nutbars, not least when she has to read out such a wretched shopping list of bills and platitudes.  She's now 88, is she really going to be expected to keep doing this into her 90s? If we can't just dispense with the entire parade of stupidity, is there any real reason as opposed to a nonsensical traditional one why Charles can't take over? And what happened to the idea of the Lord Chancellor performing the head of state's role?

As for the speech itself, when one of the pages collapses out of stultifying boredom, you know it's pretty bad. At best there are three notable, important pieces of legislation: the pension reforms we've known about since the budget, the tax relief on childcare, and the fracking act. The rest are typical of legislation left over at the end of a parliament, only the coalition has been running on empty for the best part of two years. Liz was duly left with even more flannel to spout than is usual, informing the world of how her government intends to prevent further violence in Syria, not something immediately compatible with supporting the people attacking polling stations, and will also continue "its programme of political reform".  Sorry, which one is that again?

The day after somewhat defending politicians, it can only be described as immensely depressing to realise today effectively marks the beginning of the general election campaign.  Not one, not two but three Tory MPs stood up to demand to know whether Labour intends to put a penny on national insurance to fund the NHS, further dispiriting evidence of where the Lynton Crosby-helmed Conservative campaign is going to focus its attacks.  Had he wanted to be truly honest, Ed Miliband could have responded by pointing out whoever wins the next election is almost certain to raise taxes, such remains the size of the deficit thanks to three years of the economy flatlining, with it being almost impossible to keep the roughly 80/20% ratio of cuts to tax rises.  The correlation between the pensions reform, all but encouraging early cashing out, as it provides the Treasury with a healthy percentage at the same time and the continuing state of the public finances is obvious and direct.  In the long run it might turn into a loss for the exchequer, but by then Osborne and friends hope to be long gone.

Much of the rest was similarly short-term.  The infrastructure bill looks set to reform the trespass laws to make it impossible for landowners to object to drilling under their property, something that strikes as just a little ironic considering the coalition's insistence on toughening the law against squatting only a couple of years ago.  An issue no one saw as being a major problem had to be tackled in order to defend property rights, while here we are now doing precisely the opposite to start the dash for gas.  There's also yet another crime bill, as no parliamentary session is complete without one, despite last year's currently being stalled in part down to the row over sentences for those caught with a knife for the second time.

If we had a media that was more interested in the substance as opposed to the procedure and knockabout, they might have dedicated slightly more time to Miliband's response.  In a similar style to how Cameron took on Gordon Brown at the height of the expenses scandal, he set out how many believe "this House cannot achieve anything at all", condemning the paucity of help on offer to those for whom work doesn't pay, and how following the Mark Carney's declaration that inequality was one of the biggest challenges facing the country, politicians should be judged on how they respond.  It was a strong performance, one Miliband desperately needs to put in more often, and suggests behind the scenes the party has finally realised how to develop the cost of living from being merely a slogan into a defining argument against the lethargy of the coalition. 

The election obviously isn't going to be fought over the final year's tepid legislation, but Labour must hold it against the coalition.  Wasted years, a masochistic fetish for austerity then swapped with a lust for reflating old bubbles in the search for growth of any kind, and a determination to play one part of society off against another.  We can and have to do better than this.

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6/04/2014 11:59:00 pm | |

Thursday, March 20, 2014 

The return of the stupid party.


There is only one thing to draw from the Tories' BINGO! ad, as tweeted by Michael Green Grant Shapps, and it's not that the party itself has a pretty dim view of those it's attempting to appeal to, as we already knew that. It's rather that the party's advisers and advertising partners seem to be similarly crass and thoughtless. Is this really the same party that, regardless of what you thought of it, could at least be relied on in the past to commission effective, even iconic campaigns? Compare it to the viral video released by Labour a few weeks back, which used the template of Facebook's otherwise deeply creepy auto-generated history videos to look back on the coalition's four years in an both amusing and critical manner.  Forget patronising, Shapps' tweet was downright stupid, the only surprise being it hasn't been deleted.

Thankfully, we don't just have to rely on the Tories' own chairman to show up the coalition, as the Institute for Fiscal Studies has once again cast their eye over the budget. As last year, they condemn George Osborne in wonderfully understated language, as he continues to find money for tax cuts and spending without it being made clear where the money's going to come from.  "A Chancellor focussed on sound management of the public finances over the long tern would not make a habit of repeating these sort of manoeuvres," Paul Johnson said (PDF), but then it's been clear for some time that Osborne is no more focussed on the future beyond the next election than Gordon Brown ever was. The IFS notes there was again not even the slightest reflection on whether the scale of cuts required from non-protected departments are achievable, as they and many others doubt. Such shocks, whether they be tax rises, further cuts or both are to be left until after 2015.

Nor were the more widely praised changes to pensions spared. Despite the best efforts of the coalition and their supporters in the press to say so, it is not patronising to ask whether some will underestimate the amount they'll need to live on come retirement, nor whether the result will be a rise in the cost of annuities for those who do want them.  As Paul Johnson also pointed out, the Treasury expects the amount brought in from allowing people to cash out their pension pots if they so wish to increase in the short term, then reduce over time.  The real worry is not that those approaching retirement age will run out and buy Lamborghinis and then rely on the topped up state pension to live on, but as Tode says, it will spark a further round of buying to let, further limiting the opportunity of those on low incomes to purchase their own home.  Having already made it almost a right for parents to pass their homes on to their children, now it seems they'll be able to bequest their property portfolio as well.

Not that everything is entirely rosy for the comfortably off.  The additional 2 million who have found themselves dragged into the 40p tax band since 2010 have but one person to blame: the chancellor who has slashed corporation tax and abolished the 50p rate for the mega rich, meaning the shortfall has had to be made up somewhere.  Even so, the IFS makes clear whom has suffered the most under the coalition, and it sure isn't middle earners: with the exception of the top decile, who can more than shoulder their share, the poorest have been hit hardest.  It's worth remembering that this was Alistair Darling's plan for closing the deficit, almost the model of progression.  The coalition by contrast has assaulted the poor and got away with it, helped along by those who've focused on Benefits Street rather than the Square Mile.  Still, "they" can be bought off with beer and bingo, right?

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3/20/2014 08:28:00 pm | |

Wednesday, March 19, 2014 

Very much a country for old men.

Well, now we know.  The Conservative plan to get re-elected is devastatingly simple: bribe older people, bribe them now, and bribe them often.

To give George Osborne some credit, today's budget was far smarter than just throwing money in the general direction of the 55+ vote.  It was also the work of a politician who still wears the scars on his back from the 2012 omnishambles, when he put into action almost every old suggestion made by the civil service, many previously rejected by Labour as being either a nightmare to enforce or liable to result in an almighty backlash.  Add on the scrapping of the 50p rate, something most people aren't attached to in the long run but was symbolic of the well off needing to pay their fair share, and the Tories still haven't fully recovered.

Whether it will have the desired effect is far more difficult to predict.  Where Osborne gives with one hand, he takes with the other.  He makes much of his new "pensioner bonds", where those over 65 can wedge a cool 10k of their savings and on a three-year deal expect a return of 4%, while those who want to take advantage of his doing away with the need to take out an annuity and instead take a cash lump sum will be heavily taxed for the privilege, a measure predicted to raise a very handy £1.2bn by 2018/19.  This is especially clever for the reason that it looks as though everyone with a pension or significant savings is a winner: as Rick pointed out last week, it's arguable that in some areas it's been spending by pensioners keeping whole towns afloat.  Making this cash even easier to access makes sense, at least in the short term, especially when the much trumpeted recovery has been been reliant (so far) on consumer spending.  That simply can't continue for too long, unless you make it attractive for those who previously haven't splashed out to do so.  Little wonder the more cautious are expressing concern at how this could mean the state having to step in should things go wrong, but this obviously doesn't worry Osborne when he's relying on an immediate gain.

Then there were the utterly shameless measures.  There's very little reason why the tax on bingo should be reduced by 10% while that on fixed odds betting machines should be increased to 25%, unless we're falling for the out of date stereotype that only little old ladies play bingo while just those who can't afford to shove their pounds into slot machines.  There's an arguable case that bingo halls offer a wider community benefit, but this ignores how most will now offer both side by side. By the same measure, it also bewilders why the alcohol duty escalator is being scrapped while the one on tobacco remains, especially when counterfeit tabs and tobacco are far more abundant than knocked off booze. Taking another penny off beer is the kind of gesture that costs money while not being passed on to the consumer, making it worse than useless. Makes for a good headline, though.  Just as dubious is yet another scrapped rise in fuel duty, making it all but unthinkable the next government could restore the polluter pays principle.

For pretty much everyone else there was very little to cheer in George Osborne's screed. We heard once again about how this was a budget for the makers, the march of the mallards makers previously announced having not yet materialised, with the Office for Budget Responsibility later setting out how the sector was likely to continue to decline. A further, belated £2bn was found for investment, the coalition having first cut it, without it being explained where the money was coming from. Welfare spending excluding pensions, JSA and linked housing benefit is to be capped at £119bn, rising with inflation, which while not as draconian as feared is only likely to be the first assault on tax credits and housing benefit for those in work, the Tory proposal to exclude the under-25s from claiming it a spectre in the background.

Unless Osborne is planning something truly spectacular for next year, by which point many will have already made up their minds, the reasons for why the young and the low to moderately paid should even consider voting for either coalition party continues to diminish. The reality is unless you're married, have children, you both work and can afford to save you might as well not exist in Osborne's "resilient" economy, as any gain from the further rise in the personal allowance is swiftly snatched back through the withdrawal of tax credits, while middle earners gain more. The Lib Dems seem to have realised their cherished policy isn't all it's cracked up to be, just too late to do anything about it.  There was nothing to help ease the housing crisis, just re-announced old pledges to build. Any hope the much heralded "surprise" would be cutting VAT was soon dashed.

Which leaves just the recovery itself. Delayed thanks to Osborne's austerity fetish, we are still 5 years from the elimination of the deficit he promised by the end of this parliament. As welcome as the continued drop in unemployment is, it masks how those on the various workfare schemes are counted as in work, while those sanctioned are removed from the JSA figures. What it can't hide is the massive rise in self-employment, which far from suggesting entrepreneurial zeal suggests desperation, as well as exploitation on the part of companies, locking new workers out from the usual benefits. 60% of the cuts are still to come, ones which look all but impossible in the timescale without the collapse of services, and while there are reasons to doubt Labour's figures, there's probably much truth in their claim that most people will be worse off in real terms come the election.

Who then can blame the Tories' gambit? It ought to be their only hope. The fear has to be of the most likely alternative: another hung parliament, another coalition. 5 more years of the Lib Dems pretending not to love the cuts. Should it happen, can someone please put me out of my misery?

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3/19/2014 11:33:00 pm | |

Monday, January 27, 2014 

Walking into Osborne's man trap.

It isn't always the case, but generally if you get a whole section of industry spitting tacks and issuing threats when you announce a new policy, it's generally a sign that you're doing something right.  It happened when Ed Miliband announced his intention to cap energy bills, when the big six squealed that preventing them from raising the cost of energy for 20 months would result in blackouts and a collapse in investment, and regardless of the merits of specifically capping bills, it focused attention on a monopoly that needs breaking up.

The fact that the usual suspects have been decrying Ed Balls' announcement he will bring back the 50p top rate of income tax should Labour win the next election, while being exactly what you would expect, also suggests that there's something in it.  It can't be that it'll raise almost no money while driving away business or cause those fabled wealth creators to flee due to having to pay an extra 5p in the pound.  Of course, it might raise hardly anything due to the fact that so many will use various dodges to avoid paying it, but that isn't the same thing.  The Institute for Fiscal Studies, while agreeing with the government that the £10bn Balls quoted isn't associated with the 50p rate, accepts that the evidence for how much it could raise or cost is uncertain.  The best insight is from HMRC itself, and associated with the 50p rate the coalition inherited and quickly binned.  Plenty of those who knew they were about to be affected gave themselves a windfall the year before it was introduced, while Osborne's announced abolition of the rate enabled them to repeat the procedure, only delaying it by a year instead.  The only way to know how much it raises is to give it a few years without messing around with the rate.  As Chris also points out, much of the reaction is just nonsense: top rates of 80p or more up until the 80s didn't affect the overall growth rate.

As much of a break with the past 20 years it will be for Labour to have an election manifesto that promises to put up income tax, it's insignificant compared to Balls' other announcement, that the party would ape the Conservatives and also aim to run a budget surplus come the end of the next parliament.  There was one important caveat, that unlike George Osborne Balls would seek to borrow to invest, and so only day-to-day spending would be capped rather than spending overall.  The Graun suggests it's the other way round, as budget surpluses have only been ran briefly in the past half century and are as it puts it, unnecessary.  Hopi Sen by contrast agrees with me.

The Graun is surely right when it calls Osborne's promise a hollow one.  To achieve the reduction in spending needed for his surplus the cuts would have to go far beyond anything the coalition has attempted so far, and even if the Tories manage to get a majority at the next election, you just can't see the politics being acceptable, even after the shit-kicking the poor and sick have received over the past few years.  When Osborne delays his fiscal consolidation even further, as he almost certainly will, the only people calling him on it will be Labour.  Just as no one has taken any notice of how Osborne has comprehensively failed to achieve even the reduction of the deficit foreseen by Alistair Darling, the same plan denounced by Osborne as being no plan at all and which would lead to us following Greece towards bankruptcy, so will everyone ignore the coming failure.

Should Labour win the next election though, the Tories and the right-wing press will constantly remind Balls of his rash promise.  We all knew there were going to be cuts, but to pledge to follow Osborne's lead, even while leaving himself more wriggle room was to walk straight into Osborne's trap.  Even if Balls were to call an emergency budget immediately after the election and row back completely on his pledge, getting the "bad" news out of the way straight off and setting out how he would really be aiming to reduce the deficit, such as through a more balanced mixture of cuts and tax rises, it's dubious as to how such a strategy would would play out.  The dishonest approach at the moment is to give the indication that you can make these drastic reductions in spending without it hurting when it simply isn't possible.  Better to set out how you would get the deficit down in time, in a realistic fashion.  It's surely a better option than getting involved in a game of who can make the most ridiculous gesture with Osborne when someone is going to lose horribly.  Despite everything, it still remains unlikely to be the chancellor.

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1/27/2014 09:29:00 pm | |

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