Saturday, November 29, 2008

On reflection...they could have spent that money better

There's an old saying in politics that Budgets look different a week after they are delivered than a day after - and I guess Pre-Budgets are no exception. After initially praising the Chancellor's decision to cut VAT on Monday, I've revised my opinion somewhat. Here's today's Journal column.



Thirteen months ago, Chancellor Alistair Darling stood up to deliver his first Pre-Budget report in the House of Commons in what was an atmosphere of political ferment.

Prime Minister Gordon Brown was coming under heavy fire after scrapping plans for an autumn election and the PBR – brought forward by a month from its normal November slot – was being seen as a chance for Labour to regain the political initiative.

In a bid to trump Tory plans to scrap inheritance tax for all estates below £1m, Mr Darling announced an immediate doubling of the threshold for the tax to £600,000.

But the attempted vote-grabbing manoeuvre backfired horribly, making Labour look like a government that had run out of steam and which was now reliant on the opposition for new policy ideas.

A year on, the stakes for Mr Darling were even higher. Against the backdrop of the worst economic downturn in decades, this year’s PBR needed to show that the Chancellor was the man with the plan with tackle the crisis.

Not only that, but Messrs Brown and Darling also needed to demonstrate that their plan was better than anything David Cameron’s Conservatives might come up with.

Well, the backlash against this week’s PBR has been nothing like the widespread public contempt that greeted last year’s, but neither has there been anything resembling a public outburst of enthusiasm for it.

It’s still relatively early days for Mr Darling’s Chancellorship, but if pressed for a judgement I would have to conclude that Pre-Budget Reports are probably not his strong point.

Sure, Monday’s statement had its good points, notably the decision to bring forward £3bn of spending on infrastructure projects and the earlier-than-planned increases in pensions and child benefit.

Welcome, too – at least as far as this columnist is concerned – was the long overdue decision to increase the top rate of tax on the highest earners, though only on those earning what for most of us is the undreamed-of sum of £150,000-a-year.

This has been predictably hailed by some as heralding the death of New Labour, but in truth, the 1997 commitment not to raise the higher rate of tax had become almost as much of an outdated shibboleth as the original Clause IV.

The essence of New Labour did not lie in adherence to any single policy stance, more the idea that different times require different solutions, and in that sense, the 45p tax move is as New Labour as they come.

Neither, in my view, can Messrs Brown and Darling be accused of lacking courage in bringing such a package before the voters.

The Prime Minister has been called many things over the past fifteen months - but the soubriquet which possibly did him the most damage was the one applied to him in the wake of the non-election debacle - 'Bottler Brown.'

Well, he certainly didn’t bottle this one. On the contrary, he has been completely upfront with the public both about the sheer scale of borrowing that is required, and the fact that it will require post-election tax rises to pay for it.

For Labour to try to turn the normal laws of politics on their head by promising both
tax increases and spending cuts if re-elected is a strategy so bold it almost deserves to succeed on that alone.

But for all its boldness, there was a huge unanswered question at the heart of Mr Darling’s plan, namely, whether it will actually work either economically or politically.

The centrepiece of the Monday’s package was not the aforementioned tax increase for the super-rich, but the £12.5bn tax giveaway via the temporary reduction in VAT from 17.5pc to 15pc.

The economic thinking behind this at least is clear. The government hopes it will encourage people to go out and spend, and that the resulting boost to the retail sector will somehow kick-start the rest of the economy.

Unfortunately, there is no evidence that a price-cut that amounts to a fiver off a £200 telly will have anything like the desired effect in this regard.

But if the economic case for the VAT cut is unproven, the politics of it seem even less clear-cut.

Just ask yourself for a moment, if you were Prime Minister and had £12.5bn with which to try and win the next election, what would be the most vote-winning policy you could come up with?

Well, I don’t think Gordon Brown has asked himself this question anything like as hard as he should have done – because I am quite sure the answer is not a 2.5pc cut in VAT.

A cut in direct taxation, that would have put money directly back in people’s pockets rather than making goods very slightly cheaper in the shops, would have been a far, far better option.

One person who seems to have realised this is North Tyneside MP and former Cabinet minister Stephen Byers, who asked a revealing parliamentary question earlier this year.

Mr Byers wanted to know how much it would cost to lift half a million people, a million and a million half out of income tax altogether.

Intriguingly, the answer he received showed that the cost of lifting a million people out of income tax for one year—by raising the personal allowance by £960—was £11.1bn.

Would that not have been a much better use of the £12.5bn at Mr Darling’s disposal? And would not the Tories have had a much harder time arguing against such a tax cut?

It is for these reasons that I cannot see this Pre-Budget Report as anything more than a missed opportunity for Labour.

Unlike some, I don’t view it as a suicide note to the electorate on a par with the party’s infamous “Shadow Budget” in 1992, but neither do I see it as the springboard for a 2010 election victory.

My hunch is that if the economy recovers, and Labour’s political prospects with it, it will be more in spite of this package than because of it.

Once again, a chance to regain the political initiative has been squandered – along with the taxpayers’ billions.

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Friday, November 28, 2008

A crisis carol



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Wednesday, November 26, 2008

Mandelson should answer Commons Questions

So says the Business and Enterprise Select Committee whose job is to monitor the activities of Lord Mandy's new department. But not just him. In my view, anyone should be able to be quizzed on the floor of the Commons, whether they are a member of either House of Parliament.

Here's what I wrote on the Guardian Politics Blog earlier today:

In my view we should go further, and make it possible for people to answer questions in the Commons without needing to be a member of either House of Parliament. This would achieve two things. Firstly, it would enable Prime Ministers to appoint the very best people to their Cabinets without them needing to become MPs or peers. Secondly, it would move us closer to the classic Separation of Powers doctrine on which the US constitution is built. The Prime Minister would continue to be the person who can command a majority in the House of Commons, and would thus invariably be an MP. But he would be able to appoint anyone he liked to his Cabinet in the knowledge that they remained accountable to Parliament through parliamentary questions and (more powerful) select committees.

To see the whole discussion in context, see Andrew Sparrow's original blogpost here.

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Tuesday, November 25, 2008

Remembering Big Cyril

The latest issue of Total Politics is now out and Sir Cyril Smith is the latest subject in my Where Are They Now? series. The short answer is that he's alive and well and living in the same terraced house in Rochdale which he's lived in for 80 years, but you'll have to click on the link to see the rest.

The mag also has a poll on The Top 100 Political Journalists in Britain on which I feel obliged to pass some comment. I don't want to be too critical, as it was compiled fairly objectively from the votes of politicians, lobby journalists, and the TP Facebook group, but any such poll that places Peter Oborne at 60 and David Hencke at 93 has to be taken with something of a pinch of salt.

It seems the editorial team of Total Politics weren't entirely in agreement with their electorate on this either. In the preamble to the piece, they say: "We found it difficult to understand why neither Andrew Neil nor Ben Brogan made the Top 20. Surely Patrick Hennessy, Nick Watt and Peter Oborne should have been far higher than mid-table mediocrity?"

Leaving aside the odious Mr Pad, who Daily Politics show I find consistently unwatchable on account of his overweening presence, I would second all of that.

The other point I would make about polls listing political journalists is that you are essentially trying to compare very different skills. During my time in the Lobby, Philip Webster of The Times was regarded by many as the greatest story-getter, which on a traditional view of what constitutes journalism would make him the No 1 political journalist. But not even Phil would claim he was the greatest writer, commentator or sketchwriter.

The truth is that while the most highly-rated political journalists tend to have more specialised skills, venture lower down the list and you are more likely to find genuine all-rounders. The Guardian's ace sketchwriter Simon Hoggart (No 14) would be hard-pressed to write a front-page scoop, but the Mail on Sunday's Brendan Carlin (No 73) not only excels at that but wrote a mean parliamentary sketch in his Yorkshire Post days as I recall.

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Monday, November 24, 2008

No more the bottler

VAT down from 17.5pc to 15pc. New higher tax band for the super-rich. £3bn of capital spending brought forward. National insurance to go up after the election. New air taxes on long-haul. Increases in pensions and child benefit brought forward. Whatever you make of today's Pre Budget Report, no-one can say it lacks ambition.

The Prime Minister has been called many things over the past fifteen months - but the soubriquet which possibly did him the most damage was the one applied to him in the wake of the decision to postpone a 2007 election - 'Bottler Brown.'

Well, I never believed Gordon Brown was a bottler, and this package today has proved it. He is, and always has been when it comes to the economy, a man of huge political courage.

Not the least courageous bit of it is that Mr Brown is attempting to turn the normal laws of politics on their head by promising tax increases if his party wins the next election, gambling that this will partly help defuse the inevitable Tory claims of a hidden "Labour tax bombshell."

Will it pay-off? Well, if I knew that, I'd be sitting in his chair. It doesn't help the government's case that it is borrowing huge sums of money in the hope of things turning out okay to address a problem caused by banks borrowing huge sums of money in the hope of things turning out okay.

But even if Brown goes on to lose in 2010, and the apparent rebirth of Keynesian economics after decades of monetarist orthodoxy turns out to no more than a fleeting glimmer, I think he's done the right thing by Britain and its neediest families today. Maybe history, if not the electorate, will give him credit for it.

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Saturday, November 22, 2008

Politics returns to normal

The age of political cross-dressing came to an end this week as David Cameron tore up his pledge to match Labour's spending plans. Here's today's Journal column.



Ever since David Cameron became Tory leader nearly three years ago, the shape of British politics has been fixed in a fairly rigid mould.

A Labour Party which had already shifted several degrees to the right under Tony Blair found itself confronted by a Conservative Party suddenly seeking to "detoxify" itself by shifting to the left.

The upshot was what I termed the era of political cross-dressing - an increasingly desperate fight over the political centre ground in which policies drawn up by one party were swiftly and routinely purloined by the other.

Even when Gordon Brown took over the Labour leadership in 2007, he found himself unable to do much to break out of this straitjacket, for fear of ceding vital territory to the opposition.

And there we might have stayed right up until the next election, but for the credit crunch and the ensuing economic recessson that now seemingly grips the UK.

Suddenly, things became politically possible that would once have been quite beyond the pale - nationalisation of the banks being perhaps the foremost example.

Against the odds, the one-time high-priest of "prudence" re-discovered Keynesian economics and tore up his own much-vaunted "fiscal rules" which had previously imposed a strict limit on borrowing.

Suddenly, the Tories found themselves having to rethink their own approach to economic policy, for fear of finding themselves outflanked by Labour on both tax cuts and spending increases.

The result was that, this week, the era of political cross-dressing finally came to an abrupt end, as Mr Cameron announced his party would no longer match Labour's spending plans.

In a keynote speech on the economy, the Conservative leader insisted increased borrowing today would mean higher taxes tomorrow as he ripped up his spending pledge.

"Gordon Brown knows that borrowing today means higher taxes tomorrow and if he doesn't tell you that he's misleading you," he said.

"And in any case, after 11 years of waste and broken promises from Labour, they can see that spending more and more alone does not guarantee that things get better."

In one sense, it takes politics back to where it was before the 1997, 2001 and 2005 elections, when the battle-lines were essentially between Labour "investment" and Tory "cuts."

But in truth, in the case of the most recent contest, that was no more than mendacious spin by Labour - as I pointed out on these pages at the time.

The platform on which the Conservatives fought in 2005 was not cutting spending, merely allowing it to rise at a slower rate than had been proposed by Labour

This is essentially the same as what Mr Cameron is now proposing, despite the inevitable Labour taunts that the Tories are reverting to their slash-and-burn, nasty party stereotype.

It's undoubtedly a big gamble by the Tory leader. Ever since Labour pledged not to exceed the Tories' own spending plans prior to 1997, the watchwords in economic policy have been "don't frighten the horses."

To put it another way, the conventional wisdom for the past decade and a half has been that parties which pledge to change things too much - either by big increases or big cuts in spending - risked electoral suicide.

But the real gamble here is not Mr Cameron's, but Mr Brown's, for it is the Prime Minister who is making the biggest departure from economic orthodoxy.

While Mr Cameron is merely promising lower spending increases and no immediate tax cuts, Mr Brown is promising not just higher spending, but tax cuts into the bargain as well.

People often think the era of economic orthodoxy - of not spending more than the country can strictly afford - began with Mrs Thatcher, but it did not.

It actually began with a Labour Prime Minister, Jim Callaghan, who went to his party conference in 1976 to tell them "the party's over."

"We used to think we could spend our way out of a recession. I tell you in all candour that that option no longer exists," he said at the time.

Well here, 32 years on, is his successor-but-five as Labour leader telling us that we can now do exactly that.

We will see on Monday, when Chancellor Alistair Darling unveils his Pre-Budget Report, just how much Mr Brown is prepared to bet on red as he attempts to beat the slump - but all the talk is that it will be big.

Tax credits for the worse off seems a given in the the light of the Prime Minister's recent comments, so too a decision to bring forward spending on major infrastructure projects - which could potentially be good news for the North-East.

If it works, it will go down as possibly the greatest economic rescue operation since Franklin D. Roosevelt's "New Deal" in the wake of the Great Depression of the 1930s.

If it doesn't, Mr Brown will go down as yet another Labour PM who tried and failed to suspend the normal laws of economics.

Westminster is once again rife with talk about a snap general election - even that it could be announced immediately after the PBR on Monday.

I still don't buy it. For a start, the British don't hold elections in the middle of December. Secondly, Brown got his fingers burned so badly last time that I can't believe he would go down that route again.

But what is true is that battle lines for the next election have now started to become clear - with a classic left versus right battle in prospect for perhaps the first time since 1992.

The outcome will almost certainly determine the shape of British politics for the next decade.

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