The Labour reaction to George Osborne's generally excellent budget has been hilarious to watch. They really do seem at sixes and sevens. I suppose we shouldn't be surprised bearing in mind their policies in large part caused the crisis we have today.
I said well before the election that whoever won would put up VAT and I firmyl believe it would have happened at some point if Labour had won. Alistair Darling knows full well that most of what George Osborne announced yesterday would have happened if he had remained in the Treasury too - except with some delay.
Darling had already announced £44 billion of spending cuts without actually specifying what they would be. Very courageous of him. He knows full well that most of the cuts announced yesterday would have been announced by him too. He knows it. We know it.
It is also interesting that the Labour attack yesterday was centred on the role of the Liberal Democrats. When I interviewed Yvette Cooper on LBC she was only too happy to stick the knife into the LibDems, following the lead given by Harriett Harman in her budget response. In some ways, it's understandable. I put it to Simon Hughes yesterday that not a single LibDem voter went into the polling booth on May 6th and thought to themselves: "I'll vote LibDem because I want to put up VAT, freeze child benefit, freeze public sector pay and cut welfare benefits." I would say it is to the credit of senior LibDem politicians that they have now recognised the dire economic crisis we are in and have endorsed the measures needed to get out of it. When I spoke to Danny Alexander yesterday he had no reservations in endorsing every single one of the measures outlined by George Osborne and I believe Vince Cable did the same on TV later.
Hmm... how can you possibly describe it as "generally excellent"?
ReplyDeleteI can see how you might argue that the severity of the budget was inescapable given the country's financial situation. And I can see how you might want to pin the blame for that on the previous government.
But "generally excellent" is hardly an apt description for a budget which breaks manifesto promises (not to change VAT, for example).
More like shadow boxing ... Without the shadows.
ReplyDelete7 weeks ago, the Tories pledged not to increase VAT. 7 weeks ago the Libdems (correctly) said that the Tories were lying and that they intended to hike VAT. At that time the budget deficit was forecast at £167bn.
ReplyDeleteBy yesterday the budget deficit had been revised downwards to £155bn. Nonetheless the coalition still elected to hike VAT in breach of just about the only tax pledge made during the election campaign.
You may call that bravery Iain, but most people consider it the same old politics. In fact, given that the deficit forecast was better than expected, we now know that the Tory pledge was a flat lie and that all along they intended to do just this.
If Labour had won and Darling had done the same, you would be spitting bile. But instead because your party won power, you are happy to ignore the most flagrant election lie imaginable. They say that imitation is the sincerest form of flattery and in that respect Dave is still madly in love with Blair.
Dave
ReplyDeletePerhaps you might quote me where this pledge was made. I don't think you will be able to because it wasn't.
People will just never understand that whoever won the General Elections would have to make unpopular choices. Do Labour really think if they had done the budget they would be able to cut the deficit without all of these measures. If they do then they must live in a very rosie world.
ReplyDeleteThey can argue all they like. The Measures outlined in the budget are Necesarry. No More, No Less. When people finally catch on and realise this, maybe we can all get on with it.
Couldn't agree more with you Iain
I have to say that I've been impressed by how well the Lib Dems have held up under the pressure. Even Cable and Hughes, who seemed to be foremost among those who would have rather the Lib Dems went with Labour, have stuck by the budget and the coalition, even though it does contain some pretty strong medicine.
ReplyDeleteIt also may be a fairer answer to your question about people voting lib dem on May 6th that though, no, they didn't vote for a VAT hike, but they did vote for a party that would honestly face up to the problems we face as a country, without veering into either small or large state ideology, which is pretty much what they've got.
Iain,
ReplyDeleteYou're right, it seems I'm misremembering. But if it wasn't in writing, didn't both the Tories and the LibDems make it clear in interviews that they had no intention of raising VAT?
But that's a bit beside the point. "Generally excellent" is a strange description to use. It was the most severe budget in a generation. Now that might, of course, be entirely necessary, but I can't see how it can be described as excellent.
[By the way, that's me admitting I'm wrong. See, it's easy to do. We're still waiting for you to admit that your Ed Balls/OUCA post was a complete no-story.]
Anyone who believes Labour would not have raised VAT, let me know, because I have discovered a treacle mine and I want investment money.
ReplyDelete@dave cross & p smith
ReplyDeletePledge not to raise VAT? Manifesto promises? What pledge? What promises?
I think you'll find that the formula used was "we have no plans to increase VAT".
Well, I have no plan to nip down to the pub tonight, but it doesn't mean that I've promised not to.
Vince Cable looked quite upset yesterday during the budget, clutching his arm for comfort, almost on the verge of tears at one point... but he seemed to cheer up when the tax allowance rise was announced. He clearly doesn't like what the coalition is having to do, but even he realises that it is necessary and it is being done as fairly as possible.
ReplyDeleteHarriet Harman's attacks are pathetic. There are far worse things in this world than unemployment, and being forced to work full-time just to pay for a bloated and inefficient state is one of them. One might draw an analogy to slavery, which is only mild hyperbole.
How will cutting non-jobs save money? Very simple, because we won't have to pay people to do them - the dole costs less. There's no more dignity in shuffling papers around for no net gain than there is in signing on; both are forms of welfare, both are soul-destroying, and both should be squeezed to get people doing something useful with their lives.
http://www.thisislondon.co.uk/standard/article-23830020-cameron-pledge-over-hung-parliament.do
ReplyDeleteCameron seems to say here that he has no plans to raise VAT.
Well fancy that, a politican that says one thing and does another. Never happened before.
I put it to Simon Hughes yesterday that not a single LibDem voter went into the polling booth on May 6th and thought to themselves: "I'll vote LibDem because I want to put up VAT, freeze child benefit, freeze public sector pay and cut welfare benefits."
ReplyDeleteIt's more likely that those who voted Lib Dem were voting for "none of the others", it's hard to believe the Lib Dems actually expected to be in government because their manifesto and election campaign was every-which-way. Now they're actually in government they're being torn to pieces by the left wing media and Labour, who are behaving as if somebody's stolen their toys and as if it's not fair they're no longer controlling the country's purse strings.
Would Labour have been happy for the Lib Dems, Plaid, SNP, Greens etc to throw away their key policies to be part of a 'Rainbow Coalition'? Of course they would, and would have sneered at the Tories had they had the temerity to complain.
That, if you remember, was the alternative form of government being negotiated by Labour before Brown walked out of Number 10.
Aha. I knew I wasn't completely making it up.
ReplyDeleteIn this article Cameron says he has no plans to raise VAT. I realise, of course, that that's not the same as making a manifesto pledge. But it's obviously where my memory dredged it up from.
Good to know I'm not going completely mad :-)
Shock, horror! Libdem ministers support the coalition budget!
ReplyDeleteThis is the sort of insight that makes this blog a must read.
All that I have learned and to be honest I knew it already is that politicians are lying two faced hypocrites who will say anything to get elected.
ReplyDeleteI'm sorry but telling me that completely changing your approach to deal with the reality having run a campaign arguing for the opposite just shows how unfit these people were for government in the first place.
I'm sick and tired of this class/ideology politics.
Why can't we have a pragmatic party, that seks to do what is best under the prevailing circumstances and actually campaigns on that basis
Libertarian:
ReplyDeleteBecause they would not be elected by the great unwashed, mayhap?
Vince was very eloquent today in the Budget Debate at setting out why the Budget was "good". Also had some good soundbites - worth seeing a video clip.
ReplyDeleteMr Cross - they did not promise NOT to raise VAT - they said they could not rule it out. There were no plans to raise VAT there was no pledge to raise VAT and there was absolutely no pledge NOT to raise VAT.
ReplyDeleteit is an excellent budget because it faces reality and does not fudge. And it does what it can to help the poorest.
The most telling line from Osborne was that Brown has missed his 'golden rule' target by the small matter of £480 billion !!
THATS why we had the budget we did yesterday. VAT went up because the hole to be plugged was bigger.
>>Why can't we have a pragmatic party, that seeks to do what is best under the prevailing circumstances <<
ReplyDeleteWe do, more or less - although it's a coalition, not a party.
>>and actually campaigns on that basis<<
Because they would not have been elected, had they been scrupulously honest.
Sorry, Libertarian, but you'll have to settle for more or less told the truth, give or take the odd fudge.
>>Hmm... how can you possibly describe it as "generally excellent"?<<
ReplyDeleteBecause, Dave, they failed to wimp out from unpopular choices.
It's not going to be much fun for anyone for the next three or four years...
... but this time around, there really is no alternative.
@Libertarian said...
ReplyDelete“Why can't we have a pragmatic party, that seks to do what is best under the prevailing circumstances and actually campaigns on that basis...”
Oh yes. We used to have one of those. If you remember, it was called the Conservative Party.
And then Margaret Thatcher changed it out of all recognition into the ideological monster we were left with. Current Tory doctrinaire silliness over the EU is a classic example.
See the clip from Sky News in this Con Home article. Cameron is as clear as you can be that he does not plan to raise VAT
ReplyDeletehttp://conservativehome.blogs.com/thetorydiary/2010/06/wrong-mr-osborne-the-vat-rise-was-completely-avoidable.html
It may not have been in the manifesto but Cameron was clearly trying to convince voters that CAT would not go up under the Tories. To say now this wasn't a pledge is playing just playing with words.
"When I spoke to Danny Alexander yesterday he had no reservations in endorsing every single one of the measures outlined by George Osborne and I believe Vince Cable did the same on TV later."
ReplyDeleteOr to put it another way "CABINET MINISTERS SUPPORT BUDGET SENSATION"
W T F to you expect them to do!?!?!
I think there are some pretty daft aspects to the budget, such as making it harder for people to get disability benefits at exactly the same time as unemployment is rising.
ReplyDeleteJust for once I would like to see a government which applies a little common sense to decisions. Then perhaps they would realise that when there are going to be hundreds of thousands of recently redundant people flooding the jobs market, many of them very well qualifid with lots of relevant experience behind them, disabled and sick people will be the last to be offered jobs.
I'm not arguing with the intent - I agree with the aim of getting long term sick and disabled into work - but the time to do it is when the economy is booming, not when it's bust.
Iain - You need to explain where the new jobs will come from. The depth and speed of the cuts ( why compress them into such a short time scale??) means that many people will lose their jobs. The impact of this places the recovery at great risk.
ReplyDeleteYou conveniently ignore the original Libdem arguments against VAT rise - the fact that they themselves now forget these arguments now that they enjoy the trappings of power does nothing to remove the fact that VAT rises disproprotionately affect the poor.
George Osborne needs to tell us which dictionary he gets the words 'fair' and 'unavoidable' from, since his meanings of these words is so different from those the rest of us use.
You've been watching Sky news too much.
Labour has NEVER put up VAT so i doubt your point stands up to much scrutiny iain. Labour doesn't have to answer any questions regarding the deficit or any policy thats the benefit of oppostion !
ReplyDeleteiain and his friends used to deride Brown for not answering the questions at PMQ's and yet now DC is doing just that. How long before he's asking the Labour party questions at PMQ'S.
Tory and the Liberals have to accept they decided when and what to cut in this budget. What follows from now is of there own making.
I did think that this ConDem government wouldn't last the full five year term now they have to otherwise the Liberals will be decimated at the next election.
I dont think there was any doubt that this budget was the lesser of many evils and it is to the credit of the Lib Dems that they are standing up to be counted. I think people will see them in a new light next time around..
ReplyDeleteI also hope that people remember that it was solely the work of Brown and Liebour that got us into this budget situation. lets hope they never get chance to do it again........ever
There is economics and then there is politics. Economics: no-one saw the financial crisis coming. The Tories were still complaining in 2007 that the City was over-regulated by the Labour government. There is broad consensus that Brown and Darling made the right calls in dealing with the crisis when it hit, but the inevitable result is a bloody big hole in public finances. Question now is whether Osbourne is acting responsibly or ideologically. Or both? Will he kill the patient? Time will tell.
ReplyDeleteNow politics: Labour will use this coalition to destroy the Lib Dems for good. It is the obvious political response. The Lib Dems cannot win. If the economy recovers, the Tories will take the credit not the Lib Dems. If things go badly, the Lib Dems will be obliterated at the ballot box. In short, whatever happens the Lib Dems are toast.
@Nicholas: I agree that this is very risky for the Lib Dems with not much upside, but I have to disagree on the economics.
ReplyDeleteThe City was and is over-regulated. The New Labour solution of bringing in rules, then more rules to plug the gaps in the first few, then even more new rules, ad infinitum, failed in financial services as much as it failed in every other area of policy. The solution is not more rules/laws, but fewer and broader ones to reduce the number of edge cases.
The more rules you have, the more complex transactions get to be and the harder they are for counterparties to understand. The guy with the best knowledge of the 5,000 page rulebook gets to win, on obscure technicalities. The more rules there are, the more responsibility is absolved, and the greater the case for state intervention when things go wrong.
You don't legislate for every possible derivative transaction, then every possible interaction between them on the balance sheet, then every possible systemwide effect. You legislate, Glass-Steagal style, to firewall the bits you care about from the bits you don't and let nature take its course. If an investment bank screws up, they go bust and are dealt with under corporate bankruptcy laws, not bailed out by taxpayers and levies on the banks which didn't screw up.
Incidentally, the bailout isn't part of the black hole in the budgets. It's about cost-neutral at present, and it's off the balance sheets in any case (it would add ~80% of GDP to the ~70% of GDP national debt we already have). The black hole addressed by George Osborne is entirely from gross overspending over the last decade.
Cameron said what Thatcher said in 1979, that he had no plans to raise VAT. Those of us who speak tory of course know what that means. Those who don't of course become even more cynical about the political class who continue to wonder why.
ReplyDelete@ King of Wrong, On financial regulation it strikes me that there is an awful lot of being wise after the event. At least Alan Greenspan admitted (eventually) that he'd been wrong.
ReplyDeleteAs for the deficit, I was reading yesterday that the whole huge rise in housing benefit took place pre-1997. So each side is always very selective with the facts. That's politics I guess
@Nicholas: oh, I'm under no illusions that the banking crisis was predictable - it wasn't. But there's also, to coin a phrase, "being dumb after the event" - by failing to learn the necessary lessons that could have reduced the damage caused.
ReplyDeleteValuing CDOs is an intractable problem (proven NP Complete, a form of the Densest Subgraph problem), and even fairly simple derivatives provide a rich enough basis to be subject to the Halting Problem and hence undecidable. In English, that means that it is impossible to produce a correct balance sheet for an investment bank. The only things you can do are: a) separate them, b) ban them, c) wait for another crisis.
Oh, and there was no deficit in 1997, 1998, 1999, etc... Tax receipts have increased 50% since tax year 1997-8, spending has doubled. That's not politics, that's a fact.