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.

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.

20% VAT Whoever Wins Is that Fair?

The ticking time bomb of VAT appears to be rearing its head again and neither of the main parties appears to have a diffusion team looking at fair ways to avoid the explosion.

Having just learnt myself of my annual pay review this news in The Times makes disheartening reading:

Though Labour and the Tories have denied having any current plans to increase VAT, neither will rule it out and The Times understands a rise in the tax is being considered by both parties.

The rate of 20% is bound to hit the lowest paid. My pay review justified the non-increase that the Retail Price Index (RPI) was currently averaging -0,5% but a rise in VAT to 20% as envisioned by both will effect everyone. If this is done before the next round of annual reviews it could leave a lot of people struggling to make ends meet as most of their purchases would rise by 2.1% as a result of the additional 2.5% increase in VAT.

Of course VAT is a regressive tax, it is applied to most of your purchases. Yet Alistair Darling has already ruled out either raising income taxes or increasing the scope of VAT, but not raising the sales tax. Earlier on this year I looked at the promised the Tories weren't prepared to make on the area of VAT.

Whilst the Liberal Democrats have been honest and fair about their tax proposals apparently their has debates within the Government about whether to life the opaque nature of their pre-budget report. As you would expect about a Labour party that has brought in 13 years of stealth tax increases they're not sure whether to be honest about increasing VAT before the election.

Simple answer the reason Labour are having such a debate is that people are expecting tax increases to help pay for the economic mess. But they'd like such increases to be fair, which will not be the case with ignoring progressive increases in income tax and lumping all your eggs on a VAT increase.

Information

The following underlying framework of principles underlies all the Liberal Democrat tax proposals, shame the other two parties aren't as principled.

• Fairness – tax policies should be equitable and ensure that the payment of
  taxes is linked proportionately to people’s ability to pay.
• Simplicity – tax policies should be clear to taxpayers and new policy should
  aim to eliminate complexity in existing legislation.
• Certainty – tax policies should not be retrospective and should provide the
  taxpayer with certainty over the correct treatment.
• Efficiency – tax policies should provide revenue to the government on an
  efficient basis and minimise tax leakage.
• Transparency – the reasons behind the introduction of new tax policy and
  the intention of spending of revenue raised should be clearly stated to the
  taxpayer.
• Competitiveness – UK tax policies should be internationally competitive.

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.

Deeper Cuts of the PBR

I'd thought that local SNP candidate Tam Smith would have learnt his lesson and stopped taking attributed quotes to other SNP spokespeople as his own. Sadly I see I've been proved wrong this time he is Michael Matheson MSP on the health committee.

However, the point that Tam raised about how the National Insurance hike will affect the NHS is valid one. As I blogged during and after last week's pre-budget report the pre-budget was full of regressive rather than progressive tax measures. Both the return of VAT to 17.5% and the increase of National insurance are leading to a high proportion of our poorer people paying a considerable amount in tax.

Obviously the rise in National Insurance will have an impact on all employers as their increase is payments is more than that which comes directly out of the employees pay. Those that are public employees obviously are taxing Peter to pay Paul. The SNP are saying that Darling National Insurance proposals equate to £44m out of the NHS Scotland budget. I'm not going to dispute that. Tam breaks that down to £5.99 million and £2.33 million in NHS Lothian and NHS Forth Valley respectively.

That is a considerable part out of the budget of services that Labour say they will be protecting as front line services in England. But of course in the devolved powers that is budgeting that is done by the devolved powers. There are less other departments from which they can draw on resources, because not all areas have a devolved equivalent.

Darling can put a freeze on the top earners in public services to help with that deficit, but elsewhere a cut in top salaries is the step beyond that. Indeed that is the point that Tavish Scott has been making in order to protect our key front line services.

Labour are clearly not thinking of all the implications of their taxing proposals. They are trying to avoid the headline tax issue of doing something with direct taxation, i.e. Income Tax because they are still trying to win the General Election but not hitting that too hard. But their stealth is starting to hit people hard. 32% of taxable income is now paid in income tax and national insurance by us all. If you were to spend all that you have left on VATable items you would actually pay 42% in tax (and that is only if you do not drive, drink or smoke). Labour are already taxing us heavily and doing it stealthily. As the SNP point out they are also taxing devolved powers in other ways as the sectors that are devolved have a high proportion of wages that have to come out of the budget.

Greening the Budget But What?

You have to applaud Patrick Harvie and Robin Harper for getting their £1bn deal (over 10 years) free insulation deal for Scottish Homes into the SNP budget. It is a very good move and something that a Labour led coalition would never have acceded to, so they have grasped their opportunity well is getting this through.

The Nats of course are worried that without a precedent to abstain if you don't like the budget, as we've had in Westminster since the days of Lloyd George, they could have faced defeat if they could only have garnered the support of the Conservatives as they did last year. Alex Salmond indeed was clearly panicked earlier in the week when he again threatened to go home and call an early election if the other parties refused to play with his fitba.

One thing this new budget doesn't seem to do is address the issue of how the credit crunch is affecting the people of Scotland. Alex Salmond was all bluster when Gordon Brown was thinking about what to do for the people of the UK. Neither are addressing the most hardly hit, Darling tinkering with VAT is not making a major impact on the poorest families of Scotland and Salmond in his budget appears to be all hot air.

Tavish Scott took over as leader of the Liberal Democrats by calling on the Scottish Government to make real cuts to help the people of Scotland. With the Scottish Futures Trust floundering like a beached whale in the Firth of Forth one wonders if the former economist really has a grasp of business and individuals economic needs and responsibilities at this time. The Lib Dems earlier this week reiterated their call for cuts in the personal rate of income tax. This is something that Alex actually can have some control over. Like the lift at the offices of the Hitchhikers Guide to the Galaxy might have said when asked by Zaphod to rise, "Have you considered all the possibilities of down?" This budget from the SNP appears to be steering along the same course as last year, not bearing attention that everything that Westminster has attempted to do as a stimulus is not working. The banks aren't passing on the rule cuts in rates, lending has yet to pick up. VAT cuts are not stemming the almost daily run of someone from our High Street running to an administrator, of pulling down the shutters one last and final time.

A stimulus requires a reaction, that is why you stimulate. If there isn't a reaction something else is wrong or you've been focusing your attention in the wrong place. All the while nothing is even looking like slowing down or turning around mind you the same people are suffering. Working out not what to spend but what not to spend as their budgets get tighter and tighter. They want, indeed need, to spend if given the opportunity they would happily go back to their previous spending habits. They don't have masses of savings to buffer them, they can't afford to. But give them relieve of the worry and they will spend and create stimulus, which will domino effect up the economic food chain.

But Alex may have more of Gordon in him that he cares to admit. He's a Tim'rous Beastie in the making, one with a loud hailer alright but behind the mouthpiece cowering behind Gordon and Alistair unprepared to be bold for the people of Scotland, happy to settle for the blame game and sweep all the blame down south. So he'll be hoping his Tory friends will now help back his timidity.

VAT Cuts Favour the Rich More than the Poor

Darling has carried on the trend of being Dooh Nibor a reverse Robin Hood that his predecessor had at the Treasury. Darling had made much that the poorest pay a greater percent of their income in VAT that the wealthiest.

While this is true a bigger proportion of that is taken up by the VAT on fuel which at the 7.5% rate is already under the 15% VAT level, giving no benefit. An even greater proportion of their income also goes on zero rated necessities such as food again giving a negligible effect. The Financial Times is reporting that Robert Chote of the Institute of Fiscal Studies is pointing out that low-income households will not benefit so much from the VAT cuts if they are considered as a proportion of spending.

Yet again Labour are stealthily giving greater tax breaks to the rich than to the poor. Indeed many of the poorest households would have been better off with an income tax cut rather than a VAT cut as this would have given them cash in their pockets, which they could then of used to buy more of their necessities rather than getting a bonus on many of the luxury items that many have already have to cut back on buying due to the credit squeeze.

Hat Tip to the Treasury's Webmaster

The new idea of save now pay later which the government is going under may well be about to face a stealthy VAT increase. Hat tip to Guido via Peter Black.

Whilst the press release with the pre-budget report stated that the level would return to 17.5% from 1 January 2010. Their website had the additional line:

"and subsequently increase to 18.5% in 2011-12"

Now putting on my ex civil servant hat I would expect that despite denials that this was ever part of the plan it had to have been there in the original proposals and someone forgot to check the copy handed to the webmaster to publish. Maybe it was a photocopied piece which didn't copy a crossing out and the margin note/scribble:

"Not for release yet."

Or maybe it did and we've all been done a public service in finding out Darling's true intentions. Brown may have talked prudence, but he wasn't saving, or cutting the nations credit card bill. Now we've been told that the tax cuts that are being made will eventually be followed by tax hikes, watch out for VAT being just another one of those.

Notes: The author is aware that many last minute changes to key Governemnt documents are made up to the last minute possible before issuing due to have spent a number of years doing just that whilst working in a Civil Service department at Stormont. He is therefore not surprised that an different draft may have been used on the website, though it may be ommitted from the official release it does not exclude the fact that this may still be policy.

Nothing to Pay to 2010: Darling

Well it appears that Alistair Darling isn't going to start to attempt to pay off the latest borrowings on the country's credit card until 2010. It will also be the year after 13 years of Labour reducing the tax burden on the rich while increasing it on the poor that some sort of sorting out of the order of things and some fairness will be returned.

Yes once again after umming and ahing over what to do another plank of the Lib Dem proposals to make the rich take up their more than capable share on their highest level of earnings . Of course yet again Labour will be deferring this, rather that doing it to match the reductions it is proposing at the lower end and in VAT.

Whatever happened to dear Prudence? It appears that Darling has been given permission by Prudence's greatest suitor to leave her out in the cold, when the lack of her (from some quarters) helped to get us into this fine mess in the first place.

Prevention or Cure Prime Minister?

"The more important thing that we are doing is investing £15 billion over the next 10 years in trying to find cures to diseases including cancer and skin cancer."

Wake up Gordon!

Yes folks that is how our Prime Minster opened his answer yesterday to the following question from Jo Swinson:

The most rapidly increasing type of cancer in this country is skin cancer, of which there are more than 80,000 new cases each year. As the Prime Minister heads to Suffolk for his bucket and spade holiday, I am sure that he will be stocking up on sun cream. How can his Government justify charging VAT on that essential health protection item?

So rather that cut 17.5% off products already available as a preventative measure, the PM is quite happy that some of that £15 billion pounds which may well not be available is he were to slash the VAT on such a healthy option as suncream is more important to him. His answer to Jo carried on:

The action of the national health service in making it possible for people to be seen quickly when they are diagnosed with cancer means that 99 per cent. of people suspected of having cancer are seen within two weeks. Those are the actions that we can take, and they will get rid of skin cancer in the long run.

Diagnosis is also mentioned seemingly instead of prevention. What is prudent about that Mr Brown. Zero rating sunscream is hardly going to be a major dent in the governments coffers. However, it may well be marginal enough for some of our poorest citizens who ignore suncream and are most at risk of skin melanoma's to actually take some action to help themselves, rather than relying on diagnosis and then cure.

In the words of Baz Luhram:

Advice is a form of nostalgia, dispensing it is a way of
fishing the past from the disposal, wiping it off, painting over the
ugly parts and recycling it for more than
it’s worth. But trust me on the sunscreen…

Well this advise isn't for the sake of nostalgia. Nor is it recycling old truths. PM this issue may have been looked at from time to time, yet still the wrong sort of message is coming back. Get rid of VAT on suncream, free up a few beds, doctors' hours and whatever else as a result of doing the right thing.