June Budget Initial Thoughts

Before I start into what is in the actual budget, two parties admitted in the General election that things would have to be tougher than Alistair Darling intimated in his last budget. Of course the party that didn't say that was Labour, they said they had done enough in the last budget to make things better for the economy and fairer for the poorest.

The budget that George Osborne has just brought before the house does a number of things to improve fairness. It has lifted the personal income tax allowance by £1000, realigned state pensions increases with earnings (or 2.5% whichever is greater) and brought in a Banking Levy to help pay for the mess that the Banks aided by Labour got us into. These are all things that as a Lib Dem I stood for not against as Ms Harman would have you believe.

There are also environmental taxes that have been brought in and an increase in capital gains for the highest earners. That last is something that Harriet Harman seems to have forgotten when she said it was a right wing ideology budget. After all it was Labour that increased the gap for capital gains for the top earners which surely is 'right wing' in concept but brought in by Labour.

Of course I've said here in the past that VAT is a regressive tax, indeed our VAT bombshell launch was in Glasgow and so I was there. We still have our exceptions for food and children's clothes and looking at the alternatives to share the burden of paying for Labour's debt a VAT increase in January has got some merit. It is only on what you purchase at the 20% rate that will increase in price (sadly fuel is one of those which will knock unto public transport) but it would not prevent meals being put on the table or clothes being bought for the poorest children.<

As for Gordon Brown's pledge not to increase VAT this came on on the 30 April after he like the other parties said they had no plans to increase it. It was seen as one desperate last roll of the dice. It is one thing to say you do not have plans for something before you see how bad things really are once you enter Government it is quite another to say you'd do nothing when you know the extent of the mess. Or to crow about excellent growth rates (which now that the independent body has downsized) then accuse to new Government of downplaying growth when in fact your Darling's prediction were ahead of any curve from any independent advice through the crisis (something he failed to hit once).

So yes it is an austere budget but from what I've seen so far there is enough of the fairness from the Lib Dem manifesto in who will pay, who will get some breaks that mean that the lowest paid will benefit most. The markets seem to be responding well, it would appear that it has struck the right balance with them, now could the banks please start lending to business so we can start to kick start the recovery into action rather than the slovenly crawl that Labour produced.

Danny Alexander

I'm back at work today after a long weekend as are our politicians. I fully expect that the Times today will be getting a request for the original of Peter Brookes cartoon from the Treasury.

People in the public eye used to say that if Spitting Image didn't have a puppet of you you'd yet to make it. So the cartoon (I'll not link as I'm sticking to refusing to link to future pay-walled site) has George Osborne shoes off feet kicking behind him on the chair, having crayoned in with primary colours 'BUDGET' at the top of a blank sheet. Danny Alexander peeking over the table is asking "Are we allowed to use the sharp scissors?".

It is a play on the fact that the two of them in the treasury are young, but that doesn't mean that the new Chief Secretary to the Treasury doesn't have the gravitas or experience for the job. He was the man who was Nick Clegg's aide and the author of the first Liberal Democrat manifesto to have planks put into a UK-wide programme of government. He was part of the negotiating team that struck the deal, and impressed his Tory opposite numbers.

If he hadn't impressed Osborne also part of those negotiations I doubt he would have been the replacement for David Laws. Of course in his 18 days Laws did make a mighty big impression from the off. Danny is going to have to do the same there is a budget coming up and he's going to have to carry on the work that David had started.

Qualified to Lead the Economy and Keep IMF from the Door

So Ken Clarke with his Law degree thinks that leaving the economy in the hands of Doctor Vince Cable (that PhD is in economics) and former lecturer at Glasgow University and the London School of Economics will lead to the IMF having to bail out the UK. At least that seemed to be implied as the Tories continued to say that only by giving them the keys to Downing Street as a block set will that be avoided.

I'm sure Clarke doesn't think that Alistair Darling a fellow lawyer is better qualified that the former Shell Chief Economist. So that must leave the modern historian George Osborne as the best economic mind to deal with an economic crisis.

It's ludicrous to think that voting for more LIb Dems will lead to a destabilised economy. Indeed one thing we have been saying is that we should get all the parties together to work out an economic plan to get us out of this. Looking at the manifestos of both Labour and the Conservatives one thing that is lacking is that clear plan.

Here's one that George and Ken may want to consider five tests before we start to cut the deficit and indeed possibly before the Tories might end up having to fall back on the IMF.

• the rate of growth
• the level of unemployment
• credit conditions
• the extent of spare capacity in the economy
• the cost of Government borrowing

I'm sure both Clarke and Osborne will come across those ideas when they actually get back to scrutinising the Liberal Democrat manifesto* rather than scaremongering and spreading fear. It is the spreading of fear from the Tories that is actually causing the bankers to panic rather than a promise of hope to work through this economic strive together whatever the outcome on May 6th.

However, I guess the Tories are too short sighted to see things that way.

* Scottish version also available.

Brown U-Turns on Fault with Bank Regulation

Do you recall Gordon Brown the Prime Minister saying that the banking crisis was brought on my a world wide problem and nothing to do with Gordon Brown the Chancellor?

Do you recall Vince Cable warning both Gordon Brown the Chancellor and Gordon Brown the Prime Minister of serious flaws in banking regulation that needed to be dealt with?

You probably won't recall George Osborne nodding his ascent of the former and barracking the later.

Well in an interview to be aired tonight Gordon Brown has finally admitted that he was wrong.

"In the 1990s, the banks they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation.' And everybody in the City was saying ... and all the complaints I was getting from people was, 'Look you're regulating them too much.' And actually the truth is that globally and nationally we should have been regulating them more."

As for the Tories he said they had urged him to be even lighter handed on the banks adding:

"You don't listen to the industry when they say, 'This is good for us.' You've got to talk about the whole public interest.

"And so we are tougher on the banks and tougher on the way they behave and we can be relied on to make sure the banks act in the national interest."

So who would you want in charge of the economy?

• Someone who's taken soundings knows what he's talking about and is still saying we need to be tough on banks, like Vince
• Someone who's prepared to act because one interest group have said it was god for them who then realises later, when it is too late, that other views are important, like Gordon
• Someone who doesn't seem to know what is going on or realise how bad things are and is prepared to carry on, like George.

I know which of those three I'd rather have. The steadying yet firm hand, the foresight and forethought of Vince Cable stands out head and shoulders above the other options.

That's why a vote for the Liberal Democrats is not a wasted vote this time around on May 6th. It actually makes sense to vote for the party that's been making sense over our biggest problem for the last decade.

Campaign Diary: The Leader, The Press and The Poster

Today was one of those days that will be easier once the Bathgate to Airdrie extension in completed later this year. The word had gone from Andrew Reeves for us all to available at 9:30 this morning for the launch of the Scottish campaign for the general election. For me that means either going into Edinburgh and out or hoping on the X14 bus at 7:20 to head into Buchanan Street. I took the first option, it is quicker, even the time for mishap is smaller. So I planned on the bus hoping the M8 wasn't too congested this morning.

Last night while many of us were out campaigning we got the details sent to us. We were to turn up at Pacific Quay, Glasgow. For those of you who don't know that is the location of the new headquarters for both BBC Scotland and Scotland Television; in other words the hub of the Scottish television world. We were to be joined by Tavish Scott, Charles Kennedy and the leader Nick Clegg himself. The event was to unfurl the new poster campaign.

And what a campaign it is. Yeah a little bit retro but hoisting the Tories by a petard of their own previous making.



The Tories are actually going to increase your tax burden by £389 in VAT. Because of course George Osborne’s great idea, possibly while in the bathroom, on the eve of the chancellors debate was to half Labour’s future increase in National Insurance. He's going to have to pay for it somehow. No doubt in another of his trips to the bathroom he came up with that eureka moments.This is against the Liberal Democrat promise to rise the personal allowance for income tax to £10,000, lifting 3.5 million of the poorest paid out of tax altogether and giving people £700 back.

The Liberal Democrats tax cut is paid for by closing many of the loopholes that allow the richest to pay proportionately less than the cleaner in their offices on minimum wage, green taxes on polluters. The other thing about National Insurance and VAT is that they are regressive taxes which affect the poorest far more than the richest. Income tax being a progressive system an be made fairer to the poorest by differential tax rates or raising the limit at which they start paying it. Currently you get taxed on the £6746th pound you earn. Something that Alistair Darling didn't increase in his budget last month. Something that the Conservatives didn't notice until long after Nick Clegg had mentioned it in the debate; if only they’d been bothered to stay in the chamber to listen.

However, back to the event, before his arrival the press core that was travelling with Nick turned up, including that other Nick, Mr Robinson. Then from around the corner Nick and Charles headed towards Tavish who greeted him. Then with a parting of the press core the trio strode towards where we candidates were waiting next to the billboard. Nick said a few words and there were press questions to him often as one on ones at various locations around the area. The first journalist to actually come up to the hoard of Scottish candidates for Nick Robinson, his opening words were you’re just standing here getting ignored. He then went to grab his overcoat, while he joked about him being a soft southerner. Of course Nick Robinson is from the north, just the north that is south of Scotland.

There were a few press pictures as Nick came back to us to wish us luck and say his goodbyes, for now, then by the time our commitment was over, I’d missed one X14 back to Bathgate but had time to do a delivery for Katy Gordon in Glasgow North before catching the next bus. See even when your transport arrangements get messed up there is still a time, a place, a fellow candidate who is more than willing to use your services.

So home for a quick lunch before heading out unto the streets of Linlithgow.

Vince on Top in Debate

"The Labour government led us into this mess. They have done severe damage to pensions and savings, they have wasted a vast amount of money on over-centralised public services.

"The Tories presided over two big recessions in office, they wasted most of the North Sea oil revenue, they sold off the family silver on the cheap. Now they want to have another turn to get their noses in the trough and reward their rich backers.

"The Liberal Democrats are different. We got this crisis basically right. We are not beholden to either the super rich or militant unions."

Vince Cable's closing statement in last night's Ask the Chancellors debate on Channel 4. The Guardian says that Vince drew first blood as the election truly kicked off, The Independent says he came out on top of the opening battle.

Even the readers are saying the Vince was head and shoulders above in the Guardian's poll. And the host Channel 4 are reporting that it was Vince that impressed the audience.

Last night it was easy for the supporters of all three parties to be partisan, but watching the neutrals it was clear that Vince was the one that was impressing the people that needed to be impressed, not the party faithful but those yet to decide where they will place their X.

Of course the big two parties are brushing it off, George Osborne in his closing remarks saying "there won't be a Lib Dem government" but if the Lib Dems continue to convince people we are the actual change, we are the ones who finger is on the pulse, you can never tell.

Beware of Tories Bearing Gifts

Unlike the Lib Dems who announced a full tax package [PDF link] at the same time covering who would gain and where this was being paid for, the Tories have announced a cut without the consequences. There was great fanfare last night that seven out of ten would benefit from them halving the Labour increase in National Insurance conributions (NIC) planned for April 2011. But there is no announcement as to where or when they will make up the £5bn shortfall.

There are two possible alternatives that George Osborne may, or more likely not, reveal in the Chancellors debate at 8pm this evening.

• Fund it by spending cuts
• Fund it my increasing VAT and removing VAT exemptions

If it is former cuts into what? Will these cuts impinge on the poorest? The very people that the Tories are trying to tell us they are helping.

If it is the latter, while your money would have more value at point of payment, it would lose it at the shops. If the 20% VAT that has been brandied about does come in, the poorest won't be net gainers but net losers. As well as the only 0.5% hike in NIC they will also be suffering from the VAT shift.

The Tory excuse is that NIC is a tax on business as David Cameron said on yesterday's Politics show:

"Remember it's a tax not just on people's incomes but it's also a tax on every business who employs anybody or thinks of employing anyone new."

Only the Lib Dems are offering a clearly fair taxation on the lowest paid. The increase in the personal tax allowance to £10,000 lifts 4 million out of income tax altogether. There is incentive for people to get back to work as the money is theirs rather than returning to the exchequer.

Labour have effectively frozen the personal allowance to get more tax out of us, the Conservatives are only going half the increase and possibly introduce more indirect taxation to hit the poor elsewhere, possibly more severely.

Building Blocks for a Recovery?

Today is probably going to be different from any of the other pre-election budgets I've heard since the 1980s. There isn't the leeway that is normally allowed to make it a give-away budget to all and sundry.

However, the effects of this budget may also be short lived, both the Conservatives and the Liberal Democrats are promising an emergency budget in the event of them winning the General Election and it is not even clear if what the Chancellor sets out now would be what a Labour Government wants to stick to if it is returned to power.

So what are the main themes that are being speculated about. The Guardian tells us Darling is looking to close tax loopholes, though not tellingly some of the ones that Labour themselves helped open up that Vince Cable has highlighted. The Times tells us that nuclear power and wind will be at the heart of a green economic recovery, but what about other renewables and indeed what about Vestas the UK's only wind turbine manufacturing plant when it shut down about this time last year that was hardly a 'prudent' failure last year to echo Lib Dem recovery plans now.

The little man above is made of 44 blocks of Lego, I think he is more capable of steering Britain out of this recession that was deepened by Gordon Brown's budgeting while chancellor. Not that I think George Osborne is any better. Will Labour build out of a future to make it fairer to the ordinary tax payer? I doubt it their record speaks for itself, they'll use VAT and National Insurance to raise revenue like they have done for 13 years, making the poorest pay proportionately higher taxation than the richest who can employ accountants to get them around payment of so much.

While Labour are looking at off-shore loopholes the Liberal Democrats have also pointed out some of the loopholes created by Labour and the Conservatives before them that also need addressed. Plus we'll be lifting the threshold to make the minimum wage almost a tax free full time wage.

The budget today may in the words of Holywood go straight to DVD, it will be replaced by the blockbuster to come as the real deal, the one that really will take us through the next 12 months. Whether that has Lib Dem input or indeed leadership is up to the people.

Non-Doms - In the Tories Own Words

"I think it time to pass a law that says that if you want to be in the Houses of Parliament, if you want to be a legislator, you need to be or be treated as a full UK taxpayer."

"There are members of the House of Lords whose tax status is unclear. If you want to sit in the House of Lords or Commons you have to be a fully resident UK taxpayer.

"We would pass that law if we get elected. We would pass it straight away, we would bring it into force as rapidly as we could. I think that would put the situation beyond doubt."

So said David Cameron in a Sky news interview on 12 December last year.


So what have the Tories said about non-dom status of MPs and Lords over the years? Especially over the status of major donor Lord Ashcroft.

David Cameron

1 December 2009 "[Zac Goldsmith]'s obviously going to end this status and become a full UK taxpayer and he needs to do that as rapidly as can be done." Adding that all candidates for Westminster should do likewise.

2 December 2007 "I am satisfied that the undertakings [Lord Ashcroft] gave are being met and I've reassurances.....that he is resident in the UK and pays taxes in the UK."

5 February 2008 "[Lord Ashcroft] gave assurances, I've sought assurances about them. I've been given them and I'm happy to leave it at that."

Lord Ashcroft

Statement before enoblement

9 December 1999 "Mr Ashcroft has told The Times that he recognises the concern about foreign funding and that he intends to reorganise his affairs in order to return to live in Britain."

William Hague

Apparently saying it was a done deal. Letter to Number supporting his peerage 1999.

"This decision will cost him 9and benefit the Treasury) tens of millions a year yet he considers it worthwhile."

George Osborne

On 14 February 2010 was asked in a Sky interview five times about Ashcroft's status, the best he could come up with about someone who's donated more than £4 million to the Tory war chest was, "Lord Ashcroft's tax affairs are a matter between him and the Inland Revenue."

Eric Pickles

5 December 2009 When asked about Ashcroft's tax status: "He'll be very happy to tell you."

9 February 2010 "This obsession with Lord Ashcroft is ridiculous."But refusing to mute such obsession. He claimed that the "scandal deep at the heart of politics" was not whether or not Lord Aschroft paid tax in the UK, but the extent of the reliance of the Labour party for funds on the trade unions.

Change George Still Can't Give Us Specifics On

George Osborne has just been asked a simple question on The Andrew Marr Show, "How are you going to be able to afford this change."

Now for years the Tories had been telling us that they wouldn't be giving us specifics as it wasn't the time until we were in an election. But remember back at the start of January when David Cameron fired the starting pistol on the election campaign. Well now we are even 2 months closed to the inevitable election that is coming before June.

So how did Osborne respond?

"Well you know our values."

Actually as I blogged yesterday it appears that the candidates are split over those values and aren't sure where they stand on them. Those as you say that are part of Cameron's team since his has been leader appear to have one set of values while those that are coming in may have something different.

Just as last weekend Gordon Brown tried to pass off his party's past but look to a vague fairness in the future. So the potential future Tory treasurer is unable to tell us what figures he will do to sort out our economy, he's going to be budgeting by values.

Budgeting by values!!! Stop the world I want to get off.

Fasten Your Seatbelts: Economy Facing Turbulence

Just when Labour thought they had pulled off a feather soft landing it appears that the UK economy is still up in the air and is still facing turbulence

A number of indicators are suggesting that the possibility of a double dip is even stronger that was initially feared. The oh, so small recovery in December, may end up being also oh, so short lived. So what are the figures that are causing concern.

• A £4.3bn deficit in public sector borrowing - first time on record Treasury ahs not recorded a January surplus
• 1.8 per cent drop in sales volume from December to January - three times worse than expectations worse month since June 2008.
• Sale on household goods down 13.4% fastest drop since 1988
• Fuel sales down 11.1% as a result of the poor weather.

Of course VAT going up in January may well have meant that the recovery in December was spurred by people buying stuff before the price went up. Looking at the household good which are often a January sale stalwart this may well have been the case. The possibility may have been that the recovery in December may only have been a blip ahead of the Governments own tax proposals taking effect. It might just be that the recovery hadn't really started, but people were making the most of the last month of 15% VAT, while this was still a stimulus.

If we were in an airplane no doubt the chief steward would come on the tannoy telling us to refasten our seatbelts as we will be experiencing turbulence ahead. Sixty of the wise passengers, who have a fair idea how to fly this plane have passed a note to the chief steward, a man called Darling, agreeing with his decision to delay Government spending cuts until 2011. The concern it that there may be a change of aircrew mid flight, that may not heed their memo and head straight into the storm.

The potential replacement crew's chief Steward, George Osborne, is saying that it is a lack of a logged flight plan to get us out of this mess that is losing the confidence of the passengers and indeed others who may be looking to invest in the airline. A former close follower of that band of sixty with more air hours than George when it comes to such decision, Vince Cable, has said that yes there needs to be a clear plan to deal with the deficit, but also considers that when to make to begin to make those cuts should be determined on the strength of the economy in a years time. Indeed he is itching to get on that tannoy to say:

"We've got to look at what is happening in the real economy and not be based on political dogma."

The replacement crew seem to have been on an easier that is sufficient simulator, to get ready to take over, and still seem to be blinkered by that rather than what is going on around them. Possibly spending too much time in first class and not enough checking what is going on in coach.

How Rainbow are the Tories?

Answer not much. In the Guardian today Chris Huhne Liberal Democrat Home Affairs spokesman reveals how he fears gay rights would "grind to a halt" under a Conservative government. This is based on evidence of their voting records in Westminster.

• Ten out of 32 members of the shadow cabinet voted against at least one piece of gay rights legislation. The shadow Europe minister, Mark Francois, voted against all four.

• David Cameron, Kenneth Clarke, Mark Francois, Chris Grayling, William Hague, Francis Maude, Patrick McLoughlin, Andrew Mitchell, George Osborne and Sir George Young voted against legislation to repeal section 28, which had banned local authorities and schools from "promoting" homosexuality, in 2003.

• Nineteen members of the shadow cabinet joined the attempt to block the equality bill, which included a requirement for all publicly funded bodies to promote equality.

• Seven members of the shadow cabinet voted to allow only heterosexual married couples to adopt in 2002.

• Four of the shadow cabinet voted against powers which passed through the house in March 2007 giving the secretary of state the ability to bring in regulations with a new definition of discrimination and harassment on grounds of sexual orientation.

• Thirty-five Tory MPs voted to allow only heterosexual married couples to adopt in 2002 and a third also voted against the Equality Act (Sexual Orientation) Regulations in March 2007, allowing the government to make regulations defining discrimination and harassment on grounds of sexual orientation.

Add to this their partners in Europe and you have to ask yourself where under the rainbow does the Conservative Party really position themselves. When David Cameron said in his New Year message:

"between the Conservatives and the Liberal Democrats there is a lot less disagreement than there used to be."

He ignored just where those differences actually come. As Nick Clegg said of Cameron in his interview with Attitude he is a confection. Indeed he seems to be just the soft centres the easy sweets to digest. He and his party haven't taken on the hard centres well. Indeed some of his party leave them to the side. Even key ministers have shown that they aren't on the same yellow brick road with Dorothy.

Even Dave, as I've said before, took a whole week to realise he hadn't included civil partnerships in his marriage person allowance. Not sure whether the Conservatives need to meet the wizard for a heart, a brain or the courage over gay issues, but certainly are a long way from home when they do seem to want to talk about them.

Osborne Should Learn His Recession Highway Code

"Mirror, signal, manoeuvre."

That is the order of actions to be taken over overtaking, changing lanes etc whilst driving a car. The equivalent, "look, announce, move" may well be said of a Chancellor driving an economy out of recession. Such a warning that the Conservatives party are not going to do this has come from Vince Cable, the Liberal Democrats Treasury Spokesman.

"It's foolish to set a political timetable with no regard for the state of the economy. There's a big risk that if cuts begin suddenly and on a purely political basis the economy will be plunged back into recession.

"What is needed is a set of clear economic tests, which include the growth of the economy and employment, as well as conditions in international markets, to judge when contraction of spending should begin or be accelerated."

The reason for such a call is the announcement that George Osborne is liable to make cuts within the first 50 days of a Conservative Government. Speaking and the London School of Economics he said:

"Programmes that represent poor value for money, excessive spending on things like advertising and consultants, spending on tax credits for people earning over £50,000, and spending on child trust funds for better-off families will all have to be cut during the financial year."

Adding:

"Everyone knows the government's spending plans for next year are driven by a looming election and not economic reality. So, with the date of the general election increasingly likely to be after the beginning of the next financial year, that means we will need to make early in-year reductions in existing plans."

Therein lies not one but two problems. The first is as Vince has pointed out what George is actually doing is also announcing a budget 'driven by a looming election and not economic reality'. Some of the cuts that may well be representing poor value for money may well be important ones for the economy. Just what value of money is the Tory party going to use?

The second is that he has now announced where he is targeting cuts. Expect a little bit of accelerated budget spending on some of those programmes that fear they are at risk of cuts at the start of the financial year. Commitment to spend the money before it can be taken away. If the election is May 6, that would mean George's quick budget would come by 25 June. So spending may be accelerated first quarter of the financial year to avoid it being taken away, then a slow down in the remainder of the year for fresh spending.

Therefore it is possible that the acceleration and contraction of spending may well be outwith the control of a Conservative Chancellor. He is hinting that the two-thirds cut and one third tax to cut into the deficit he is looking at an 80:20 ratio to accelerate this reduction himself. Of course Vince is merely reiterating the opinion he took over the weekend when he said;

"My party takes the view that the government's eight-year plan, with a four-year halving of the deficit, is a reasonable starting point.

"My judgment is that we will probably discover that it is not enough, but we have to start somewhere and it is a reasonable working assumption."

Vince was ignored over the issue of Bank deregulation that got us into this mess. He's sized up the situation and cast his eye over the best way to now bring us out of it at present that needs careful care. It is the reason that the Lib Dems have cut back on new spending commitments, even though they are dear to our heart. It's about the economy, stupid. First and foremost at this time it is about making that flow as smoothly as possible.

Of course the rapid budget is nothing new in Conservatives taking over from Labour they did just that in 1979. It was a radical shift to try and lift the UK out of recession, spending was cut and taxes were raised. Of course then the Government was fighting inflation, but the effect was falling aggregate demand and reduced growth. Unemployment quadrupled in those early years to the height of 3m. Then it lead to a full scale recession, now it could plunge us back into one.

V is for VAT

A continuing series of spelling out Conservative plans Part 3.

At the end of last year I noticed that Iain Dale had said that VAT would rise to 20% in his predictions for 2010. Speaking yesterday David Cameron said:

"Britain needs responsible economic policies that deal with our debts, so we have stability to create jobs and keep mortgage rates and taxes lower."

However, in today's Sunday Torygraph the last Conservative Chancellor Kenneth Clarke said:

"It is something that every Conservative tries to avoid but I didn't avoid it when I was getting us out of recession before [in the 1990s]. Coming out of a recession when you have such a severe deficit you can't rule out putting up taxes.

"If you can't get it down quickly enough, in order to maintain the confidence of the markets and to create conditions for growth and employment, then you may have to look at tax increases."

When asked specifically about the fact that many commentators have sad that the Tories will but up VAT to 20% even temporarily he went on to say:

"When you're the most indebted country in the western world, and people are talking about looking at the credit rating of the country, and we're not sure that foreigners are going to buy gilt-edged bonds to finance our debt, then you cannot start promising you are not ever going to start increasing taxation.

"We will try to avoid it, we'll minimise it if we have to by having proper control of public spending, which we haven't had in this country in the last 12 years."

So the Tories look set to carry on the Labour policy of increasing regressive taxes. The tax policy that has led to the poorest paying a considerable higher proportion of their income in tax than the richest. VAT affects everyone at the same rate on the same items, there is no threshold to help the poorest escape it. National Insurance which has been Labour's toy in recent years does have a threshold, yet even those who are on the 'minimum rage' are above that threshold. Surely that cannot be right.

The Liberal Democrats are promising to sort out the tax system in this country in a fair way. We promise to raise the tax allowance to £10,000, it currently stands at £6,475. Somebody currently on a 37 hour week at the full minimum wage (currently only required for those over 22) would be earning £11159.20. So 42% of their so called working wage is taxable for both Income Tax and National Insurance, plus anything they purchase which has VAT is now taxed at 17.5%. The Lib Dems while not completely removing the poorest from the first two taxes will at least reduce that amount to 10.4%.

Yes as Kenneth Clarke did point out we are the most indebted country in the Western World and we do need to find a way to get ourselves out of that, but we need to be fair in who we affect by those decisions. We need fairer taxes, taxed that are based on the ability to pay. The concentration on VAT must be at the end of any changes to help pay our way out of recession. Yet it seems to be something that the Conservatives are contemplating very soon.

Is Iain Dale Hinting At Cameron's "Fairness"?

Of course you probably wouldn't be a Lib Dem blogger, or a regular reader of Lib Dem blogs and escaped the news of David Cameron's love bomb New Year Message.

We there is an interesting possible proviso of what may lie ahead in Iain Dale's blog. In his ten predictions for 2010 he predicts that:

"VAT will go up to 20% at some point this year"

Now that is an interesting statement for someone who has recently looked at becoming a Conservative candidate. There are only three possible occasions that VAT could be raised next year, after it goes up on January 1st that is.

The first would be in the budget. The second would be if an incoming Conservative Chancellor wants to radically change things just after a splash and dash budget into General Election failure by Labour. The third would be in the Autumn Pre-Budget Report as Darling did last month.

So does this mean that the Tories are planning to lift the level of the regressive* VAT to 20%. Cameron is talking about fairness. The Lib Dems are promising to lift the income tax threshold closer to the level of the national minimum wage than any of the other main parties is prepared to go. The Lib Dems also recognise that VAT hurts most those on the lowest incomes. The raise in VAT would be vintage conservatism. Its very nature of being the same on all goods means that their wealthy donors don't feel that they are being hard done by.

But historically look at who has made the increases in VAT.

In Geoffrey Howe's first budget for Margaret Thatcher in 1979 the Tories almost doubled the standard rate from 8% to 15%, even the higher rate before then was only 12.5%. The only other Chancellor to take VAT to new heights was John Major in his 1991 budget taking it the 17.5% level. The Major increase was to help fund for a cut in that other regressive tax the Poll Tax, robbing Peter to pay Paul. Darling's cut in 2008 was only a temporary measure one which he felt would act as a stimulus.

Cameron as I said yesterday likes to think that we are more in common, but I don't think there is anything in common about how to raise the Government's finances in a fair way, which is kind of a major issue.

Embarrassing Update: No sooner do I post about the difference's between Lib Dems and Conservative than Sara Bedford points out one of our MP is following in an Anatidae nature.



* Yeah that was even my initial reaction as I live blogged the pre-budget report.

We Don't Need Another Overpromising Chancellor

Don't get me wrong I'm all for an aspiring Chancellor seeking economic advice from Economists, after all my degree is in economics so I know the importance of gauging other's opinions. Also I did say earlier this week that George Osborne,

"Like any mediocre student...went to the library and looked up what the master [Vince Cable] had written, taken some key points out of it, tried to pass it off as his own work, but fell short as the whole thing doesn't fit right together."

So the fact that he had also read and used figures from a National Institute of Economic and Social Research paper in preparation for his big keynote speech would be good news. Shouldn't it? Well no apparently he misunderstood that as well to the tune of £3bn or a period of 5 years out.

The previous chancellor promised he's done away with boom and bust. We now say, 'huh?'. Our current chancellor Alistair Darling has mispromised recovery and misrepresented respected economic sources in his budgets. A fact that Darling failed to understand his own incompetencies when he condemned Osborne by saying he:

"has overclaimed comes as no surprise at all. He has shown a shocking lack of judgment through this crisis. His erroneous claims on what he would raise from his pension cuts are just another example."

We don't need another chancellor who is that fictional with the fact, but that is how it is shaping up. At the start of the week of Conservative Party conference we were promised by Dave on the Andrew Marr show that they would be straight talking, and we certainly got austerity, doom, gloom and reality biting home. But have we been oversold the hope? Has Osbourne really promised 5 years quicker to deal with something than is achievable?

If he has he has taken the decision that it fits into the election cycle pattern rather than reality. Not everything is achievable in the 4-5 years that most UK Governments are elected into, that is a reality that we need to wake up to. Politicians can't promise the world and expect to deliver it in one term, if that is not doable.

Osbourne tried to wiggle out of the £3bn difference in claiming that he was accounting for inflation to come up with his 10 year hence figure. However, the NIESR said:

"There is no way of knowing how much it will save except in today's money.. The general principle behind raising the retiring age to 66 is sound. Indeed there is a good case for a rise earlier than the Conservatives are proposing. As we understand it, the full benefits of the package that the Conservatives are proposing will not be realised until after 2020. In 2016 it will only raise £4bn, rising to £10bn in 2023, with the full effect coming in 14 years' time."

So not £10bn in today's money (£13bn with 'inflation') by 2020 as George promised and tried to argue away.

What they can promise is to sort out the system to make the improvement possible. The current chancellor in his last budget overpromised on the recovery the country would rebound with, as figures since have proven. The man who may be next has misrepresented and overpromised another think tank.

We don't want, need nor deserve chancellors who look at economic advise a guideline figure and then try and improve on that. What we do need is someone in charge of our economy who understands economics the principles and mechanics behind what advise is given, not someone playing bridge or poker and merely upping the bidding. Vince Cable shines in that respect above both Darling and Osborne, he knows the issues, understands the theory and reasons the best and doable solutions. If you want straight talking he's the man.

Osbourne Dipping Toe in Unemployment Ocean

David Cameron has said that with 2.5 million people unemployed in this country that we are facing a "jobs crisis". So what is the big scheme to deal with this?

Well George Osbourne has announced a plan to cut the employers National Insurance contributions for the first 10 employees of a start up company. The net effect? Well even Osbourne says this will only create 60,000 new jobs in the first period of a Conservative government.

So the net effect that this plan is going to have on 2,500,000 unemployed is reduce it to 2,440,000. Wow! That looks impressive. How many jobs without such a tax break will be lost in the same period? Even in good years 60,000 jobs are lost through natural evolution of businesses, in good years these tend to be picked up elsewhere.

David Cameron said yesterday:

"This is such an important week for us. This time we have a real chance of making a difference … Sixty million hopes resting on our shoulders. We must not let Britain down.

"Let this be the week we talk to the country about our plans, our vision."

Well so far in the job market 0.01% of that sixty million have had their hopes realised. We await with baited breathe the next big small idea.

Of course it is not the first tinkering the Tories have announced regarding National Insurance at the weekend they announced the rich people's top up scheme to ensure free medical care.

It's a Matter of Trust

Peter Riddell in today's Times looks at a Populus Poll on the most trusted politicians. Top of the list comes Lib Dem Shadow Chancellor Vince Cable who is more trusted by Tory voters than William Hague, George Osbourne or Boris Johnson. He also scores over 53.4 on the scale of 0-100 of trust with Labour voters too.

The only other leading politician to score over 50 with the supporters of another party is Lib Dem leader Nick Clegg, who is also the third most trusted non-Labour politician behind Cable and Johnson, only just 0.1 behind the London Mayor. Overall the rankings have Cable ahead of, David Cameon, Hague, Clegg, Johnson, Osbourne Gordon Brown, Tony Blair, Alistair Darling, Michael Gove, Harriet Harman, Peter Mandelson.

One thing this Populus poll does show is that the Lib Dems are being trusted on the big issues of the day like how to handle the economy across party divides. Of the three potential people to help the UK emerge from recession after the election and deal with the debt Brown and Darling have gotten us into Cable is the man the people would like to see at the helm. Seeing as he scored 6.8 points higher than Osbourne from his own supporters why are the press talking about the Tories as being the best party to take Britain forward? The country seem to not really trust that idea?

No Tory Helping Hand to Nats

The SNP may well have thought the hand of friendship was going to be offered to them, especially in light of the favourable agreement that the Ulster Conservatives and Unionists seem to have struck for Northern Ireland. However, George Osbourne has spelled out to Alex Salmond and John Swinney that they will have to make efficiency savings even when a Tory government is elected. Osbourne said on yesterday's BBC Politics Show:

"Gordon Brown has left the UK in a complete mess and some of the burden of restraint has to be borne by Scotland as a whole."

adding:

"There needs to be restraint. Britain, Scotland needs to live within its means, the party's over."

So the SNP should stop their whinging as it will appear to fall on deaf ears from both the Labour and Tory camps and get on with doing things, and doing them more efficiently. Osbourne has also echoed the call of Tavish Scott the Lib Dem leader to get over the idea of independence just now and focus on the economy saying, "the SNP's obsession with independence needs to be put on one side while we all deal with Gordon Brown's recession".



Seeing as how interdependent all the global economies are right now on each other this is not the time to go messing with the status quo. Throwing in further uncertainty to the mix at the moment will only have one effect, that would an accelerated negative effect on the Scottish economy. Alex Salmond is obsessing about the rather precise number of 8,664 jobs (heaven knows how he came up with that detailed a number) rather than looking at the bigger picture. It is a time for macroeconomics not microeconomics. Especially at Government level who should get too bogged down in that sort of minutiae in the first place.