Budget findings are problems for me, the government, Labour, and especially the poor
The Institute for Fiscal Studies have concluded that the coalition’s first budget is regressive. That my party voted for it is sad. But I still haven’t heard of a viable progressive alternative, and still think that the Lib Dems made the situation better than it would otherwise have been.
It’s not surprising that a budget cutting government services hits hardest those who use those services most. The NHS’s budget is protected, so the next biggest spending government department is the Department of Work and Pensions. Cuts there mean fewer benefits, and the poorest suffering most.
These are Conservative measures, and ones which under normal circumstances I wouldn’t support. But of course we did support them, and whilst it makes me sad there are reasons why which I think are valid and which need considering.
The Conservatives took more votes and seats at the election than anyone else. This annoyed me because I’d worked hard for the Lib Dems to win. But we didn’t. We’d said throughout that, if a coalition was required, we’d look to form one with the party with most support. I guess I’m more left-leaning than not, so it was a shame that it had to be the Tories. It would also have been a shame though if it had have been Labour, since I disagreed with many of their policies then, and do now.
So we did form a coalition with the Tories. I was upset to be in league with people whose philosophy, especially at a grass roots level, I really don’t like. But that’s what was needed. The alternatives were an unworkable centre-left coalition which would have meant a broken promise and wouldn’t have stacked up in terms of numbers, or a minority Tory government unable to govern at a time when that really wasn’t a wise move.
The budget itself was, of course, massively Tory. Lib Dems are one sixth of the coalition, and probably have about one sixth of the policies in the budget. These include a rise in corporation tax and in the income tax threshold, both of which help the poorest. Of course, the two parties always did have things in common too. We have also enthusiastically supported some common policies like reforms to banking, for example.
There was lots in the budget that wasn’t Lib Dem. The bulk of it, in fact. Our own budget would’ve been massively different, but we aren’t the only governing party. The Tories have the huge majority of government votes because they won the election. This wasn’t a Lib Dem / Tory budget of two equal parties, as Labour will try to claim. It was, as the electorate determined, a Tory budget tempered a little by the Lib Dems.
We had to vote for it because we are in this coalition. It’s how coalitions work. Lots of Lib Dems are, I’m sure, privately upset about it. Lots of Tories are too, because they didn’t want to put Corporation Tax up or put the income tax threshold up. But what are the alternatives?
Labour are, of course, making the most of the regressiveness. I would if I were them. But their argument must rest on a viable alternative, and so far they haven’t provided one. Yes, it’s a shame that the budget is regressive, but where is the progressive alternative they say they have which will also deal with the debt and deficit? At election time, hey too promised bigger-than-Thatcher cuts. Would they have been progressive? Don’t think that they automatically would have been. I don’t see how.
Perhaps they’d have taxed the rich more, or cut different things in different ways. We don’t know, because they haven’t said. What we do know is that the Conservatives got more votes and seats than them, and so have a bigger mandate to govern on their own terms.
Let’s remember that in thirteen years under Labour, good years when cuts weren’t on the cards, the gap between rich and poor got bigger, and social mobility reduced. That looks like thirteen regressive years to me, compounded by things like doubling the income tax rate for the lowest earners as Gordon Brown did.
This is a difficult time. A sad time. I don’t like seeing those with the least getting even less, whilst those at the top don’t pay their share. It’s why I’m not a Conservative. But solutions are far more difficult than pointing out problems (as I am finding very clearly having moved from supporting the opposition to supporting the government) especially when the solutions are mainly from a party you don’t like.
It’s disappointing that the government have rejected the IFS’s conclusion. This conclusion wasn’t clear before, but I think it is now.
A better tactic, in my view, would be to honestly say that these are the measures which the government believe will work in the long term, relieving the whole country of a debt and deficit which will leave everyone more free to prosper in the future. That, to me, has the potential to be truly progressive.
By rejecting these findings the government looks churlish, plays into the hands of Labour, and by not yet coming out with any sort of differentiating line between the two governing parties, the Lib Dems in the government once more seem to be worryingly keen on standing by it.
Volunteer
Help in election
Report a problem
Join Us
Your views
Register to vote
Postal vote
Email updates
August 25th, 2010 at 1:17 pm
“I seen no sign of you, I only heard of you, holding up a big monkey man.” – Toots & The Maytals
It’s worth remembering that the Tories couldn’t get any of this through Parliament without the Lib Dems – that’s not a sixth of the share of power. As I see it, the Lib Dems ushered a right-wing libertarian to leadership without considering the consequences; now we’re run by a political elite that owes more to Carswell and Hannan than Kennedy or Ashdown.
August 25th, 2010 at 2:28 pm
That’s a great quote. No idea what it means, but I’m very much up for obscure pop references on here.
I agree with some of what you say. The Tories wouldn’t have got this budget through without us. But (and it’s a big but), some kind of budget would have had to have been passed, and it would have had some nasty cuts in it. Given the parliamentary maths, and the allergy that Labour and the Tories have to each other, surely this type of Lib/Con budget was the only plausible one? And surely the Lib Dem-ness of it has been enhanced greatly by the formalisation of a coalition deal, with Lib Dems around the Cabinet table, involved in the decisions etc?
As I said, I’d be well up for a progressive, “leftish” alternative. But can you think of one that would work and would be able to get through parliament? Because I can’t…
August 25th, 2010 at 10:22 pm
At what point do say enough? Pull out – save the image of the party and let the Tories go alone?
So far we seen:
The rise in VAT – fairly regressive don’t you think.
A budget, that hits the poorest hardest.
In year cuts to all councils – with northern councils hit hardest – this is why your colleague Vic is now up in arms against potential cuts to Prestwich Festival
The cancellation of much needed school building programmes right across the country – and to make it worse the publication of the wrong list of building works being cancelled (twice)
The threat of redundancy hanging over much of the public sector
A bill to reduce the size of the Commons by 50 MPs (because we need less politicians) – then the appointment of over 50 unelected new Lords into parliament…
Huge restructuring of the NHS that will cost 3billion just to implement and is at best a big risk
And despite the squeeze on the public purse for important front line services an extra £80 for the vital AV referendum and new boundary changes which will basically abolish the right for local input and review
What appears to be the shortest period of time between a Minister taking office and having to resign for financial scandal.
Its only been 4 months and look at this list. I have to agree with what Nick said this week when he told Lib Dems to expect to get wiped out at next years local elections.
August 26th, 2010 at 7:56 am
I don’t agree there actually. The reasons for the coalition remain, those being that the biggest single party (the Tories) need the support of another party (us) to form a stable government, and have had to compromise on policies. What we need to do much more of, I feel, is say where policies would be different under a Lib Dem government.
Since coalition government is new to almost everyone, we need to explain how it works, i.e. that parties put aside their own policies sometimes for the sake of a wider agenda. This is especially difficult for a party like our’s where we make up one sixth of the coalition and yet seem to be expected to wield all the power. We’re doing nothing to let the public know that we don’t have anything like the power in the coalition that the Tories rightly have because they won the election.
We shouldn’t leave the coalition, because it’s the democratically responsible thing to do (because the Tories came first in the election) and because I think we’re getting more Lib Dem policies out of it than we probably electorally deserve.
Your list excludes all the good things the coalition has done, and couches everything else in very negative terms. It also, crucially, doesn’t mention the debt or deficit or rhe reason we have those things, or the party which governed whilst we ran up those things. T
Yes, Lib Dems campaigned against a VAT rise, and if we were governing alone we wouldn’t have had one. But we aren’t.
Yeah, the government is doing some unpalatable stuff. But it’s better than it would be under the Tories alone. Since Labour have no alternative (and promised bigger-than-Thatcher cuts themselves) the only better plan I have is the Lib Dem manifesto, but sadly not enough people voted for it.
I’ve not heard the Clegg quote. Maybe you could send me the link? To be honest, if a party is going to be wiped out, I’d rather it happened as part of a plan to do things differently and try to work together with another party, than for any other reason. But I don’t think it will happen.
August 26th, 2010 at 10:54 am
It seems to me that Nick Clegg has given up ‘doing things differently’. Witness his pretty unconvincing performance yesterday ‘shooting the messenger’ ie the IFS when he had previously used their every word to batter the Labour government.
August 26th, 2010 at 11:28 am
Maybe using the IFS when in opposition but ignoring them when in government was what he meant by “doing things differently”!
To be fair, I think there’s no right answer to this. The IFS might be right, or they might not be, in terms of the long term progressiveness (or regressiveness) of the budget. It’s impossible to judge the effects of a budget when they won’t be realised for years and are dependent on so many unknowns.
The IFS are probably right (I am no economist, so I just believe what they say) about the effect of the budget now, but the government argue that this is short term pain for long term gain and that continuing to spend might well be progressive now but would be very bad in the long term, especially for the poorest.
Labour argue the opposite. I guess Labour’s is an easier argument to sell because it involves no short term pain (even though in the election they promised just that). But nobody can claim to be absolutely right, because nobody knows.
Unfortunately, both sides are claiming to be absolutely right, including the government of which my party is a member. I suppose the only thing to do is to remember that there was an election barely 100 days ago, and to remember that in that election more people voted for the Conservative way than the Labour way.
I don’t like the Conservative way, so am pleased that my party is tempering it slightly with things that I do like.
August 26th, 2010 at 2:20 pm
Pulling out of the coalition now would be childish at best. The IFS report looks only at the effects of this budget, and not what the impact on peoples’ lives will actually be with regard to previous and future budgets. You could very reasonably argue that VAT is less regressive than people make out since the poor buy more 0-rated stuff than the rich, and that there’s nothing ‘progressive’ about a benefits system that encourages able workers not to work. Richard’s right – the coalition is doing much more good than bad, and Labour sniping is opportunistic and hypocritical, considering how Miliband Jr and Balls have turned on Alistair Darling lately. Oh, and all this calling Clegg right-wing and making Kennedy out to be some kind of mini-socialist is ridiculous.
August 26th, 2010 at 2:50 pm
And I’d receommend that people read Clegg’s article in the FT about this, as well, he mounts a very good defence.
August 26th, 2010 at 3:08 pm
When Nick Clegg introduced the budget he said that fairness had been ‘hard wired’ into it. David Cameron said that everyone would feel the consequences of the cuts. If we were to ask Philip Green what effect they have had or will have on him and his family what do you think he might say – or how would David Cameron or the long line of millionaire Cabinet Ministers we are now governed by reply.
August 26th, 2010 at 5:48 pm
In reply to Jim M, the IFS report was clear that everyone is indeed feeling the consequences of the cuts. The argument goes that although the poorest lose most now, this is unsurprising given that cuts will obviously affect those who rely on public services more. This will be offset in the future because the sooner the debt is paid off, the sooner a better system can emerge again. Interestingly, the very richest 10% (the Philip Greens of the world) pay far more than 80% of others, so you’re not quite right there.
I also think it’s a bit cheap to have a go at the backgrounds of ministers. Yes, lots are privileged, but it’s hardly as if this is a new thing, nor does it make them bad at their job or unable to think about people less well off. The Labour government had plenty of very wealthy ministers in it, including Tony Blair himself. And Labour spectacularly failed to make social mobility any easier and thus this situation any less likely to occur in the future.
August 26th, 2010 at 7:09 pm
I’d try not to fret overmuch about the LibDems breaking promises. Remember that it was Nick Clegg that told your Party Conference that he would never lead his party into a Tory Government. But he did…
Let’s look at this claim of “doing things differently”. In an interview on the Today programme of yesterday, concerning whether the Budget was regressive or not, the Financial Secretary to the Treasury (Mark Hoban MP) was asked on a number of occasions whether George Osborne’s budget had been assessed under the Equalities Act of 2010, as was a legal requirement. He waffled and mumbled, but failed to answer the question. It was extremely revealing, and a link to the interview is here:
http://news.bbc.co.uk/today/hi/today/newsid_8942000/8942261.stm
Meaning? The Budget had not been assessed according to Law. Nope – not much difference there!
Richard, you keep on asking what alternatives there are, to deal with the difficult financial situation. But at the same time, you keep blaming the last (Labour) Government for the difficult financial situation we face now. You have yet to come up with a single suggestion as to what that Government, and that Chancellor, could have done, in order to alleviate the disaster which hit the world-wide banking system. Crocodile Tears, or what?
You know, I know, everybody knows, that what Darling did was absolutely right, given the circumstances. We had to protect the Banks, because our economy depends so much on the Banks. There was no other alternative, other than to allow our economy to sink without trace, resulting in a ten-fold increase in unemployment and poverty, and financial chaos for decades to come. Look at Greece! To say otherwise now, and to continually blame Darling for it all is nothing more than Politicking.
So – a few “alternatives” for you:
Given that “we are in this together” (and that means that companies will shrink or even fail, resulting in people being put out of work), why not legislate to ensure that Petrol Companies and Train Companies suffer too? At the moment, their retail prices go up whether we like it or not. We don’t have a choice, they know it, and they can and do protect their profits, despite everybody else having to take a hit. Is that “in this together”? It isn’t even the case that their profits mean extra revenue for the Government – loopholes such as “investments in infrastructure” make sure of that!
The Banks themselves. What legitimacy could there be in allowing them to switch around their charges, in order that, whatever action the Government takes, they still make their vast profits?
We, the British people, are paying the cost of the failed Banks. So when the Banks are fit for sale again, and the Government gets its’ money back (as some in Government are already talking about doing), will the British people get their money back? People in Government making that suggestion are a trifle thin on the ground.
And finally, whilst I understand your desire to support the coalition, remember this. Nobody voted for a coalition. All three major parties presented some (but nowhere near all), of their ideas for dealing the the economic crisis, during the Election Campaign. Even a minority Government would have been able to put at least some of the necessary measures on the Statue Book, with the support of the House of Commons. And then, perhaps six months later, have another Election.
That would be the will of the people. Politicians may not like it, because it doesn’t allow them the freedom to do as they want, but that’s how things work in an imperfect Democracy. What I know for sure is that to assume that any coalition of Political Parties, as created by those same Politicians, is something that the majority of the electorate agree with, is a mistake. They don’t. And I doubt that they are impressed by claims that, because the LibDems are smaller in number than the Tories, that the “nasty things” are more their fault than the LibDems. Those two parties jumped into bed together – and both parties have collective responsibility.
But you’re right – they are “doing things differently” now. No longer can large cash donations get you the ear of a Minister. Those days are gone. But apparently, a large cash donation will ensure that you “just happen to be seated next to one at dinner”.
August 26th, 2010 at 11:07 pm
The refusal to give a straight answer on the Equality Act point is irritating, although quite how such an assessment could objectively work is very unclear. Why didn’t he say that, I wonder?
What Darling et al did was sensible, but he shouldn’t have put us in the position he did in the first place. The banking sector was in a terrible mess and we needed bailing out. Darling did this, and credit to him for that. But it was 13 years of spending, not enough regulation of the banks, too many costly projects (like legally dubious wars, ID cards etc) and the like that meant that banks could take us for a ride and that the government would have to wrack up a massive debt to sort it out.
Effectively, Britain’s house was on fire, and Darling doused the flames. But he’d also filled the house with petrol cans for the previous 13 years and thrown out all the fire extinguishers.
I’m not sure of your point about petrol companies and train companies… Massive, publicly traded companies make lots of money, and good for them. Their profits help pay our pensions. I want to share in them, not stop them. And we do have a choice. Don’t buy train tickets.
Banks too can make vast profits, so long as they pay their share of taxes and make those profits in a fair and open way. That’s why better regulation is needed, fair bank charges are necessary, and tax avoidance needs to be sorted out. The government is trying to do this. But it’s pretty complicated and takes time.
I think you’re wrong about “the Brisith people getting their money back.” When the publicly-owned bank shares are sold, of course the state will get the money back (hopefully with a hefty profit generated by shares being worth more due to the profitability of the banks). What do you think will happen to the money? And what else do you suggest?
You’re right, nobody voted for a coalition. But, by the same token, not enough people voted for one party to govern alone. The same logic applies. You assume that a minority government would’ve been able to pass necessary measures onto the statute book. How would they have done this, without backroom dealing? Surely such backroom dealing is less honest than a coalition. And you say that six months later there could have been another election. OK, but what if that too was indecisive? Wait another six months? And another?
We are where we are. It’s difficult, but I still think the only option. And despite saying that you have “a few alternatives” I don’t see a single cut suggested or a single tax rise proposed (except for something vague about oil companies). That might pass an Equality Act assessment, but it won’t solve the debt problem.
August 27th, 2010 at 3:20 pm
I find your logic confusing. You say that Darling did the right thing, in bailing out the Banks, and I agree. But you then go on to complain about the position we are in being caused by “13 years of spending, not enough regulation of the banks, too many costly projects (like legally dubious wars, ID cards etc)”.
Let’s look at that lot… “13 years of spending”? Government collects Tax and other Revenue in order to spend it – that’s the point. A Treasury with Billions in the Bank whilst society falls apart is neither use nor ornament.
“Not enough regulation of the banks”? You’re right – in hindsight. Unfortunately, nobody (literally nobody) saw what was coming. And the fact is, the banking collapse was world-wide, started in America, and spread by domino effect. It wasn’t because Darling nipped out to Costa Coffee one day, leaving nobody minding the till. In fact, the crisis demonstrated that Bankers around the world were a morally-bankrupt lot – but that wasn’t news. It’s just that Governments around the world (including the Brown/Blair one, and others prior to that), chose to ignore the problem.
“legally dubious wars”? You mean the wars that the House of Commons overwhelmingly supported at the time? The ones that the then Opposition parties complained were not having enough money spent on them?
“ID cards”? How much was spent on ID Cards then? Not “how much was planned for the scheme”, but how much was actually spent?
“etc”? Dunno.
Are you really not sure about my points regarding petrol companies and train companies? Let me explain it a little clearer…
The cost of petrol contributes to the Cost of Living Index. Now, the cost of raw materials is (generally) going up – but (generally) companies have to swallow those extra costs these days, or try to increase their prices. Usually the former, because the consumer DOES have a choice. So companies become less profitable, meaning that they have to make redundances or, in the worst case, cease trading. But not Petrol companies, because we don’t have a choice. We have to purchase fuel – look what happened during the blockade a few years ago. The country virtually ground to a halt.
Do we stop using our cars, and take the train instead? Train companies are allowed, by Law, to increase prices by a certain amount above inflation every year. Have we seen a single train company going bust since privatisation? No – but we have seen services decline, and profits increase. There is no choice for the travelling public. And just this week we hear that the Rail Watchdog is concerned about the Train Companies definition of “Peak Travelling Times”. Shock, horror – they just realised!!
And now… you view that I’m wrong about the British people getting their money back, when the privatised banks are sold.
Here’s the situation: I paid the Government £2 in Income Tax. The Government then decides that it will use £1 of that to bail out the banks. Theoretically, I now own £1 worth of a the banks. (That’s good.)
But the Government then tell me that I will have to reimburse them the £1 that I’d already given them. (That’s OK – the Government still need Revenue, but the banks had to be rescued. So I pay them another £1, ‘cos we’re all in this together, you know!)
Later on, on my behalf, the Government decides to sell its’ interest in the Bank (which it purchased with my money, and I reimbursed them for). But for me to realise my investment, I will have to pay out yet another £1, to purchase my little share in the bank, that I’ve already paid for twice.
Can you spot the illogical, immoral argument that I’m outlining?
But it actually gets worse!! Because I’ve paid the Government so much of my hard-earned money already, I cannot afford to purchase my little share in the bank. And I’m not alone… the vast majority of the public can’t afford to buy their little shares either. What to do? What to do??
Answer: Sell the shares in bulk, to those institutions that are still profitable enough to buy them. Like… er… Banks!!
What do I suggest be done instead? Well, how about taking the money that is realised by selling off those assets, and use them to subsidise the Railways (as is done in most of Europe)? Then at least we’ll have a realistic choice to let the train take the strain.
And finally, all three major parties knew (and were reasonably vocal), about the need to take serious financial measures, post General Election. A healthy majority of the House of Commons would have voted such measures through – and it did not need the very obvious, and blanket-televised, “backroom dealing” to achieve it.
The truth is… Nick Clegg wanted power. In order to achieve it, he entered into a coalition agreement with the Conservatives, who could have put 90% of their Budget Measure on the Statute Book as a minority Government.
Nick Clegg told the LibDems that he would never do it. He did do it. And now the LibDems are saying that, as they are the minority partner, it really isn’t their fault. It smells to me of…politics! I fear that Nick Clegg’s promise, which he was happy to break so readily, will come back to haunt him.
August 27th, 2010 at 4:21 pm
Yes, government should spend what it takes. But it should take less and spend less, making sure that what it does spend actually works. 13 years of massive spending led to a growth in the gap between rich and poor, and social mobility decreasing.
Some people did see a banking collapse coming. Vince Cable being one of them.
I do mean the wars you refer to. The Iraq one in particular, that my party was against. Arguing that troops should have money spent on them is a different argument. Of course they should. They shouldn’t be there in the first place though.
Lots was spent on ID cards. £250m in fact. (http://news.bbc.co.uk/1/hi/uk_politics/8707355.stm). Yep, less was spent than was saved by not proceeding, but I’d quite like that £250m back please.
I still don’t understand your point about oil and trains. What are you suggesting as alternatives? Yes, petrol is expensive, and oil companies make big profits. But these profits are taxed, share price rises help with our pension pots. What do you want to happen?
Your bank share argument doesn’t stack up either. The government bought shares in the bank with tax money. It then sells those shares at a profit, and uses the money to spend on public services. What’s the problem? Of course we still have to pay taxes in the meantime, but what else do you suggest? You only have to “pay twice” if you personally buy those shares off the government. There are plenty of people who will want to buy them, using their brains to judge whether or not it’s a good investment.
As for your solution… Well the railways are heavily subsidised already. Maybe we could subsidise them more, that mightn’t be a bad idea. Buses too would be nice.
I think the last part of your comment is naïve. Do you really think that all three parties would have come together and voted through cuts? That would have involved Labour and the Lib Dems supporting a Cameron and Osborne-led minority government make significant cuts. Really?? I really don’t. I think what would have happened is indecision, another election, market turmoil, perhaps another hung parliament, and then more turmoil. Or a Tory majority, which I think would have been worse.
Nick Clegg’s comment can be put in the pantheon of bad political u-turns, alongside such Labour gems as “We will never introduce top-up fees” (adopted 2005, abandoned 2006) and “We support AV” (adopted spring 2010, abandoned summer 2010).
Several wrongs don’t make a right, and Clegg shouldn’t have said it or done it, but it’s daft to suggest that the Lib Dems are any worse than anyone else. If only they were all better…