Simon Fires First Warning Shot 'Cross Coalition Bows

Yesterday the newly elected deputy leader of the Liberal Democrats Simon Hughes fired the first major warning shot across the coalition's ship bows.

It's all coming down to the matter of fairness. Having been canvassing members for the past three weeks there was a noticeable shift in their line of questioning come Tuesday. The reason of course that instead of the speculation of what the budget would bring we had the detail. Simon highlighted one of the concerns the welfare system in this case the pensioners. It's bad enough that many may have to wait longer for a state pension without other benefits being hacked into as well. As he said:

"The coalition deal is a deal. There cannot be any unpicking of items in that deal, otherwise the whole thing risks falling apart."

One key element of that as far as Lib Dems are concerned is that yes we need to tackle the deficit and we need to do it fairly. Impinging VAT increases (although noted bringing us in line or behind most of Europe) , benefits getting frozen while inflation continues and not properly tackling the tax loopholes as we promised are some of the areas of concern. The raise in the personal income allowance and the aviation taxes does offset some of that. Making it a less regressive budget than the Tories had promised during the campaign, but does it really make it a progressive budget?

Of course it is hard to be fully progressive when you have not one but both hands tied behind your back by the level of debt left by Labour. I've heard the Labour arguments that their investments were required to bail out the banks and to secure jobs. Securing jobs is fine but they could have and should have looked at the whole mentality of public sector expenditure before now. At the end of each spending round there are always inventive ways to use up to budget so as not to lose any for the next year. Yet Labour and the SNP are both saying there is no more room for efficiencies. There always has been, and unless something is done always will, the mentality of the public sector is to spend money rather than to save it.

You only have to look at the attitude of many of the MPs caught out over expenses. Some did use the defence it was needed, but the majority claimed it was within the rules as if it was an entitlement rather than a provision if required.

So yes Simon is right to sound a warning shot, and that is all it is, we Lib Dems are prepared to make tough calls on expenditure just as long as you are fair to the poorest in our society when you are doing so. Don't exacerbate their problems for the sake of expediency.

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.

What is the SNP and Plaid Cymru's 'Fairer Funding'?

I've been reading that the SNP and Plaid Cymru are saying they want fair funding. Ieuan Wyn Jones Plaid's leader has said of demands of the other parties in the event of a hung parliament:

"We would demand fairer funding for Wales and Scotland to protect jobs, our schools, our hospitals and the most vulnerable in society.

"At the heart of our platform there would also need to be a real commitment to grow our economies through fast transport links and additional support to create thousands of high-quality jobs in the green and creative industry sectors."

So looking at the departments they want:

• Enterprise - protected/increased


• Education - protected


• Health - protected


• Business - increased


• Transport - increased


• Environment - job creation - increased

By my reckoning that is every single Scottish Department that they either want to see no cuts or increased investment in.

Now watching the Ask the Chancellor's debate I know that what the nationalist parties are asking for above seems to be beyond the reckoning of the UK economy. While yes the most vulnerable in our society should and ought to be protected (I know under the Lib Dems they will be) there is issues in the others. Creating jobs in green and creative industries is something that the Lib Dems promise and the Labour budget has actually gone some way to help with. The Lib Dems are also promising a pupil premium for the most disadvantaged children. Guess what? As a result of the Barnett formula this will mean additional money for Education coming to Scotland and Wales through the calculator.

But let's not beat about the bush while both Alistair Darling and George Osborne failed to answer the question of what cuts they would bring, Vince Cable was honest to say 'None of us can guarantee no cuts in any department'. However, it is how you make those cuts that is significant and how you fund them. There are some things that the SNP would agree with Vince scrapping of Trident, doing away with the ID card database, all projects that will release billions to be used elsewhere meaning less cuts. But the SNP have failed yet to look closer to home. they have failed to look at what they can do to make savings to allow the very goals they expect from others to be as well funded as they want.

Look at the fact that we are now on our third consultation regarding Independence. We have a Scotland Futures Trust that has yet to deliver. These are just two headline issues there are others in the quagmire or quangoism that the SNP have control over. Only a few weeks ago the SNP were saying they were opposed to any cuts in Scotland's budget, reality may have settled in slightly, though not from my reading of the above, now they are saying "More Nats, less cuts". May I ask after this launch, where? Where are they planning the lesser cuts for Scotland if all the devolved areas that they and Plaid Cymru in coalition in Wales have control over are to be protected or enhanced.

I know the song says 'you gotta have a gimmick' but I don't think wearing blinkers and not taking ANY responsible actions in this crisis is a very good look for either Alex Salmond or Ieuan Wyn Jones.

Myopia of the Long-Sighted Fool

by Peter Brookes in The Times 25 March 2010

There are three things about Alistair Darling's budget statement that point out just how ineffectual he is in the role of chancellor on the shifting tide of current economic situation. The first is his setting of the personal income tax allowance, the second his long range growth forecasts, the third is the unexpected larger return on taxing bankers bonuses.

"I have no further announcements on VAT, on income tax or on national insurance rates."

Normally by that point of the statement the chancellor has announced changes to the personal allowance at which tax is started to be paid. Apparently the decision to freeze the personal tax allowance at £6475 came when the retail price index dipped below zero in September. At the time the retail cost index which actually has a more direct relevance to the lowest paid was still over 1%. RPI has rising steadily since then to 3.1% now. Instead of taking a mean, or median month over the last 12 months to make the adjustment to the personal allowance the chancellor took the best performing month and used that as a benchmark, or rather as a way to penalise the lowest paid with an extra £48 tax a year. Many of them are not enjoying the luxury of the 1.5% this year that the MPs have received, in fact that is double my increase over the last 2 years.

"This year, as I said in last year’s Budget speech and last year’s pre-Budget report, I expect the economy to grow by between 1 and 1½ per cent. I have decided to revise slightly downwards my forecast for 2011 to bring it into line with those of the Bank of England, to growth of between 3 and 3½ per cent."

The second is what is often pointed out as being Alistair Darling's over optimistic growth forecasts. The independent sources tend come to a figure which seems reasonable, though even the IMF have been over optimistic, yet the chancellor has been prone to double that. Has he realised the error of his ways by scaling back his prediction for next year. Well he hasn't scaled it back by the amount he was wrong and is still well above the scaled back level that the IMF have predicted. Below is the Bank of England's predictions and even they add the caveat that there is only a one in ten prospect of hitting the darkest segment.

"At the time of the pre-Budget report I put in place a one-off 50 per cent tax on the excessive bonuses of bankers....I can tell the House that that tax has raised £2 billion—more than twice as much as was forecast. That is money paid by the banks, and those receiving bonuses will, of course, also have to pay income tax at the highest rate."

The unexpected doubling of the return than what Darling was expecting on bankers bonuses being taxed at 50%. Err, duh. Lets do the maths.

Alistair predicts X returns from taxing Y bonuses at 50%

Therefore 2X=Y

Alistair receives 2X returned from taxing bonuses at 50% therefore bonuses =2Y. Bankers take home after taxation Y in bonuses. So the net effect is negligible to the bankers but and extra bit out of the banks money, when they could be using more of that to pay back the bail outs.

Cider House Rules Maybe

I think the operator of the Official SNP Twitter account has been quaffing too much cider before the tax increase at midnight.

First all seemed normal and a policy I actually agree with.


I mean the differential in fuel pricing between those with good public transport provision and those that don't, and therefore need to use their own vehicle, most notably in rural Scotland is grotesque.

But then soon after the SNP seemed to want to have their cake and eat it too.

So it appears that Darling can raise the 3p extra on fuel if he wants to as long as he gives it to Scotland!!! Yeah I think if I'm following that train of thought correctly the SNP fuel policy is:

Fair fuel is want we want but if we can't get it, it's Scotland oil so give us the money.

But the cider drinking continued with the result of secondary school elections (not sure if these are mock election of SYP ones [not clear in the press release]) in Aberdeenshire earning the headline and tweet.


Reading the actual story it turns out to be ab epic fail. On the day of the UK budget this is your first story after the event! They later actually look at a real benefit for Scotand's computer games industry but to release this as your response when everyone else is looking at the budget and the fall out is an epic fail.

The headline is a question "Jim Murphy on Facebook?" So you would expect that the object of the question being on the subject would be in question and therefore the epic fail of the hashtag. But no it is poor grammar, something that the winners of the elections in Aberdeenshire I expect would like to put right. Although I do love one quote in the piece which I have taken and changed to make a true statement (my changes in red)

"It is the Lib Dems which trust Scotland's young people to have their say - that's why we've consistently supported giving the vote to 16 and 17 year olds.

"It is the Lib Dems which is introduc promising record more apprenticeships and paid internships, more college places, guaranteed training or education after 3 months unemployed and more investment in youth-services. It is the Lib Dems who care about young people, and it is only with Lib Dems MPs that we can block cuts ensure further investment to the services young people cherish."

The SNP will block cuts in investment in youth the Lib Dems though the Barnett formula differential will be providing more for that end. I believe it is protected for that purpose and might well be in agreement with a Scottish government.

So there you have it, either a cider induced afternoon in the SNP media centre of a somewhat epic fail. I'll let you decide.

Dooh Nibor Tax Breaks

I have long been arguing for Labour to stop using the regressive taxes such as national insurance and VAT to get their pound of flesh especially from the poor and deal with progressive taxes. Well today Alistair Darling did that but what has he done. It is another example of Dooh Nibor* taxation like the doubling of the 10% tax rate. It may not be as bad but it is another move in that direction. The personal allowance has not gone up from £6,475, this at a time when the Chancellor capped all public sector pay to a 1% increase, inflation is running at about 3%.

Pensions have been removed from index linking and now so has the personal tax allowance. The worse off are going to suffer more yet again. Yes they may well get a pay rise bit more of it is taxable and therefore their tax burden increases once again. Add on to this the fuel increase 3% in stages. I can see the bus fares increasing in stages at each increase and yet again by a higher percentage than the actual add on to the costs.

Under the Lib Dems the income tax personal allowance would rise to £10,000 pounds. The poor would be better off not worse as Labour have left them in this final budget before the general election. Yes it is costed Jeff counter balanced with making the tax system fairer, closing far more loopholes that Darling did earlier but as you say Labour have launched an attack on the poor.

As for the increase tax on cider, as David Heath has just said in the commons, it takes year to grow a harvest capable of producing cider. The sudden increase may well affect the artisan ciders rather than the high alcohol mass produced drinks that are a source of binge drinking. Heath suggested a production volume exception or a alcohol level to incur the 10% increase as alternatives rather than the flat rate suggested. But hey, flat rates are the Labour way.

* Robin Hood in reverse taking from the poor etc.

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.

A Positive, Serious Contribution Deserves a Serious Answer

No my ears were not deceiving me. That is what Alex Salmond replied to Tavish Scott's question regarding colleges admission (or not) findings and youth unemployment in Scotland.

Basically Tavish pointed out that 85% of colleges in Scotland have had to turn away applicants this year, many for the first time ever with some having seen a 800% increase in applications. In West Lothian the number of applicants has increased by 41% over last year, Oatridge college who have never had to turn away applications before saw a 74% increase in applications and turned away 300. These findings came from a Liberal Democrat survey of the the 43 colleges in Scotland looking at the numbers of applicants each has had to turn away over the last 3 years, the first of its kind to be published. On top of this the number of our young people claiming Job Seekers allowance over the past year has risen by 35%.

Jeremy Purvis the Finance Spokesperson has said about the findings in the report:

"Too many young people have been hit twice. They can’t get a job and now they can’t get a college place. What government can do is give them the opportunity to gain the skills and experiences that will help them get the most from economic recovery when it comes. Scotland as a whole will benefit from having more people ready and active for the workplace."

An increase in college places and training opportunities is one of the issues that the Lib Dems have been applying pressure on the SNP Government to provide for to help in this recession.

Alex Salmond's response to the actual question "Will the First Minister agree that action taken by his Government in this Budget must increase college places across Scotland?" is encouraging as is his acknowledgement that a recession inevitably increases the demand on college places.

Jeff has already pointed out that he thinks the answer "dropping the jousting" he gave Iain Gray and Annabel Goldie is a "clear signal that the budget would reflect Tavish's concerns" I would tend to agree, it seems that lessons have been learnt over the last 12 months on both sides.

Are SNP Considering a Budget to Do Some Good?

On the first day of debate in the Scottish budget both Nick Clegg in Westminster and Tavish Scott in Holyrood highlighted in different ways the failure of our banks to lend. While Nick asked in the Commons how a bank we bailed out, which is not lending to domestic businesses to protect jobs, is leading to an American takeover of a UK company that will lead to losses, Tavish tried to deal with the SNP budget.

Writing to all members he says:

"The economic background is serious. Unemployment continues to rise in Scotland, when it is falling in the rest of Britain. The gap in economic growth between Scotland and the UK is now widening to Scotland’s disadvantage.

"Liberal Democrats have taken up the challenge to work with the SNP Government to persuade them to take forward our proposals that will build a fairer society and a sustainable economy.

"We are discussing practical plans. We can do more to give Scottish business a fighting chance of getting through the recession. Many businesses still can't get the lending they need from their banks. Scottish manufacturing – including the Borders textiles industry that I highlighted in Parliament last week – needs help. The Scottish Budget needs to help strengthen these businesses, putting them in a good place to reap the rewards of economic recovery."

He went on to point out that the total salary bill for those earning more that £100,000 is £413million and is £651million for those over £80,000. And that is just 5,300 people out of half a million in the public sector. Pointing out that ordinary people cannot understand how the highest earners in the NHS are also able to nominate themselves for bonuses worth up to £75,000 a year on top of such salaries.

As well as the pay of the top civil servants he also urges the SNP Government to have a hard look at the quangos, including the Scottish Futures Trust continues to consume millions of tax pounds but builds absolutely nothing.

At the time he wrote that email he said:

"It is disappointing that the SNP Government has not moved to change its Budget yet. That is why we couldn't vote for the Budget today. We have given them the benefit of three more weeks to respond to our positive and constructive approach."

Within hours though the BBC reported that John Swinney is looking to freeze the pay of top civil servants and is also considering Lib Dem demands to cut the pay of the highest public sector earners.

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.

U is for Uncosted

A continuing series of spelling out Conservative plans Part 4.

I've just taken a quick look through the Conservative Party's manifesto chapter on health (you can access it here). Now on a cursory glance although expense and savings are mentioned many times there is no actual figures for much of this. Indeed apart from a line of in the introduction that says:

"By the time you've finished reading this sentence we'll have racked up £33,000 more in [national] debt"

There are only three figures of actual costs either current or future of what is involved.

First up we have we have that poor mental health costs the economy £77 billion each year. Before they go on to say that rules preventing welfare-to-work providers and employers purchasing services from Mental Health Trusts.

There is of course the one-off payment upon retirement of £8,000 for their 'free personal care for the elderly' as I blogged earlier during their conference this is but a poor imitation of what the Lib Dems have been proposing for a number of years now, and delivered in Scotland.

The only other monetary amount to be mentioned is a £10 million a year commitment beyond 2011 to support hospices in their vital work with children.

In the past the Tories have often thrust the argument out at the Liberal Democrat manifesto pledges that they were uncosted and meant nothing. That of course is no longer the case Lib Dem manifestos are fully audited and costed. For all their talk of expense and savings the Tories have not indicated one costing of what will be saved or what will be committed in what is Chapter one of their manifesto.

Lib Dem MP Norman Lamb had this to say about the announcement this morning.

"All today’s announcement confirms is that the Tories can’t be trusted with the NHS and have every intention of playing fantasy politics all the way up to the election.

"The NHS is facing enormous shortfalls in funding over the next few years yet the Tories continue to promise extra health spending without any details of where the money will come from.

"The time has come for David Cameron to be honest with the British public. If the Tories want to pledge extra spending on health in some areas then they must admit that without extra funds it will lead to cuts in frontline services elsewhere. And if they plan to remove all central targets how do they intend to prevent a return to the waiting lists of old?

"The sad truth is that David Cameron knows his health policies don’t add up. How else do you explain the sudden U-turn today on their flagship single room’s policy?"

Alistair Darling meanwhile has pointed out:

"The Tories have made over £45bn of promises, but can barely explain how they can pay for a quarter of this. This leaves them with a credibility gap of £34bn.

"These are not long forgotten promises from another time. All have been confirmed in the last two years. Most have been repeated in the last few months.

"You can't fight an election on a nod and a wink; sometimes claiming you are committed to these promises, and when challenged claiming you are not."

Maybe he has a point.

Time For Alex to Wake Up and Cut the Big Bosses Pay

Alex Salmond keeps telling us he has the right to govern Scotland and to an extent he is right, he party does have the largest block in Holyrood. But his decision in 2007 to form a minority Government means that he has to work with others to get things done. If Aaron Sorkin were to really want to top The West Wing in behind the scenes dealing he should really look at the foot of the Royal Mile.

When Labour announced the Pre-Budget Report the SNP immediate reaction was to snipe about the cuts that would end up being made to the Scottish budget. That is the reaction of opposition not Government, and here comes the rub. We are in a recession, not just in the UK but also in Scotland. Therefore the ability to raise taxes, whilst stimulating the economy and keeping up levels of spending is difficult. If Salmond doubts that he should ask any person trying to make ends meet on a tight budget.

Today Tavish Scot has offered a hand to ensure the 2010-11 budget passes. Many across the country have taken pay cuts either in actual terms or real terms over the last year just to survive. Many of these have been on the lower pay levels and took the cut to ensure that their bills would continue to be paid, after all a job is better than no job. Yet at the top end of the scale the people who have some responsibility for the budgets, the policies the initiatives that we have gotten into are insistent on maintaining the level of pay increase they have become accustomed to.

The proposal is simple, cut the pay for the top earners working for quangos, health boards, councils, universities and government agencies by 5%. By doing so it protests the pay of those working in the front line and frees up some money to maintain other budgets. As Tavish said:

"We need to see the highest paid across Scotland in the public sector taking their fair share of the financial pain that we are all in.

"And we want to make sure that we protect people on the lowest incomes working in the public sector by taking something out of the top level."

As I blogged earlier it was the question that Tavish raised with the First Minister on Thursday. There are 1,200 in NHS Scotland alone earning over £100,000.

Is Brown Really the Electioneering Budget Maker?

Maybe we should let the Chancellor off when we say he created a pre-election budget. It appears the title for that role goes to the man who claimed he had done away with 'boom and bust'. Yes it appears that Darling's predecessor the Prime Minister put a stop to some of the tax increases that he had intended to eat into the deficit before the general election.

There is also speculation that Brown is in denial about the depth of cuts that will be needed to claw back the borrowing that the Government has undertaken to keep the ship afloat. This is why although health, policing and education budgets will rise as announce, spending across Whitehall will actually in the words of the Chancellor remain flat. There is no cut in Government spending in actual terms, just that some departments will feel the pinch.

Mind you the decision was to go with National Insurance rises not VAT. In essence this did allow for some protection of the poorest paid, although they will suffer from the restoration of the 17.5% VAT rate. But why the avoidance of raising more through income tax? There is a little extra being raised here through freezing of the allowance for the upper band, but this is one progressive tax, that the Government have most control over. They can set the bands, and allowances as they see fit and the rates. Of course they have already removed the 10% rate to the detriment of the poorest paid.

But to do so would have been to affect the headline tax that everyone knows about. Labour have continued to tinker around with the other less high profile tax questions VAT and NI they have managed to make people pay a 32% (12% NI 20% IT) tax rate on their taxable income and that is before they get to spend it. The tax burden is still going up on the poorest paid despite efforts to protect within NI because of the regressive nature of VAT.

Pre-Budget Report Live Blogging

So the Chancellor is going to raise corporation tax by 1% but no longer hold off on returning VAT to 17.5%. Therefore this recressive tax which proportionally hits the poorsest more is going to have a bigger impact that on corporations, thus far.

Anyone under 24 is to be guaranteed work or training after 6 months out of work. And all 16 to 17 year old's guaratnee to be extended for another year.

State pension is to go up 2.5% so that will pretty much be swallowed up by VAT.

But hey we'll be borrowing a whole £3bn more this year than HE anticipated. That is £178bn instead of £175bn. Of course being only £3bn off is better than a lot of the doomssayers also thought we'd turn out. But still that is £1.5bn net more to be paid back under Darlings four-year-plan to cut it in half.

Boiler scrappage scheme has been confirmed and tax breaks announced for YIMBYs* in the form of a tax break for feeding any additional wind or solar power back into the national grid.

After Labour have removed the 10% income tax rate, they are now to give just such a break to corporations that take part in research or development. Maybe I should become a limited company and so a little bit more R&D in my job then.

The biggie has arrived any bankers monus over £25,000 is to be taxed at a one off rate of 50%.

Inheritance tax threshold is not a priority so will not rise from £325,000 to £350,000 just now.

The Chancellor likes to say that half of the additional reveunue raised on bonuses and inheritance will come from the top 2% of earners. He claims it is about fairness? Is it just me or did I miss a similar break down on the VAT increase he announced earlier? Might that be that that increase wasn't about fairness? Much in the same way that the abolition of the 10p tax rate proved to be.

There is to be £5bn of efficiency savings, scaling back in major IT projects (does that mean ID card database?) , reforming legal aid and outsourcing prison management.

National insurance contributions are to be raised by a further 0.5% but those earning less than £20,000 will be protected.

*Yes in My Back Yard.

Darling Takes Centre Stage

Today's the day that the Chancellor makes his pre-budget statement and in the six months since his budget it would appear that he has failed to get his predictions right. Industrial output failed to grow in October, which is considerably worse than Darling expected in April. Indeed gloomy manufacturers are not expecting output to increase in future months, therefore putting Darling behind the optimistic curve he tried to portray in the Budget.

The Chancellor has already said he will be protecting spending on front line health and policing, as well as education. So it is widely expected that spending cuts will occur elsewhere, as much as 15% is expected in some departments. Ironically when the Labour Government was branding David Cameron Mister 10% when he first talked about having to make cuts in public sector budgets.

There is also the awaited introduction of the Super Tax being imposed on big city bonuses to help finance the loans the Government has made to that sector, whether this is an one off or a longer term imposition exerts expect the Chancellor to announce later.

However, it is speculated that if Darling wanted to hold off until after the election to impose his plans it may be too late as Britain is in serious threat of losing its Triple-A Credit rating. It seems that he is going to have to act with the scalpel before the Prime Minister is able to go to the country.

Tories Reject GARL

The Confederation of British Industry (CBI) are once again not best pleased with the Scottish Tories (or the SNP for that matter). They have decided to side with the SNP in not reinstating the £170m funding for the Glasgow Airport Rail Link back into the 2010-11 budget at the Finance Committee in Holyrood yesterday.

The CBI have in recent weeks been attacking the SNPs budget proposals as not being in the best interests of encouraging much needed growth in the Scottish economy and the decision of the Tories on the Committee to side with the SNP on this issue raise their hackles further. The rail link would have provided 1,300 jobs been a boost to Scotland's second cities business sector and was also an integral part of the 2014 Commonwealth Games plans.

Iain McMillan the Scottish director of the CBI said:

"We always knew the Scottish Tories would be the swing vote on the question of whether GARL should be reinstated.

"We are very, very disappointed the Conservatives did not see fit in the committee to vote with Labour.

"We are very disappointed that the Scottish Tory party does not appear to share our view that the Scottish Government should root out waste in these austere times in order to release money to allow strategic transport projects like GARL to go ahead."

So the Tories are like the SNP unable to finding achievable savings to stimulate the economy and pay for much needed projects. Instead they are content with a while range of measures in the budget that are not an effective use of the money that Holyrood has to spend, with £9m of funding estimated to see through the Referendum Bill to a vote in the Parliament, we have an SNP Government, backed implicitly by the Tories, arguing for Labour in Westminster to make cost savings so as not to cut money available to Scotland, while at the same time they are not prepared to prioritise their own funding issues.

It looks like next months budget round could again be a sticky time for the SNP.

The Swinney Flu

The art of Governance is often defined by the ability to Govern in a crisis.

Love them or loathe them although they got the UK into the fine mess they gotten us into over the Banks collapsing Labour did at least find a way to do something about it. While it may not be the right thing in the long term they did something.

However, with the swine flu issue the SNP are failing to display the art of Governance. The £33bn budget for the current year was only passed in February but already John Swinney is running cap in hand to the Treasury in Westminster asking for more money. Instead of looking for where the funds may be available for repatriation to the vaccination of Scottish citizenry the first reaction in the crisis is the SNP default position blame it on Westminster.

Yes there is a £11.2m health budget surely somewhere in the whole Scottish budget £100m that Nicola Sturgeon the Health Minister claims is 'owed' to deal with swine flu can be found. Having worked in the Civil Service I'm aware that while budgets have been allocated to projects for the 12 months not all of these are going to be on time, therefore there is bound to be a little surplus in some departments budgets. I also know that even if there is this will find some way of getting spent at the end of the budget cycle.

Put another way John Swinney claims that out of all the department budgets under the SNP control it is impossible for him to find 0.0003% of savings from his budget*, with half the year still to come to be able to find the £100,000 required for the inoculation of Scotland against Swine flu. That sounds like lousy, slipshod and poor financial management to me.

*You can tell I work with stats can't you?

The 3.5% Growth Myth 2: The IMF Deception

The below is exactly what Alistair Darling said about economic growth in his Budget speech yesterday. I make no apologies for quoting it at length as the whole point I wish to draw out of it is one of contextualisation. I've added parenthesis to draw out the key elements.

"Mr Deputy Speaker, the UK went into this global recession with employment at an all-time high, inflation, public debt and interest rates at low levels. But no country can insulate itself from this worldwide downturn. The position here, as in every country, deteriorated in the autumn. In the last few months, world trade fell at the sharpest rate since 1945. As an open economy, the world's sixth biggest exporter of goods and the second largest exporter of services, we are affected by the collapse in demand in other countries. The unexpected severity of the recession has led the IMF to
downgrade its own forecasts for the world economy three times since
October. We, as well as other countries as diverse as Japan and France, India
and the US, have reduced our growth estimates.

"Mr Deputy Speaker, the UK economy contracted by 1.6 per cent in the last
quarter of 2008. For the first quarter of this year, I expect the economy will again contract by a similar amount. And my forecast for GDP growth for the year as a whole will be –3 ½ per cent – in line with other independent forecasts. But
because of our underlying strength, the measures we are taking, domestically and internationally, I expect to see growth resume towards the end of the year.

"The IMF forecasts published today confirm the problems that all countries will face this year. But they also show that the British economy will suffer less than Germany, less than Japan, less than Italy, and less than the euro area as a whole this year. The British economy is diverse, flexible and resilient – which is why we can be confident in recovery. Next year, because of the pick up in world demand, the continuing benefit of lower prices, and the substantial recovery measures put in place, I am forecasting growth of 1 ¼ per cent in 2010.

"In future, the sources of our growth will be more varied – and we need to ensure we play to our country's strengths. It will increasingly come from an expansion in investment by businesses in the industries of the future, such as low-carbon, advanced manufacturing and communications. These industries,
together, are as important to the British economy as the financial services
sector. That is why it has been so important that we have increased investment in Britain's science base by 88 per cent in real terms over the last ten years.
Growth will also be driven by the opportunities to export as the global economy doubles in size in the next two decades. From 2011, I am forecasting that the economy will continue to recover, with growth of 3 ½ per cent from then on."

He repeatedly refers the IMF predictions from their report for yesterday, it adds gravitas does it not? You think that he is drawing from a wealth of experience to make his predictions for the future. What did the IMF figures say 2009 -4.1% and 2019 -0.4%. The only bit of fact that Darling does extract from the IMF figures is that the 2009 figure is better than the Eurozone -4.2%, Japan -6.2%, and Germany of -5.6%. Of course he fails to mention USA who take all the blame for this recession only dipping by 2.8% and Canada most closely aligned at -2.5%.

So therefore who are these other independent forecasts that he speaks off. Having reviewed all of yesterdays papers the most optimistic forecast I was for 2010 was +0.5%, the Times had 0.3% but suggested Darling would say 1%. Where oh where has he squeezed the extra 0.25% out of what was even deemed an optimistic prediction yesterday.

Maybe be he has discovered the golden fleece, or sold the Downing Street cat to a stranger in the street from some beans which are are growing very well in the garden of Number 11. Fee fi fo fum I smell the lie of an Darling tongue.

The £2000 Car-Scrap Scheme Myth

In the Time Budget supplement Ben Webster points out the mythologies of the benefit to a car owner of the car-scrap scheme policy from the Darling budget.

The headline figure was that it would be worth £2000 per car or van aged over 10 years scrapped between 1 May 2009 and 1 March 2010 and replaced with a new car. However, only £1000 of that is coming from the Government the other thousand will be matched by the industry at the floor court. Thing is to try and encourage such sales most retailers are already offering at least that level of discount. Therefore will the price of cars on the forecourt go up to the real figure to allow the retailers to actually be seen to give this full £2000 benefit.

Also scraping cars over 10 years old irrelevant of condition is poor environmental move. Many cars just over this age are still environmental. The only reason that I got rid of my late father's car last year was that it had become too expensive to repair just after getting through it's 12 year MOT. Also the people most likely to be able to buy new cars anyway are the wealthy. Personally I have never owned a new car. Even many of my parents cars have been ex-hire cars, several of these serving a year on one of the channel islands before being sold on to them. While the tax is aimed at helping the car industry is does little for the poor and the environment.

There are also 9.5 millions vehicles that would be eligible for this scheme, Darling has earmarked £300m for this scheme, therefore it would be the first 300,000 people after May the first to take advantage who will benefit. Probably best if your old car still runs to keep it running folks.

The 3.5% Growth Myth

I've been trying to find historical data that would back up Alistair Darling and Yvette Cooper's claim that we can bounce back to a sustained level of 3.5% growth. What I did find was the OECD figures back to 1970. Firstly though lets look at the figures since Labour came to power.

Even with the dot com boom coinciding with the start of that period of growth 3,5% was never sustainable. Something that Darling seemed to indicate in his budget speech earlier. Indeed 2.5% seems to have been closer to the mean over this period of sustained growth. Taking out the first 3 1/2 years that coincided with that boom it was actually 2.58%. Over the first 10 years of Labour it averaged 2.95%.

However, the claim I heard from Yvette Cooper on Channel 4 News when I finally got in through the door was that after periods of recession we have often bounced back very strong. Looking at the data yes we have had times of recovery to 3.5% or above, but maybe for only a year or two. Darling this afternoon seemed to promise at least 4 years, if not more, of that level of growth. Also the other times that the woes of the world took our growth down we came out of it on the worldwide recovery to that level if it happened. It was outwith the control of the man carrying the Gladstone dispatch box.

Of course one country is sustaining that sort of level of economic growth, China. So maybe that is why the civil liberties in this country are being eroded so much we are going to follow the Chinese example in all things.