Showing posts with label Budget 2012. Show all posts
Showing posts with label Budget 2012. Show all posts

Saturday, December 22, 2012

Budget debacle that left Coalition floundering

Here's my annual political review of the year, published in this morning's Newcastle Journal.

Until the early months of this year, the Con-Lib coalition that has governed Britain since May 2010 had by and large done so with a fair wind behind it from the public.

Without ever reaching the heights of popularity enjoyed by New Labour as its zenith, David Cameron’s government appeared, at the very least, to have earned the benefit of the doubt, particularly when it came to the economy.

All that changed on Wednesday 21 March – the day Chancellor George Osborne delivered his third Budget.

To say it was the pivotal moment of the political year would be something of an understatement. In terms of its impact on public opinion, it may well prove to be the pivotal moment of the entire five-year Parliament.

In the space of a 59-minute speech, the Chancellor announced a package of measures which seemed almost deliberately designed to alienate as many sections of the electorate as he could find.

He slapped VAT on hot food and caravans, froze the age-related tax allowance for pensioners, removed a tax break on charitable giving that would have hit hundreds of good causes, and topped it off with a cut in the higher rate of tax worth £42,295 to anyone earning £1m a year.

It was the ‘pasty tax’ rather than the top rate cut which proved the most politically toxic, playing as it did into the ‘Tory toffs’ narrative which had increasingly started to dog Messrs Cameron and Osborne.

In the end, the plan was ditched following a campaign by this newspaper among others – one of a series of budget U-turns which left the Chancellor’s credibility seriously damaged.

From there on in, even though the festivities around the Queen’s Diamond Jubilee and the London 2012 Olympics provided useful temporary distractions, the government struggled to get back on the front foot.

And the slide in its opinion poll ratings was accompanied by increasing tensions within the Coalition itself – notably over Europe, welfare cuts, gay marriage and, most of all, Lords reform.

With his dream of a new electoral system shattered in the May 2011 referendum, deputy Prime Minister Nick Clegg was pinning his hopes of achieving lasting political reform on securing an elected second chamber - but the Tory backbenchers were having none of it.

The Lib Dems retaliated by scuppering the Tories’ plans for a review of Parliamentary boundaries that would probably have gained them 20-30 seats at the next election

Frustrated in his attempts to regain the political initiative, Mr Cameron resorted to the time-honoured tactic of a reshuffle, but some of his new appointments soon began to unravel.

He shunted Justine Greening out of the job of transport secretary on account of her opposition to a third runway at Heathrow only to see London Mayor and would-be leadership rival Boris Johnson rally to her cause.

His appointment of Andrew Mitchell as chief whip also swiftly backfired when he was involved in an altercation with police officers at the entrance to 10 Downing Street.

However in what has surely been the most interminable and convoluted political story of the year, Mr Mitchell now looks likely to have the last laugh, after it emerged that a police officer may have fabricated evidence.

In the North-East, the regional political agenda continued to be dominated by the fallout from the government’s spending cuts.

Newcastle city council responded to the spending squeeze by taking the axe to the arts budget – reminding those of us with long memories of the antics of so-called ‘loony left’ councils in the 1980s.

Yet at the same time, the year saw something of a rebirth of regional policy, driven by Lord Heseltine’s ‘No Stone Unturned’ report which was explicitly endorsed by Mr Osborne in his autumn statement.

The mini budget also saw the Chancellor forced to back down on plans to introduce regional pay rates following a fierce campaign by the unions.

The year ended with increasing speculation that the Coalition may not, after all, go the distance to the planned next election date of May 2015.

With the government seemingly stuck in a trough of unpopularity, the need for the Liberal Democrats to assert their separate identity from the Tories is growing.

Mr Clegg’s decision to make a separate Commons statement from the front bench on last month’s Leveson report into press regulation was unprecedented, but may well prove to be the start of a trend.

If 2012 was the year the Coalition lost the public’s goodwill, 2013 may prove to be the one that sees it splitting asunder.

Saturday, May 19, 2012

Clegg fires welcome warning shot over regional pay

When the history of David Cameron’s government comes to be written, the Budget delivered by Chancellor George Osborne on 21 March may well be seen as a decisive turning point in its fortunes

Whether it was the pasty tax, the granny tax, the tax on charitable giving or the abolition of the 50p rate, those looking for something to criticise in the Chancellor’s package found plenty of things to choose from.

But of all the measures announced by Mr Osborne two months ago, surely the most pernicious as far as the North-East is concerned was the proposal to introduce regional pay rates – paying teachers and other public sector staff in Newcastle less than people doing the same jobs in London.

Far from seeing the prosperity gap between richer and poorer regions as an evil which needs to be addressed, the idea of regional pay takes such inequality as an incontrovertible fact of life and then threatens to institutionalise it throughout the entire British economy.

Despite the efforts of some North-East MPs and union leaders, the proposal has received little national attention up until now, demonstrating once again the London-centricity of our national media.

But that may be about to change.  For the question of regional pay now appears to be playing into the much wider political narrative concerning the longer-term future of the Tory-Lib Dem Coalition.

In what can only be seen as a shot across Mr Osborne’s bows, Lib Dem leader Nick Clegg warned this week that his party could not sign up to a policy that would exacerbate the North-South divide.

It seems that regional pay has now joined the growing list of issues, alongside Europe, House of Lords reform and Rupert Murdoch, where the two parts of the Coalition are singing from increasingly varying hymn sheets.

Speaking to the National Education Trust in London Mr Clegg said: “Nothing has been decided and I feel very, very strongly as an MP in South Yorkshire, with a lot of people in public services, we are not going to be able simply willy-nilly to exacerbate a North-South divide.

“I think people should be reassured we are not going to rush headlong in imposing a system from above which if it was done in the way sometimes described would be totally unjust because it would penalise some of the people working in some of the most difficult areas.”

Perhaps the most heartening aspect of Monday’s speech was simply hearing a senior minister – the Deputy Prime Minister no less – talking about the North-South divide again.

It became practically a banned subject under Tony Blair, who first attempted to dismiss it as a "myth,” then tried to con the region into thinking something was being done about it by inventing a spurious target to narrow the gap between the three richest regions and the six poorest.

In one sense, Mr Clegg’s intervention is not unexpected given his own status as a South Yorkshire MP in what is a genuinely three-way marginal constituency.

Mr Blair’s former spin doctor Alastair Campbell has stated that Mr Clegg's only hope of retaining his Sheffield Hallam seat at the next election is to join the Conservative Party, and even making allowances for Alastair’s obvious partisanship, I’ve a sneaking suspicion he may be right,

But in the meantime, it is clearly in the Lib Dem leader's interests to try to put some clear yellow water between himself and the Tories on issues with a particular relevance to the Northern regions.

In view of the Lib Dems’ dismal performance in local elections in the North since the party joined the Coalition in 2010, it is surely not a moment too soon.

Mr Blair’s indifference to the whole issue of regional disparities was partly responsible for the Lib Dems’ dramatic surge in support in the region between 1999 and 2007, with Labour-held seats like Newcastle Central, Blaydon and Durham City briefly becoming realistic targets.

Meanwhile at local government level, the party took control of Newcastle from Labour, and actually managed to hang on to it for seven years before being swept away in the post-Coalition backwash of May 2011.

It will be a long way back for the party to reach those giddy heights again, still further if it is to mount a serious challenge for additional parliamentary seats in the region.

This week, however, Mr Clegg might just have taken the first step along the road.

Saturday, April 28, 2012

The end of the beginning

Honeymoon period is doubtless an overworked term in politics – but all governments to some extent or other tend to enjoy a period of time in which the prevailing public attitude towards them is one of general goodwill.

Tony Blair was lucky enough that his lasted nearly five years, though that was in part down to the general uselessness of the Tory opposition of the time and the benign economic climate which he had inherited.

The public enthusiasm generated by the formation the Coalition government in 2010 was never quite on the scale of that which greeted Mr Blair’s arrival in 1997, and hence was never likely to last quite as long.

Nevertheless until relatively recently, the government was still widely seen as competent, and though its economic policies may have polarised opinion in some quarters, the press and public were still tending to give it the benefit of the doubt.

All that started to change with the Budget. The granny tax, the pasty tax and the row over tax relief on charitable giving combined to make this the biggest PR disaster to come out of the Treasury since Gordon Brown’s 75p pension increase.

There followed the woeful mishandling of the prospect of an Easter fuel strike, leading to what turned out to be a quite unnecessary spate of panic buying.

The government’s difficulties continued with the fiasco over the attempted deportation of Abu Qatada after the Jordanian terror suspect’s lawyers ran rings round Home Secretary Theresa May.

And by the end of last week, the run of mishaps had even acquired a name: omnishambles.

Things got no better at the start of this week as outspoken Tory backbencher Nadine Dorries tore into Prime Minister David Cameron and Chancellor George Osborne, branding them “arrogant posh boys who don’t know the price of milk.”

Then Jeremy Hunt, one of David Cameron's closest Cabinet allies and a potential future Tory leader, found himself accused of operating a ‘back channel’ of communication with the media mogul Rupert Murdoch during his bid for BskyB.

His special adviser took the rap and resigned, but this failed to quell opposition demands for Mr Hunt himself to fall on his sword.

It brought forth the wounding jibe from Labour’s Dennis Skinner: “When posh boys are in trouble, they sack the servants.”

But all of this really pales into insignificance besides the news that was delivered by the Office for National Statistics on Wednesday morning: that the government had, after all, led us into the dreaded double-dip recession.

Months of Labour warnings that the government was cutting too far, too fast were suddenly and dramatically vindicated.

It is too early to say whether it will prove to be a political game changer on the scale of, say the 1992 ERM debacle or Mr Brown’s election-that-never-was in 2007.

But it does, almost certainly, mean the end of a period in which the government’s claims about the economy have generally been given greater credibility than the opposition’s.

The politician whose personal fortunes have most closely mirrored those of the government over the past six weeks is Mr Osborne.

He has gone from being seen as the strategic genius of the Tory benches to being widely blamed for many of the government’s current difficulties.

The corresponding beneficiaries are Boris Johnson – Mr Osborne’s main rival for the future Tory leadership – and of course the Shadow Chancellor, Ed Balls.

As the former Labour special adviser Dan Hodges put it in the Daily Telegraph: “Ed Balls has won the right to be listened to now. That doesn’t mean people will automatically agree with what he says. But they will listen.”

In the light of the ONS figures though, perhaps the most damaging attack on the government last week came not from Mr Balls or even Mr Skinner, but from Ms Dorries.

The particularly lethal nature of her comments is that they play into a growing preconception about Messrs Cameron and Osborne that is being heightened by the worsening economic conditions.

A Prime Minster can get away with being a posh boy so long as he is competent on the one hand, and empathetic to the plight of those worse off than himself on the other.

On both of those scores, Mr Cameron is currently being found wanting.

Saturday, April 21, 2012

Labour must share blame for region's plight

Over the past few weeks, the domestic political agenda has been dominated by the continuing fallout from what has by now surely become of the most controversial, even reviled Budgets of recent years.

It started within a few minutes of the Chancellor sitting down on 21 March with the revelation that he had performed a stealth tax raid on pensioners' incomes by freezing their personal allowances - the so-called 'granny tax.'

It continued with the belated realisation that, in pursuing the entirely laudable objective of limiting the amount of tax relief that can be claimed by the super-rich, the government had also made life much, much harder for the charitable sector.

And throughout it all there has been the ongoing row over the so-called pasty tax, coupled with increasingly laughable attempts by Old Etonian ministers to get with the workers by claiming to be fans of the hot snacks.

But until this week, no serious consideration had been given to the particular impact of George Osborne's proposals on the North-East.

So first off, congratulations are due to Gateshead MP Ian Mearns, always a doughty campaigner on behalf of the region, for securing a 90-minute debate on that very subject in Westminster Hall on Tuesday.

Having spent quite a lot of my career covering such debates, it would be easy for me to write them off as so much hot air, but that would be an overly-cynical view even for me.

They may not change anything, at least in the very short term, and the ministerial replies may be invariably formulaic. But where they do succeed is in raising consciousness of an issue to the point where it becomes harder to ignore, and that sense they are vital.

It was clear from the start that this was a Budget that was particularly pernicious in its potential impact on the region.

Quite apart from the impact on Tyneside-based pasty-maker Greggs, one of its central recommendations was the introduction of regional pay rates, which would institutionalise regional income disparities in the public sector for no better reason than the fact that they already exist in the private sector.

Mr Mearns chose not to dwell on that particularly in his opening speech to Tuesday's debate, however, choosing to highlight some damning statistics about the effect of Mr Osborne's higher-rate tax cut and the government's spending priorities.

He revealed that, while in London, the South-East and East Anglia, nearly 195,000 taxpayers will reap the benefit of the tax giveaway, in the North-East the figure will be fewer than 5,000.

On transport spending, the disparities are even more alarming. Mr Mearns revealed that more than 160 times as much is being spent on transport infrastructure projects in London than in the North-East.

"Once more, the people of the North East are paying the price for an economic strategy made in and for the wealthier south," he said.

He didn't, as it happens, mention the proposed HS2 high-speed link, but although it has its supporters, my own view is that it is not necessarily the panacea that some say it is.

For one thing, it won't arrive here until 2032 at the earliest. For another, any economic benefits to the wider North are likely to migrate towards Leeds and Manchester, which will be getting the link a good half decade earlier.

But the most fundamental question that has to be asked of any Labour politician when raising the issue of the North-South divide is why the party did not do more to address it during its 13 years in power from 1997.

Ian Mearns at least can point to a consistent track record on that score. As a leading figure in North-East local government during the Tony Blair years, he was one of those who regularly highlighted that administration's failure to address the issue, while the likes of Nick Brown and David Clelland also argued strenuously behind the scenes for a better deal for the region.

But the party as a whole allowed Mr Blair to get away with two particular claims that, taken together, served fatally to undermine the case for a more proactive regional policy.

The first was that the differences within regions were as great as the differences between them. The second was that any attempt to rebalance the economy risked harming the Southern regions which were the main driver for the economy as a whole.

Whatever the merit of these arguments, they became, over time, an excuse for simply doing nothing.

In the words of its response to a 2003 report on the issue: "The government does not accept the proposition that increased public funding to the less prosperous regions is a necessary condition to improve their prosperity."

The sad truth of the matter is that New Labour had an historic opportunity to do something about regional economic disparities at a time when it had a fair political wind behind it and, crucially, public spending as a whole was rising.

For the Coalition to try to tackle the gap in the current economic environment is a much harder task.

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Saturday, March 24, 2012

Bad news management costs Osborne dear

There is a hoary old adage in British politics that a Budget that looks good on the day invariably looks like a turkey a few weeks later.

But there can be few Budgets in the recent past which have unravelled quite as quickly as George Osborne’s latest package unveiled to MPs on Wednesday.

Within an hour of him sitting down, #grannytax was the top trending item on Twitter and the revolt against the Chancellor’s ‘stealth tax’ raid on pensioners was under way.

Rarely have the following days’ newspapers seen such a degree of unanimity over a Budget statement – or made such depressing reading for the man from Number 11.

Part of the largely hostile press reaction can be put down down to poor presentation and rank bad news management on the part of the government.

As one Labour veteran reminded us, Gordon Brown’s modus operandi was to get all the bad news out there beforehand and hold the good stuff back for a big ‘rabbit-out-of-the-hat’ announcement on the day.

The government appears to have taken the opposite approach with this Budget, with more leaks than a St David’s Day parade as one heterographically-minded blogger put it.

Indeed one reason it has had such a bad press is that most of the more positive measures were old news by the time the Chancellor got to his feet.

There were at least some good points. Annual tax statements will be a welcome addition to the public’s right to know, while the 2p cut in corporation tax ought to help meet the desperate need for new jobs.

And the imposition of 7pc stamp duty on the purchase of homes over £2m is the nearest we are likely to come to the Lib Dems’ cherished “Mansion Tax.’

Furthermore, despite its appalling presentation, I don’t necessarily go along with all the criticisms that have been made of the so-called ‘granny tax.’

As the Institute of Fiscal Studies has pointed out, pensioners have so far done better than younger people from the government’s austerity measures, and this at least helps even things up a bit.

Inevitably, much of the ire of left-of-centre politicians and commentators has been directed at the 5p cut in the top rate of income tax, worth around £42,500 a year to someone earning £1m.

It provided Ed Miliband with the best joke of the week – and perhaps of his leadership – telling the Prime Minister he will save so much that he “will be able to afford his own horse.”

A more serious moral point was made by the commentator Martin Kettle, arguing that the top-rate tax cut highlights the different worlds inhabited by the super-rich and the rest of us.

“The vast majority of us would be prosecuted if we opted not to pay [tax.] If the rich don’t pay, the law is changed to reflect the fact that they won’t pay up,” he wrote.

The economic arguments over the efficacy of the 50p rate will doubtless run and run, but this is perhaps one area where the politics should have trumped the economics.

If the 50p rate symbolised the fact that ‘we’re all in it together,’ then the political damage to the government engendered by its removal may well outweigh any economic benefit in the longer term.

The move towards a single personal tax-free allowance of £10,000 has been widely welcomed, but - just as Mr Brown once did – Mr Osborne is recouping some of the cost through so-called ‘fiscal drag.’

It means around 300,000 middle-income earners are finding themselves dragged into the 40p tax rate at the same time as top-rate taxpayers see their own rates cut by 5p in the pound.

But saving the worst till last, for me the most pernicious of all the Budget measures – at least as far as the North-East region is concerned - is the proposed introduction of regional rates of pay in the public sector.

As has been pointed out, this will only serve to entrench existing regional economic inequalities and institutionalise low-wage economies in areas such as the North-East, Wales and South-West.

The government’s argument seems to be that as private sector pay is lower in these regions, so therefore public sector pay ought to be lower too.

To me, that sounds suspiciously like two wrongs make a right.

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