Politics trumps fiscal principle in the case of universal benefits

By Peter Hoskin
^{Follow Peter on Twitter}

Forget the Lords for a second — perhaps the most significant bit of political news to emerge yesterday was David Cameron's reaffirmed support for universal benefits. Speaking in PMQs, he rejected Nick Boles's proposals for curtailing certain pension-age handouts, saying that, “at the last election I made a very clear promise about bus passes, about television licences, about winter fuel payments. We are keeping all those promises.” And then Downing Street made the Prime Minister’s meaning even clearer, suggesting that this promise would continue past the next election.

This is smart politics from the Prime Minister, you might say. After all, why alienate those better-off pensioners who might be inclined to vote Conservative? But I’d say that there’s a very important reason to take that risk: namely, the state of the public finances.

Continue reading "Politics trumps fiscal principle in the case of universal benefits" »

Social Care White Paper published - rebuffing localism and dodging the cap

By Harry Phibbs
^{Follow Harry on Twitter}

Most of us (76% apparently) will need to have some form of care and support when we are old. As we tend to live longer, the amount of the care needed will tend to increase - even with medical advances. Thus there is the awkward matter of how to pay for this growing cost - at a time when public finances are already hovering at the level that threatens national bankruptcy. Already 1.8 million of us are getting state funded social care - at a cost to local councils of £16 billion a year.

Today the Government have published their White Paper on social care for the elderly and disabled.

The well known dilemma is that if the rich are left to pick up their own costs, then their life savings can rapidly be eradicated. Those foolish enough to have savings of over £23,250 (for instance through becoming home owners) have to pay for care. Those with over £14,250 have to contribute. Those who have gone through life earning the same, but who have been profligate and not made any savings, are rewarded by having free care.

So that is unreasonable. But then the alternative that the state provides free care for everyone, rich and poor, is not terribly attractive - especially at a time when there isn't a huge appetite for massive public spending increases.

One proposal from the Government's White Paper is for those in need of care to be able to take out loans on their homes which are only repayable (including all the interest) on their death. This would be a way of avoiding people being forced to sell their homes in order to get care.

Continue reading "Social Care White Paper published - rebuffing localism and dodging the cap" »

Nick Boles is right to put universal benefits on notice

By Peter Hoskin
Follow Peter on Twitter

Universal benefits never did make much sense to me. Even allowing for Ed Miliband’s argument that hand-outs for the middle classes (and richer) keep everyone on board with the welfare state, they do seem a bit superfluous. Why should the state borrow and tax money only to give some of it back to those who don’t strictly need it? Wouldn’t it be better to just borrow and tax less in the first place? Or at least focus the money on those who do actually need it, such as the 18.5 per cent of Winter Fuel Allowance recipients who are actually in ‘fuel poverty’? And so on and so on.

And yet — thanks in part to David Cameron’s “read my lips” moment ahead of the last election — universal benefits have persisted, even as other items of state spending have been cut back. For both Mr Cameron and Mr Miliband, it has always been a risk too far to start talking about taking fuel allowances and bus passes away from free-voting older people. And so they have slumped into a cosy and easy consensus: keep ‘em, don’t cut ‘em.

Continue reading "Nick Boles is right to put universal benefits on notice" »

Is the real clash of interests in British politics between older and younger voters?

By Paul Goodman
^{Follow Paul on Twitter}

David Cameron's proposed reforms to housing benefit are partly about increasing opportunity and party about saving money.

Oh, and differentiating his party from the Liberal Democrats.  Which is a reminder that it's possible that none of his plans may be effected, since we don't know what parts of them Nick Clegg's party would agree to in this Parliament, if any, and there's no guarantee of a Conservative Government in the next one.

On increasing opportunity, I think that the Prime Minister is right.  Drawing housing benefit and being workless at 18 isn't a likely route to improvement and prosperity.  However, I would like to see the detail (of which there may not much, given Mr Cameron's working timescale).  He says that his proposals "would not apply to victims of domestic violence".  What about others who can't live with their parents - for example, the 60,000 or so children in care?  And if living with one's parents is our working presumption - because renting let alone buying for many younger people is unaffordable - how does this square with labour market mobility?

Continue reading "Is the real clash of interests in British politics between older and younger voters?" »

Andrew Lansley wants GPs to make up for upcoming strike by working next weekend

By Matthew Barrett
Follow Matthew on Twitter.

The Guardian reports this morning that the Health Secretary, Andrew Lansley, has a plan to help conquer the huge backlog of patients - up to 1.25 million - denied an appointment next Thursday thanks to the first doctors' strike since 1975. Mr Lansley wants doctors to work next Saturday, to help prevent the backlog being carried over for weeks after the strike.

Mr Lansley's letter to the chairman of the BMA, Hamish Meldrum, says:

"As GPs are self-employed, I would also ask your members who are GPs that they consider working on Saturday 23 June to clear the backlog of appointments they will have created by their action on 21 June. As you know, the action GPs will take could potentially displace up to 1.25m appointment bookings in primary care into the days and weeks following your strike – including appointments for some 140,000 children."

Mr Lansley has also warned that hospitals may have to postpone up to 30,000 planned operations, 58,000 diagnostic tests and over 200,000 outpatient appointments. This new letter to the BMA claims that 1,350 people waiting to have a cataract removed, and 700 elderly patients needing a hip or knee replacement will be disrupted by the strike.

There is, as with every letter from a Minister to a union leader such as this one, a veneer of practicality masking a political attack. Mr Lansley knows the impact of the strike is not likely to be quite as drastic as that - those who voted against the strike are still set to turn up to work on Thursday, and the BMA only represents two-thirds of doctors in the first place, and even some of the doctors on strike will be at their surgeries, and are likely to see some patients, according to a leading doctor quoted by the Guardian. However, it is still right that Mr Lansley makes the gesture of telling doctors to make up for their strike action. 

Continue reading "Andrew Lansley wants GPs to make up for upcoming strike by working next weekend" »

IDS says we should cut rich pensioners' benefits. Cameron says that would be bad politics. They're both right.

By Tim Montgomerie
_{Follow Tim on Twitter}

The Sun brings to life a story that first appeared in The Times a few Saturdays ago. Iain Duncan Smith is being asked to find another £10 bllion of welfare cuts. This won't be easy. Many cuts that the Chancellor has already pocketed for future years' projections haven't yet been made. Welfare cuts are always more popular in principle than when the hard cases start filling newspapers. The Sunday Express' coverage of the Remploy closures being a case in point. If further cuts are necessary IDS doesn't want them to fall hard on working individuals and families. He thinks better off pensioners shouldn't be exempt. Christian Guy of the Centre for Social Justice agrees. He writes this for today's Sun (bottom of this page):

"Middle-class benefits are luxuries we can’t afford. It’s madness for millionaire pensioners or expats on the Costa del Sol to get welfare handouts. And do all the 11million people getting free bus travel really depend on it? Compassionate Britain has a proud history of helping those who fall on hard times. That’s the point of our welfare system. But benefits should be reserved for people who genuinely need them. Politicians must rethink our five-star menu of “nice-to-have” middle-class giveaways."

The Sun agrees with Duncan Smith and with Guy. It launches a new campaign - Ditch Handouts To The Rich - in support.

David Cameron, The Sun tells us, does not agree. Neither does George Osborne. They remember the granny tax controversy. They remember the fact that pensioners are twice as numerous as younger voters and much more likely to vote. They remember the promise David Cameron made in the election debates not to chop pensioner benefits. They are keen to ensure that Labour doesn't have an opportunity to tell older voters that Cameron lied to them in the same way that Clegg lied to students. Numbers 10 and 11 fear a U-turn on pensioner benefits could cause problems not unlike the Liberal Democrats' U-turn on tution fees.

I'm left thinking that IDS is right fundamentally but that Cameron is correct politically.

In the absence of a straight-talking, lead-from-the-front Wisconsin-style approach the best way forward is the spending commission proposed by Paul Goodman. A consensus on what a smaller, budget-balancing state might look like might not be possible but we should at least make an effort to find one.

Iain Duncan Smith says cutting welfare is difficult, but opens the door to withdrawing middle class benefits

By Matthew Barrett
^{Follow Matthew on Twitter}

Iain Duncan Smith's interview in the Times (£) this morning covers a number of different issues, four of which I've pulled out below. 

Difficulty of cutting welfare

Firstly, IDS stresses the difficulty of cutting welfare, in light of George Osborne's call for further cuts to the Work and Pensions budget. The Chancellor said in his Budget speech: "If nothing is done to curb welfare bills further, then the full weight of the spending restraint will fall on departmental budgets. The next spending review will have to confront this." IDS responds:

"...the Work and Pensions Secretary warns the Chancellor that the poor must not be the only ones to carry the burden. “This is my discussion with him,” he says. “My view is that it’s not [all going to come from welfare] ... We’ll have a look and see what scope there is but we’re all in this together.” Having already made £18 billion of savings, he insists: “There is no such thing as an easy target in welfare ... We have a responsibility to support people in difficulty, we can’t run away from that.”"

Middle class benefits

IDS also rejects the Brownite method of introducing middle class benefits to make millions of Britons who don't need help feel part of the welfare system, rather than just limit the welfare state to those in genuine need. Of particular note is his personal opposition to benefits like the winter fuel allowance. This may open the door to such middle class benefits being withdrawn in the future:

“The welfare system is there to support you in times of need and when you get clear of it you should be clear of it ... It’s rather daft to take tax off the middle classes and pay them a little bit back ... That’s a very expensive way of giving a bribe.” He says that he would not want to receive the winter fuel allowance himself and hopes that other people will return it. “I’d be inclined to send it back ... If you honestly think it’s going to pay for your holiday then give it back, because it’s not what it was meant to do.”

Continue reading "Iain Duncan Smith says cutting welfare is difficult, but opens the door to withdrawing middle class benefits" »

A defence of the 'Granny Tax'

By Tim Montgomerie
_{Follow Tim on Twitter}

On his blog Bagehot (David Rennie) wrote a defence of the "granny tax" that George Osborne should have given in Wednesday's Budget (I hope he and The Economist will forgive me for a lengthy reprint):

"To help working families on low incomes, I am increasing the basic personal income tax allowance to within sniffing distance of £10,000 pounds a year. But I need to pay for that. Part of the money is going to have to come from middle-income pensioners. Now, that may feel desperately unfair—even frightening—to older people who cannot go out to work and earn more money when funds are tight, and who are already feeling the pinch as a result of low interest rates and rising prices.

But I would point out that pensioners have been expensively shielded against inflation by the so-called "triple lock", this government's guarantee that pensions would be measured against three different indicators each year, and uprated by whichever is the highest. That is why pensioners are about to see a 5% rise in the state pension, when most workers had to settle for a 2% pay rise last year. That protection has cost this government an absolute fortune.

I also know that something else makes many pensioners anxious: a sense that their children and grand-children are struggling to get ahead, or even enjoy the same standard of living as their elders. I hear all the time about pensioners struggling to help their children put down deposits on first homes, after a multi-decade property boom that has seen houses in some areas increase in value one hundredfold in just 40 years, lifting even modest family homes way out of the reach of those on ordinary incomes. I know that many grandparents fret about how the next generation seems to be falling further and further behind.

I don't imagine that every pensioner is living in clover. But at a time of great social inequality, when many 20-somethings or young families are struggling to live anywhere near where they grew up and today's workers doubt that they will ever be able to afford to retire, I believe it is no longer possible to justify giving pensioners on middle incomes a tax privilege that the working young do not enjoy. In the name of solidarity between the generations, and with that triple-lock guarantee against inflation untouched, I am asking frugal, hard-working, middle-class pensioners to do their bit for the country. I am confident that they will agree."

Beautifully written.

Continue reading "A defence of the 'Granny Tax'" »

George Osborne is still eating far too much of the pie

By Tim Montgomerie
_{Follow Tim on Twitter}

There are lots of things I liked in today's Budget. The movement towards lower corporation tax, in particular. Getting rid of 50p and replacing it with taxes on property is economically sensible and socially just. Labour is simply being dishonest when it says this was a budget that gave too much to the rich. I think the politics of raising the income tax threshold are obvious but I'd have preferred we went down the Lawson route and that everyone paid tax but at low rates. I would have introduced a 10p rate but that debate has gone. The tax statement for every citizen is a brilliant idea. Relaxation of Sunday trading laws for the Olympics period is also a neat idea as long as its temporary. Also welcome were announcements on roads and decentralised pay but the devil will be in the detail on those changes.

The overall Budget Day experience was slightly disappointing. Everything apart from the sting on pensioners was preannounced. It wasn't clever of George Osborne to disguise what may amount to a £3 billion raid on pensioners. Labour is suggesting the average pensioner will lose £75 from next April. There are very good arguments for asking the baby boomer generation to shoulder a bit more of the burden but George Osborne should have made them and made them transparently. The press pack are more excited at the 'Granny Tax' because they discovered it and I expect it will lead many of the the papers tomorrow. Gordon Brown buried things in the small print and it's a shame the Chancellor has done the same.

Strategically I can only agree with Paul Goodman. There has been far too little focus on the size of Britain's bloated state. Cuts have been too timid. Two weeks ago ConservativeHome ran a five part series which identified tens of billions of pounds of extra cuts. Some of the cuts were much more politically realistic than others but if a fraction of them had been pursued the Chancellor would not have had to introduce so many job-threatening revenue measures over the last two years. The reality is that Britain was over-taxed when the Coalition came to office and is more heavily-taxed now. 38% of deficit reduction in this coming year comes from higher taxes but Britain doesn't have a tax problem but a spending problem. For the last three years the state has accounted for half of national income. Brown and Blair came to office as New Labour but governed as Old. Because the Coalition has not set a radical enough change of direction British business travels the world bearing an unnecessarily high tax burden. As Simon Jenkins argued in today's Guardian, "Cameron and Osborne are big government men to their cores". So long as they are spending a bigger percentage of national income than Brown and Blair spent for the vast majority of their time in office it's hard to disagree with that judgment.

Finally what's the big story? Is it deficit reduction? Is it fairness? Is it growth? I have no idea. There were lots of individual announcements today but no great sense of direction.

The three kinds of compassionate conservatism

By Tim Montgomerie
_{Follow Tim on Twitter}

In the latest ConservativeHome survey we asked respondents to rate the importance of 23 policy themes for convincing voters "that the Conservatives are a modern, compassionate party". Respondents voted between 0 (unimportant) to 10 (very important). The average ratings are pasted below:

1. Improve schools: 8.48
2. Keep inflation under control: 8.33
3. Fight crime: 8.29
4. Helping the unemployed into work: 8.07
5. Cut welfare bills: 8.02
6. Looking after people who do the right thing: 8.02
7. Cutting the debt burden on tomorrow's taxpayers: 8.01
8. Reduce taxes on low income people: 7.77
9. Address problem of long-term care for the elderly: 7.70
10. Protect income of pensioners: 7.55
11. Supporting marriage and the family: 7.46
12. Improvement of the NHS: 7.10
13. Early intervention programmes that prevent the most disadvantaged children becoming tearaways: 6.89
14. Ensuring bankers and the rich make their full contribution to the nation's finances: 6.56
15. Protection of Britain's environment: 5.85
16. Help for poorer children to get into university: 5.66
17. Better childcare: 5.56
18. Improve the rights of disabled people: 5.25
19. Reduction of regional inequalities: 5.23
20. Encourage more giving to charities: 5.16
21. Promote more northern candidates: 4.29
22. Guard the rights of gay people: 3.39
23. Fight hunger and disease in the poorest parts of the world: 3.38

Continue reading "The three kinds of compassionate conservatism" »