From the category archives:
Labour has tabled a series of amendments to the Finance Bill to protect Mountain Rescue services from the government’s VAT hike.
Before the election, Government chief secretary Danny Alexander said; “Whatever the result on Thursday, I hope this is a policy (refunding VAT for mountain rescue services) which will be put into action”. Let’s hope the government accepts our amendment.
Here’s the background
Mountain Rescue England & Wales Taxation – Context
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Here’s the link to the Hansard of the second reading of the Finance Bill – scroll down to 5.15pm for the start of my contribution.
Today, I set out in the Guardian exactly what the Lib Dem’s broken VAT promise is going to mean for charities – something like £150 million more in irrecoverable VAT. First strike against the Big Society?
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Today, the Government announced that they will cancel support for jobs, industries of the future and the frontline NHS.
In a botched announcement in the House of Commons, Chief Secretary Danny Alexander, finally had to admit that the notion of Labour’s ’scorched earth’ was utterly misleading.
In slight desperation, he had to add up the total lifetime cost of the projects he was cancelling. In fact, when we look at the project costs of the investments he cancelled in this financial year, it amounts to at best 0.07% of this year’s public spending. And indeed, one of the most high-profile project – Sheffield Forgemasters – was actually a government loan, that paid 3.5% interest plus equity warrants for the government.
Mr Alexander went on to say another £8 billion of schemes would be reviewed. He was oddly silent on the fact that just one project – the renewal of our search and rescue service made up 3/4 of the figure – and again would be a cost spread over many years in the future.
The cost of defending our country against the global recession in the last two years has been high. But if we’d have taken the wrong decisions, the cash-points would have stopped working and the dole queues would have been massively longer. Now, we are on the road to recovery, it is time to pay that bill. That is why Labour set out in such detail, £19 billion of tax rises and the first £20 billion of spending cuts in our budget this year (see chapter 6 of the Red Book).
But the projects the Lib Dems and Tories have cancelled tell you all you need to know about this new Government’s approach:
Danny Alexander finally concluded today the Liberals are simply the Conservatives’ whipping boys. After all, here’s what Vince Cable had to say to the IoD on 28 April 2010
“We Liberal Democrats recognise the sheer scale of the challenge ahead. The economy also requires rebalancing and transforming. We are the only party with a plan to do just that and we are ready to begin that massive undertaking.”
They’ll transform the economy alright – by risking the recovery.
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George Osborne’s plan to cut £6bn from public spending this year was a key debate in the recent general election – and risks putting Britain in the slow lane back to growth.
During the election, Labour’s argument against the Tories’ plan was two-fold:
First, that pressing ahead with these cuts, in year and on top of our existing ambitious efficiency programme, would mean hitting frontline public services.
Second, that with the recovery just underway, now was not the time to be taking risks with people’s jobs by taking money out of the economy.
The Liberal Democrats, and Vince Cable in particular, agreed. Here’s the link to what Vince Cable said in January: “I do not think we should rush into rapid cuts”.
We intend to be a responsible opposition. But we will be powerful and effective check on this Tory-Liberal Government.
On Monday the coalition will announce details of how they will make these cuts. This will provide a first test for the new Government. And of the influence of the Liberals on the Tories.
Today I make two predictions:
That we will see real cuts, not efficiencies, announced on Monday. Cuts with a real impact on peoples’ lives. That would be in direct contradiction to George Osborne and David Cameron’s clear promise that frontline services wouldn’t be cut.
Second, my guess is that Vince Cable will have lost out to George Osborne who will push ahead with taking the vast majority of the £6bn out of the economy – a risk that we shouldn’t be making now – with only a token few hundred million being reinvested to save the Lib Dems blushes.
I hope I am wrong. But if on Monday we do see cuts to frontline services like skills or university places, or investment in rebalancing our economy then our clear warning about the Conservatives’ plans will I’m afraid have come to pass. No amount of joint press conferences or Liberals in the Cabinet will have made an ounce of difference. The “new politics”, will look like old fashioned broken promises.
My fear is that George Osborne is determined to set course for the slow lane out of recession – and a return to the economy of the past by axing investment in the skills and jobs of the future.
Finally, it would be completely unacceptable if this announcement of cuts, and this change in Government’s spending plans, is being made anywhere other than in the House of Commons.
That’s why Rosie Winterton wrote to the Speaker yesterday, asking him what can be done about George Osborne’s plan to make this announcement in a press conference rather than to Parliament.
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The BBC’s excellent Stephanie Flanders has blogged about our new document, which reveals the £22 billion credibility gap at the heart of Tory economic policy. Our document, is here -
I’m a huge fan of Stephanie’s work but there are a few points where I think she’s got the wrong end of the stick.
To kick off with National Insurance. Stephanie says that we have costed the Conservatives’ NICs policy “as if they were reversing all of next year’s rise”.
This isn’t right. The document we published today presents an HM Treasury costing of the precise Conservative policy, calculated following the Conservative announcement and cited in Parliament by me on Wednesday. This is specifically, as I told Parliament this week, a costing of the Conservative proposal for increased NICs thresholds, not a costing of the reversal of Labour’s policy.
“Even the shadow Chancellor has said that that will cost £5.6 billion, but the Treasury has now costed those increases in national insurance thresholds at £6 billion in 2011-12, £6.3 billion in 2012-13 and 2013-14, and £6.7 billion in 2014-15.” Liam Byrne, Hansard, 30 March 2010, column 738
Stephanie questions whether the Tory policy to bring back the dividend tax credit is actually party policy, saying that George Osborne’s office told her that he wants to bring back the dividend tax credit, but have said that it could take “more than one parliament”.
The fact is that the Tories are campaigning on this issue – for example, they put it in their posters this week. They say it is a problem they want to solve, and David Cameron has included it as an issue they wish to address over a Parliament.
If they are ruling our any move here for the rest of the next Parliament then we will accept that – but they need to then stop suggesting to the British people that they are making a promise on this issue. Whether they do this by abolishing stamp duty on shares or by some other measure, they don’t seem to disagree that there is a pricetag of around £5bn.
On reducing taxes on savings, Stephanie suggests that Tory promises made at the time of a Budget aren’t actually “Tory policy”. Sorry, Stephanie! What we say at a Budget is Labour policy, and what the Tories say at a Budget is Tory policy! These were their policies – and they campaigned on them. When it was pointed out that they had no money to pay for them, then they suddenly started talking about them being “budget submissions”.
Now we come to marriage tax. Stephanie says that the Tories haven’t committed to spending £5 billion on “recognising marriage”. The truth is that they have been promising these tax breaks for five years and never once come to a firm proposals. But what we do know is:
o The only proposal that’s come from an official Conservative Party policy review is of a transferable tax allowance
o David Cameron has said that it would apply to all married couples
o The costing is for the final year of a Parliament, so that even if it was implemented in a staged way, the full tax break would be in
operation by that year.
Now you could “recognise” marriage in the tax system for almost nothing – like taking VAT off confetti or wedding cake! But the Conservatives have told the British people that this is a substantive pledge. If they are today downgrading their pledge officially to less than a billion pounds, we will happily update the document. Mind you, they would still have to set out how it would be funded though – and they have got nowhere near doing that at all.
On efficiency savings, Stephanie says that the Tories are promising to cut departmental spending in line with the savings and says that makes them ‘real’, even if they are not as painless as they suggest.
Of course the Conservatives could simply cut budgets by £6bn indiscriminately. But that is not what they have said publicly. If they are now saying that they will make £6bn in cuts rather than vague efficiency savings, then they should tell people where those cuts would fall. We’ve been clear about where we will find the £35 billion of efficiency savings over the next year – the Tories haven’t given us any details of where they’d find the extra £12 billion of savings they think they can find in a matter of weeks.
On council tax, we think Stephanie has made an error. She describes our costing of the Conservatives’ council tax freeze as a mistake saying that the Institute for Fiscal Studies don’t agree with us. But they do! The Treasury has costed their policy at £1.4 billion, and the IFS says that this is correct, when the Barnett Formula us taken into account:
“Under the infamous ‘Barnett formula’, a £1.3 billion increase in grants to English local authorities would be matched by a £0.3 billion increase in grants to the devolved administrations in Wales, Scotland and Northern Ireland. This increases our estimate of the total net cost of the policy to £1.4 billion after rounding – and would presumably increase the Treasury’s estimate of the cost to roughly the same level if they were to net off the council tax benefit savings too.”
Institute for Fiscal Studies, “The Conservative Party’s Council Tax Freeze”, March 2010,
Elsewhere in the same IFS document, they say: “Labour rightly say that this pledge costs £1.4 billion (if we consider the pledge in isolation from the planned reductions in advertising and consultancy spending)”.
It’s worth stating that the document we published today does not consider the pledge in isolation from the planned reductions in advertising and consultancy spending. These are presented on p. 90 of the document. Our document considers tax, spending and savings pledges separately, but the final figure we present is net of all of these.
Now a few points which might only be of interest to politics geeks – but which we think are worth setting straight.
Stephanie also asks why we haven’t mentioned the Tory promise to reverse the On 50p rate of income tax, and why we haven’t classed it among our “Tory broken promises”. Well, the truth is that we thought we’d bend over backwards to be fair to the Tories on this one. Following the publication of our analysis in January, the Conservatives conceded they won’t commit to reverse the Government’s position on 50p rate of tax and pension relief reform. Even though they gave the strong impression at the time – through nods and winks – that they would reverse it, we’ve given the benefit of the doubt and taken it out, so it doesn’t appear in the document we launched today at all.
On the Tories’ broken promise on providing 45,000 new single rooms in the NHS. Stephanie suggests that the Tories “stepped away” from their 45,000 single rooms. That’s not actually correct -
Stephanie says that the Conservatives had “arguably” stepped away from their promise of 45,000 single rooms before the first dossier came out. This is not true. The first Labour dossier and the Conservatives’ draft health manifesto were published on the same day. The Conservatives’ health manifesto represented the first time they had publicly backed down from their previous firm promise to build 45,000 new NHS single rooms. They had not “stepped away from it before the first dossier came out” – in fact, the dossier was published a few hours before the draft manifesto. Their policy of building 45,000 new single rooms was still on their website until later that week.
Similarly, with maternity nurses. Stephanie suggests that our dossier today provides “no documented evidence for a [Tory] pledge to spend £492m a year on providing maternity nurses for all”. In fact it does. The dossier includes quotes from shadow children’s minister Maria Miller, saying “we are also committed to introducing our version of the Dutch kraamzorg system” in a speech to Conservative Party Conference, 30 September 2008, and the shadow children, schools and families secretary Michael Gove talking about “implementing a version of the Dutch kraamzorg or state maternity nurse system” in a speech to Barnardo’s, 9 March 2009. This goes further than Conservative officials saying that they will just “look at” the system in Holland!
Do take a look at our document – here -
Stephanie’s blog is here -
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This was a very slippery performance from David Cameron that will set alarm bells ringing up and down Britain.
He said he wants deeper, faster cuts than Labour but then deepened the mystery about where the cash would come from.
Again he said he wants to cut the deficit faster but yet again he says nothing about how. People will notice he refuses to match Labours promise to protect police teams, sure starts and schools and draw the obvious conclusion.
Frankly the time has now come for him to make clear tax and spending commitments.
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I thought it might be worth posting in full my opening of the debate on the pre-budget report in the House of Commons this week.
Here I set out the argument for precisely how we halve the decifit over the next four years – and how the sums add up – and second, gently make the point that the Conservatives still have a £34 billion credibility gap to fill before they even get close to matching us on the level of detail needed to be taken seriously on the question.
Text below
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Today we set out some of the work we’ve been doing over the Christmas break, putting a price-tag on Mr Cameron’s effort to be all things to all people.
It’s an extraordinary picture.
Its looks as if there is an incredible £34 billion gap in what the Tories are saying they want to do – and the tax rises and spending cuts they have proposed to pay for them. And this is before they turn their minds to reducing the deficit.
How did the Tories get themselves in this position? It looks as if its as simple as Mr Osborne failing to keep track of all the promises he and David Cameron have been making. In short, for two years, David Cameron has gone round the country telling people whatever he thinks they want to hear. Every audience gets told whatever they want You want tax cuts, here they are. You want a faster cut in the deficit, we’ll do that too. You want more spending, here it is. Lots of it. You want to reverse what Labour’s doing, we can do that too. That’s their message.
But no one has been keeping tabs of all their promises – certainly not George Osborne.
Until today. For the first time, we have brought all the Tory promises together to present the bill.
The Tories have made over £45bn of pledges, but can barely explain how they can pay for a quarter of this. This leaves them with a credibility gap of £34bn. They have made tax promises worth £21bn per year by the end of the Parliament, including: • £4.1bn for removing basic rate income tax from savings • £4.9bn for married couples allowances, where the highest earners get the most benefit • £1.5bn for Inheritance tax cuts focused on 3000 estates.
They have also said they have a ‘queue’ of planned tax rises that they would reverse. These amount to £13.3 billion per year by the end of the next Parliament. These include measures to reduce the deficit, such as the national insurance rise, the new 50p top rate and restrictions on pension tax relief for the very highest earners. They have also made over £11.1 billion of spending commitments. Such as 45,000 extra rooms for the NHS, 5000 more prison places and 3 more infantry battalions.
And this doesn’t include many potentially expensive promises – like tax credits for grandparents or a ‘National Citizen’s Service’ – which are just too vague to cost. We have included Tory figures for efficiencies and cuts where they are credible and genuinely additional to anything the government is already doing.
Even in the most generous scenario for the Conservatives, all these pledges would yield annual savings of £6.6 billion.
And finally, their tax rises – on increasing the cost of business investment and putting a levy on non-doms from day one, for example – yield them a further £5.1 bn.
Taken all together this leaves a credibility gap of £34bn in their plans.
By the way, we’ve tried to be as generous as possible to the Tories. Generous to a fault you might say. We have given the Tories the benefit of the doubt and used their estimates except where there are clearly more recent or more credible numbers available. The costings are based on publicly available sources such as Parliamentary Questions or the Pre-Budget Report. In some cases, later costings credit the Tories with additional revenues or savings. In others costings suggest the Tories have over-estimated revenues or under-estimated costs, leaving them with a substantial credibility gap.
Now, already this morning, Mr Cameron has backed off some of the commitments we listed. Fine. We’ve been trying to get the Tories to clarify for 18 months whether their promises are real or empty. We just want him to be straight with the British public.
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Here’s the text of my article in today’s Independent.
George Osborne admits that he devotes more time to politics than to economics, and on Wednesday we saw the proof.
In a serious debate on the pre-Budget report, he fired cheap shots when what was needed was a big judgement call. Alistair Darling set out the most detailed plan of any G7 country for halving the deficit over four years. He acted to secure the economic recovery and go for growth – because faster growth will cut the costs of unemployment. He set out plans which will rebuild the public finances fairly – because we need to get the timing right, not choke off the recovery by cutting too soon.
And, true to our Labour values, he promised to protect our schools, health, police and Sure Start – while making services smarter, more efficient and more responsive. His message was clear: we will tighten our belts, as families are doing. It will not be painless, but it will not be reckless.
In reply, all Osborne could offer was political knockabout – long on jibes but desperately short on serious policy. The contrast, not just in demeanour, but in sheer weight of policy, was striking.
Now that we have set out our plans, the time has come for Osborne to do the same. The broad contours of the Tory approach are becoming clearer. We know that by cutting support for the economy now, he risks a decade of austerity and low growth. We know that he favours unfunded tax cuts to the wealthiest. We know that by opposing our guarantees on public services, such as being certain of seeing a specialist within two weeks of your GP suspecting cancer, he’s content to reduce public services to a gamble.
But there are more questions he has to answer. The key question in British political economy is this: Osborne says that he would close the deficit faster, but halving the deficit just a year faster than us would mean cutting £26bn from public services or increasing VAT to 23 per cent. Which will he choose?
On spending, Osborne has also failed in the first task of a shadow Chancellor – controlling his Shadow Cabinet colleagues, who have indulged themselves in the Tory habit of trying to be all things to all people, making spending pledges as they did so. The cost of the resulting list? Tens of billions of pounds.
Meanwhile, his plans to save money unravel by the day. His party claims that its plans to curb spending – including scrapping ID cards and the NHS IT scheme, bringing forward retirement age and capping public-sector pensions – would save up to £45bn. In fact, our analysis suggests they’d save less than 5 per cent of that. What else will he cut – or which taxes will he increase – to make up that gap?
At their party conference, the Tories claimed they could make £7bn in savings, including £3bn a year by the end of the Parliament, by cutting Whitehall and quango costs by a third. But our “Smarter Government” document, published just before the pre-Budget report, saves around that amount from central government alone – and in fact much more in the wider public sector. How can he go further than that?
Treasury figures, disclosed to Parliament, show that his claim to save £400m from cutting Child Tax Credits for households on more than £50,000 a year misses the mark by a country mile, saving just £45m a year. They reveal that to save £400m means cutting benefits from people earning just £16,000. Will he cut those benefits or will he admit he got it wrong?
We live in serious times, and people want serious answers from their politicians. This week, Alistair Darling delivered them. As a pretender to the same historic office, the time has come for George Osborne to set aside the lightly proffered laurel of the Parliamentary sketchwriter. He must answer the tough questions he has so far ducked. It’s time for him to step up.
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If you were in any doubt about the basic unfairness of the Tories’ inheritance tax plans, looks at this story. here.
Its about a survey that shows the vast majority of people don’t pay inheritance tax. That means the Tories need to explain why in difficult times, they are prioritising a tax giveaway of £200,000 for the richest estates and nothing for 98% of the population. They are a party for the few, are they not?
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Liam is the MP for Birmingham Hodge Hill, and Labour's Shadow Chief Secretary. Find out more...
