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Extensive summary of the coalition deal

The initial coalition agreement covers 12 areas (a final document will be published in due course covering other areas not covered in this document)

Here are the key points:

1. Deficit Reduction

  • Significantly accelerated reduction in the structural deficit over the course of a Parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes;
  • Protect those on low incomes from the effect of public sector pay constraint and other spending constraints;
  • Protection of jobs by stopping Labour’s proposed jobs tax;
  • Emergency budget within 50 days of the signing of any agreement;
  • Forecasts of growth and borrowing should be made by an independent Office for Budget Responsibility;
  • Modest cuts of £6 billion to non-front line services can be made within the financial year 2010-11;
  • Reductions can be made to the Child Trust Fund and tax credits for higher. 

2. Spending Review – NHS, Schools and a Fairer Society

  • Full Spending Review should be held, reporting this Autumn;
  • Funding for the NHS should increase in real terms in each year of the Parliament, while recognising the impact this decision would have on other departments;
  • The target of spending 0.7% of GNI on overseas aid will also remain in place;
  • Fund a significant premium for disadvantaged pupils from outside the schools budget by reductions in spending elsewhere;
  • Hold a full Strategic Security and Defence Review alongside the Spending Review with strong involvement of the Treasury.;
  • Maintain Britain’s nuclear deterrent; the renewal of Trident should be scrutinised to ensure value for money, with Liberal Democrats continuing to make the case for alternatives.
  • Play a strong role in the Nuclear Non-Proliferation Treaty Review Conference, and press for continued progress on multilateral disarmament. 
  • Establish an independent commission to review the long term affordability of public sector pensions, while protecting accrued rights;
  • Restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats.

3. Tax Measures

  • Personal allowance for income tax should be increased in order to help lower and middle income earners;
  • Announce in the first Budget a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes (to be be funded with the money that would have been used to pay for the increase in Employee National Insurance thresholds proposed by the Conservatives, as well as revenues from increases in Capital Gains Tax rates for non-business assets as described below);
  • The increase in Employer National Insurance thresholds proposed by the Conservatives will go ahead in order to stop Labour’s jobs tax;
  • Further increasing the personal allowance to £10,000 will be a longer term objective, and that this should take priority over other tax cuts, including cuts to Inheritance Tax.
  • Provision will be made for Liberal Democrat MPs to abstain on introducing transferable tax allowances for married couples;
  • A switch should be made to a per-plane, rather than per-passenger duty (a proportion of any increased revenues over time will be used to help fund increases in the personal allowance);
  • A detailed agreement will be sought on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities;
  • Tackling tax avoidance is essential for the new government.

4. Banking Reform

  • A banking levy will be introduced;
  • There will be robust action to tackle unacceptable bonuses in the financial services sector;
  • Detailed proposals will be brought forward to foster diversity, promote mutuals and create a more competitive banking industry;
  • Ensuring the flow of credit to viable SMEs is essential for supporting growth and should be a core priority for a new government, through a major loan guarantee scheme and the use of net lending targets for the nationalised banks;
  • Establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way;
  • Give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation. 
  • Rule out joining the European Single Currency during the duration of this agreement.

5.  Immigration

  • There should be an annual limit on the number of non-EU economic migrants admitted into the UK to live and work, and joint consideration will be given to the mechanism for implementing the limit;
  • The detention of children for immigration purposes will end.

6. Political Reform

  • Introduction of five year fixed-term parliaments - the next general election will be held on the first Thursday of May 2015;
  • Legislation will also provide for dissolution of Parliament if 55% or more of the House votes in favour;
  • Referendum Bill on electoral reform, includeing provision for the introduction of the Alternative Vote in the event of a positive result in the referendum, as well as for the creation of fewer and more equal sized constituencies. Both parties will whip MPs to support a simple majority referendum on AV, without prejudice to the positions parties will take during such a referendum;
  • Early legislation to introduce a power of recall, allowing voters to force a by-election where an MP was found to have engaged in serious wrongdoing and having had a petition calling for a by-election signed by 10% of his or her constituents. 
  • Establish a committee to bring forward proposals for a wholly or mainly elected upper chamber on the basis of proportional representation (draft motions by December 2010), likely to advocate single long terms of office;
  • It is likely there will be a grandfathering system for current Peers;
  • In the interim, Lords appointments will be made with the objective of creating a second chamber reflective of the share of the vote secured by the political parties in the last general election;
  • Bring forward the proposals of the Wright Committee for reform to the House of Commons in full – starting with the proposed committee for management of programmed business and including government business within its scope by the third year of the Parliament.
  • Reduce electoral fraud by speeding up the implementation of individual voter registration;
  • Establish a commission to consider the ‘West Lothian question’;
  • Implement the Calman Commission proposals and the offer of a referendum on further Welsh devolution;
  • Tackle lobbying through introducing a statutory register of lobbyists;
  • Pursue a detailed agreement on limiting donations and reforming party funding in order to remove big money from politics;
  • Promote the radical devolution of power and greater financial autonomy to local government and community groups, including a full review of local government finance.

7. Pensions and Welfare

  • Phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women;
  •  We agree to end the rules requiring compulsory annuitisation at 75;
  • Implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders;
  • End all existing welfare to work programmes and to create a single welfare to work programme to help all unemployed people get back into work;
  • Jobseeker’s Allowance claimants facing the most significant barriers to work should be referred to the aforementioned newly created welfare to work programme immediately, not after 12 months as is currently the case.;
  • Jobseeker’s Allowance claimants aged under 25 should be referred to the programme after a maximum of six months;
  • Realign contracts with welfare to work service providers to reflect more closely the results they achieve in getting people back into work;
  • The funding mechanism used by government to finance welfare to work programmes should be reformed to reflect the fact that initial investment delivers later savings in lower benefit expenditure;
  • Receipt of benefits for those able to work should be conditional on the willingness to work.

8. Education

  • Reform schools in order to ensure that new providers can enter the state school system in response to parental demand; that all schools have greater freedom over curriculum; and, that all schools are held properly accountable.;
  • On higher education the findings of Lord Browne’s final report into higher education funding will be judged against the need to increase social mobility; take into account the impact on student debt; ensure a properly funded university sector; improve the quality of teaching; advance scholarship; and, attract a higher proportion of students from disadvantaged backgrounds (if the Liberal Democrats cannot accept the Government response, they will be able to abstain).

9. Relations with the EU

  • The British Government will be a positive participant in the European Union, playing a strong and positive role with our partners, with the goal of ensuring that all the nations of Europe are equipped to face the challenges of the 21st century: global competitiveness, global warming and global poverty. 
  • There should be no further transfer of sovereignty or powers over the course of the next Parliament;
  •  Examine the balance of the EU’s existing competences and, in particular, work to limit the application of the Working Time Directive in the United Kingdom;
  • Amend the 1972 European Communities Act so that any proposed future Treaty that transferred areas of power, or competences, would be subject to a referendum on that Treaty – a ‘referendum lock’. We will amend the 1972 European Communities Act so that the use  of any passerelle would require primary legislation;
  • Examine the case for a United Kingdom Sovereignty Bill to make it clear that ultimate authority remains with Parliament;
  • Britain will not join or prepare to join the Euro in this Parliament;
  • Strongly defend the UK’s national interests in the forthcoming EU budget negotiations and that the EU budget should only focus on those areas where the EU can add value;
  • Press for the European Parliament only to have one seat, in Brussels;
  • Approach forthcoming legislation in the area of criminal justice on a case by case basis, with a view to maximising our country’s security, protecting Britain’s civil liberties and preserving the integrity of our criminal justice system;
  • Britain will not participate in the establishment of any European Public Prosecutor.

10. Civil liberties

  • Implement a full programme of measures to reverse the substantial erosion of civil liberties under the Labour Government and roll back state intrusion, including:
  • A Freedom or Great Repeal Bill;
  • Scrapping the ID card scheme, the National Identity register, the next generation of biometric passports and the Contact Point Database;
  • Outlawing the finger-printing of children at school without parental permission;
  • The extension of the scope of the Freedom of Information Act to provide greater transparency; 
  • Adopting the protections of the Scottish model for the DNA database;
  • The protection of historic freedoms through the defence of trial by jury;
  • The restoration of rights to non-violent protest;
  • The review of libel laws to protect freedom of speech. Safeguards against the misuse of anti-terrorism legislation;
  • Further regulation of CCTV;
  • Ending of storage of internet and email records without good reason; 
  • A new mechanism to prevent the proliferation of unnecessary new criminal offences. 

11. Environment

  • Implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including: 
  • The establishment of a smart grid and the roll-out of smart meters;
  • The full establishment of feed-in tariff systems in electricity – as well as the maintenance of banded ROCs;
  • Measures to promote a huge increase in energy from waste through anaerobic digestion;
  • The creation of a green investment bank;
  • The provision of home energy improvement paid for by the savings from lower energy bills;
  • Retention of energy performance certificates while scrapping HIPs;
  • Measures to encourage marine energy;
  • The establishment of an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient CCS to meet the emissions  performance standard;
  • The establishment of a high-speed rail network;
  • The cancellation of the third runway at Heathrow.;
  • The refusal of additional runways at Gatwick and Stansted;
  • The replacement of the Air Passenger Duty with a per flight duty;
  • The provision of a floor price for carbon, as well as efforts to persuade the EU to move towards full auctioning of ETS permits;
  • Measures to make the import or possession of illegal timber a criminal offence.;
  • Measures to promote green spaces and wildlife corridors in order to halt the loss of habitats and restore biodiversity;
  • Mandating a national recharging network for electric and plug-in hybrid vehicles;
  • Continuation of the present Government’s proposals for public sector investment in CCS technology for four coal-fired power stations; and a specific commitment to reduce central government carbon emissions by 10 per cent within 12 months;
  • Seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee;
  • Liberal Democrats will be allowed to maintain their opposition to nuclear power while permitting the government to bring forward the national planning statement for ratification by Parliament so that new nuclear construction becomes possible. That process will involve the government completing the drafting of a national planning statement and putting it before Parliament; specific agreement that a Liberal Democrat spokesman will speak against the planning statement, but that Liberal Democrat MPs will abstain; and clarity that this will not be regarded as an issue of confidence.


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