Conservative Diary

Tax and spending

21 Jul 2013 10:53:41

From firmness on internet standards to wobbliness on Crosby – Cameron’s Marr interview

By Peter Hoskin
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David Cameron was chin-juttingly firm about many subjects in his interview with Andrew Marr. On child pornography, the main subject of the piece, he warned of “stronger laws” if the internet firms don’t act stronger themselves. On the idea that Samantha Cameron is influencing Government policy toward Syria, he claimed it’s “a total urban myth”. And on Europe, he raised the prospect of Brexit if we don’t get the renegotiation we want.

But it was two wobblier moments that stood out. The first was on Lynton Crosby, when Cameron twice or thrice declined to directly answer the question of whether he had ever spoken with his adviser about plain packaging for cigarettes. Instead, he tried a one-size-fits-all response – “He’s not advising us on policy or issues and he doesn’t intervene on those” – and laughed “that’s the answer you’re getting” when Marr pressed him to be more specific.

Continue reading "From firmness on internet standards to wobbliness on Crosby – Cameron’s Marr interview" »

15 Jul 2013 11:19:13

The benefits cap goes nationwide today – another reminder that welfare will feature heavily in 2015

By Peter Hoskin
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Rewarding work infographic 14 july 2013

And the word of the day is “cap”, as in “benefits cap”. You might have heard it during Iain Duncan Smith’s growling appearance on the Today Programme earlier, or read it in Grant Shapps’ article for the Daily Telegraph. For today’s the day when the Government extends what is effectively a £26,000-a-year cap on the out-of-work benefits that can be claimed by a single household across the whole country. So far, it’s only applied in four London boroughs.

To mark the occasion, CCHQ has released the infographic at the top of this page. Actually, I say “infographic”, but it’s a more a digital raspberry blown in Labour’s collective face. As we know, and as per the polling that’s available, the Tories think they’re on to a vote-winner with this cap. Hence Shapps’ confidence, in that Telegraph article, that “Labour are miles behind” on welfare. Although, as I’ve said before, he and his colleagues shouldn’t allow that confidence to spill over into callous rhetoric – there’s more to Iain Duncan Smith’s reforms than lazy lines about “scroungers” and “shirkers” admit.

Continue reading "The benefits cap goes nationwide today – another reminder that welfare will feature heavily in 2015" »

13 Jul 2013 08:52:25

Osborne has set off another round of differentiation – who will gain from it?

By Peter Hoskin
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The recent Spending Review was meant to be a united front: a hypothetical overview of how the Tories and Lib the Dems would together manage the public finances in the year after the election. But since it was delivered it’s been differentiation-a-go-go. Not only have we had George Osborne setting out a position on tax and spending that may not sit well with the Lib Dems, but today we also have Vince Cable attacking the Tories in rather scornful terms. “We can avoid,” he’s set to assure a Lib Dem audience in Manchester, “the sort of cuts that Conservative politicians seem all too eager to anticipate.”

This may not be surprising, particularly coming from Cable, but it’s still striking. It suggests – as Harry Phibbs did on ConHome yesterday – just how politically significant Osborne’s little pledge could be, in distancing the Tories from the other two main parties. And it’s also representative of the new normal in Coalitionland. Increasingly, the two partner parties are defining themselves by their differences rather than by what unites them.

Continue reading "Osborne has set off another round of differentiation – who will gain from it? " »

12 Jul 2013 10:13:44

Osborne's tax pledge heralds a class war, 2015 General Election

TaxbombBy Harry Phibbs
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There will be lots of issues at the next election - the Government's record on the economy, welfare reform and public services, the presidential contest between David Cameron and Ed Miliband, the EU in/out referendum (especially if Labour is not offering one.)

However, we can now see that the Chancellor of the Exchequer, George Osborne, will offer the electorate a clear pledge that a Conservative Government would not put up tax.

Naturally Mr Osborne will be quizzed about this. Probably it will be made clear this means no overall increase in tax - some might go up, but only if offset by other tax cuts.

There is also the complication that we are talking about tax revenue rather than tax rates. Mr Osborne's pitch is that enough spending cuts have been identified to gradually restore a balanced budget - that no extra tax will be required. This should still allow cuts in tax rates where this would allow increases in tax revenue. In opposition, Mr Osborne was dismissive of the Laffer Curve - either through scepticism or because he thought putting forward the Conservatives as tax cutters was misguided politically.

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10 Jul 2013 07:20:17

Royal Mail privatisation gets back on track under Michael Fallon's guiding hand

By Mark Wallace
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Pillar BoxToday, the Government - in the person of Vince Cable - will present to the Commons its plans for privatising Royal Mail.

The Royal Mail is one of the last outposts of the state in the service sector. While its competitors in the UK and abroad have been able to innovate, attract private investment to modernise and adapt to the challenges of the digital age, Britain's public sector postal delivery service has struggled. 

There are clear opportunities for the company to grasp - particularly the boom in parcel delivery brought about by the rise in online shopping. But there are still major challenges for a service facing an inevitable decline in letter-writing given the arrival of e-mail.

Interestingly, the Royal Mail sale will involve at least three different markets. As well as selling shares to private investors and offering attractive deals to members of the public, a 10 per cent stake will be given to Royal Mail employees either free or at a sizeable discount. George Osborne will likely be watching closely as he mulls the best way to return the banks to private hands.

Continue reading "Royal Mail privatisation gets back on track under Michael Fallon's guiding hand" »

27 Jun 2013 07:58:57

George Osborne, the best political strategist we've got. (Indeed, the only one we've got.)

By Paul Goodman
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Osborne PenknifeYesterday, Mark Wallace set out in detail on this site George Osborne's patchy record as Chancellor.  Progress on deficit reduction has stalled.  There have been some welcome tax cuts, but little tax simplification.  Big infrastructure decisions have been slow to come, though there may be some good news today about nuclear.  (Patrick McLoughlin takes to this site today to make the case for the money-guzzling HS2 project.)  The proof of the Michael Gove schools and skills pudding will be in the eating, which won't take place for a decade - in other words, until today's generation of children become tomorrow's workers.  Michael Fallon is striving mightily at BIS, but while £4bn of regulatory costs have been eliminated, £3bn of new costs have been imposed in the last two years.

Indeed, the Chancellor has compromised his original version of a German model for Britain's economy (what Tim Montgomerie called in opposition "a heavy emphasis on economic fundamentals like skills, high-end manufacturing, science investment and regionalism") and is staking his hopes on a good, or rather bad, old-fashioned British housing boom - talking of which, today's papers remind us of the possible consequences for Britain's indebted homeowners when the Bank of England abandons quantitative easing.  Why, then, are the centre-right papers - with the exception of the Sun - positive, on the whole, about yesterday's spending review, which announced a mere £11.5 billion of savings: little more than the total Government spend of well over £700 billion?

I think there are three main answers.  First, because the review will have reminded them that there is no alternative to a Cameron-led Conservative Party as a governing force - when it comes to comparing it with Ed Miliband's unreformed and unready Labour Party, at any rate.  Second, because they will have liked most of Osborne's announcements: the cap on the welfare bill, the requirements to learn English, the seven-day wait before signing on, the end to automatic pay rises for millions of public sector workers.  There will be devils in the detail of some of these plans: I'm curious to know, for example, exactly how they will apply to disability benefits.  But the broad thrust of them is right, and they thus have merit regardless of whether or not they place Ed Balls on the wrong side of a dividing line.

Furthermore, the Chancellor got them past the Liberal Democrats and, in doing so, held out a tantalising glimpse of what a majority Conservative Government - or rather, to be realistic, a second blue-yellow Coalition - might look like after 2015.  Very slowly, imperfectly, but unmistakably all the same, Osborne is striving to shape a Conservative idea of Britain, in which Gordon Brown's client state is, if not rolled back, at least trimmed, and in which the state pension, the NHS, science, the security services, free schools and defence (up to a point) are protected.  Rab Butler once agreed with the suggestion that Anthony Eden was "the best Prime Minister we've got".  The Chancellor is not only "the best Chancellor we've got" but the best political strategist the Conservatives have got.

This is certainly a compliment, but less of one than it seems.  For the fact is that Osborne is the only political strategist the Conservatives have got.  None of his Tory Cabinet colleagues quite fit the bill, at least yet.  Iain Duncan Smith's long crusade for social justice has helped to change the climate of opinion about welfare.  Michael Gove is the Government's most effective reformer to date.  Eric Pickles's achievements at CLG are under-rated.  Theresa May is beginning to spell out her view of what the Conservative Party should be and do.  But none of them have produced a big plan that has put Labour on the back foot - and is helping to change the content of national debate about welfare, immigration, integration and public sector pay in a way that was almost unimaginable until very recently.

25 Jun 2013 08:30:15

Married Couples Tax Allowance due in 2015

TelegraphmarriedBy Harry Phibbs
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The Daily Telegraph reports this morning that the Conservative policy of tax relief for marrried couples is back on the agenda. "Tax breaks worth up to £150 to married couples will be written into law by David Cameron before the next election,"  it reports the Tresaury minister  David Gauke as promising.

But when?

The report says that "George Osborne’s Spending Review on Wednesday is unlikely to contain any giveaways to support married couples or stay-at-home mothers."

While "the most likely date for the introduction of the tax relief is April 2015", during the next general election campaign" it was "still possible that ministers could legislate for the change in this parliament and delay its implementation."

The Conservative Manifesto was clear:

We will recognise marriage and civil partnerships in the tax system in the next Parliament. This
will send an important signal that we value couples and the commitment that people make when they get married.

The policy survived the Coalition Agreement with this proviso:

We will also ensure that provision is made for Liberal Democrat MPs to abstain on budget resolutions to introduce transferable tax allowances for married couples without prejudice to the coalition agreement.

There is a view - held by Lib Dem politicians and others - that the state should be neutral about marriage. That is a powerful sentiment. However marriage (or the lack of it) is not neutral on the impact it has on the state or on society. The Centre for Social Justice research finds:

Nearly one in two cohabiting parents split up before their child’s fifth birthday, compared to one in twelve married parents 

Three-quarters of family breakdown affecting young children now involves unmarried parents.

If you have experienced family breakdown, you are 75% more likely to fail at school, 70% more likely to be a drug addict and 50% more likely to have alcohol problems.

The health gain from marriage has been found to be equivalent from giving up smoking.

In any case many feel that tax system at present punishes marriage (unlike most other developed countries.) It especially punishes the traditional family arrangement where the husband goes out to work, often long hours, and his wife stays at home to look after the children. Why should this couple get a smaller tax allowance than if they both worked part time? 

Others will object that people should not get married for love not financial reasons - and scoff that £150 a year should make a difference. Yet when a couple decide to marry they understand that love is not enough, they also need to sort out practical arrangements. Money does come into it. £150 a year might not be much to the rich but it is to the poor. Often it is finance which puts marriages, or the prospect of marriage, under strain.

If the Daily Telegraph report is accurate this issue will be rather topical in the next election campaign. I would suspect that the Conservatives having estalished the principle will promise to go further. Labour and the Lib Dems will oppose it as an old fashioned way of helping smug rich people. Yet in refusing to back marriage in a tangible way it is Labour and the Lib Dems who prove themselves out of touch in helping the vulnerable.

Many Labour and Lib Dem voters back this Conservative policy. In January a YouGov poll found 53% to 36% support for married couples tax allowance. Among Lab voters support is 46% to 44%. Among Lib Dems it was even at 47% for and 47% against.

20 Jun 2013 06:14:53

At last, the prospect of getting some taxpayers' money back for our bank stake

By Mark Wallace
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OsborneAccording to the Chancellor's Mansion House speech, the Lloyds sell-off could start within a few months - with the prospect of a sale of shares to the public following the initial tranche being sold to institutional investors.

There had been calls for all of the shares to be given away to the people in thanks for the huge amounts taxpayers paid for the bank bailout, or for a purely market-focused sale. Instead, George Osborne has sought to strike a compromise between the two.

The rationale for a giveaway was obvious - a rare thank you to taxpayers and a handy pre-election contrast with Labour, who spent their last two years in power passing cash the other way. But it risked being too obvious a bid for votes in return for a freeby.

Continue reading "At last, the prospect of getting some taxpayers' money back for our bank stake" »

17 Jun 2013 08:18:13

Caveat emptor - Boris is not a standard issue Conservative

By Tim Montgomerie
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Boris Johnson is the only Tory politician to have won a major election in more than twenty years. He won in traditionally Labour territory. Twice. Once in the middle of a period of Tory-led austerity. His popularity with the general public is exceptional. The bounce he enjoyed after last summer's Olympics has been sustained according to a ComRes poll in yesterday's Independent on Sunday. He enjoys a favourability rating of 44% compared to Cameron's 23%. In the absence of a compelling alternative the Tories would be making a good bet in choosing Boris as their leader at some unknown point in the future. If the party does ever choose him as its leader it should go into the arrangement with its eyes wide open, however. As I argue in today's Times (£) Boris is typical of a number of centre right politicians who have prospered in normally left-of-centre jurisdictions... and that will upset some Tories.

4 heads

Boris is similar to other centre right politicians who've prospered in left-of-centre cities and states. He shares Arnold Schwarzenegger's relaxed approach to immigration and some of the former California Governator's greenery. Like New York's Giuliani he has the same commitment to abortion rights and full equality for gay people and minorities. Like the interventionist Heseltine - Maggie's minister for Liverpool after the 1980s riots - he favours grands projets. 

Continue reading "Caveat emptor - Boris is not a standard issue Conservative" »

16 Jun 2013 08:32:42

If Cameron is to defuse Leigh's criticisms, he must get on the front foot over renegotiation

By Paul Goodman
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Cynics will say that now Edward Leigh has his knighthood in his pocket (so to speak), he will feel free to be as openly critical of the Government as he likes.  But I think this would be to mis-read the significance of his sweeping dismissal on this site today of the Queen's Speech as "the weakest legislative programme in recent memory", and his warning that "unless there is a change of course, and a firming-up of our Conservative instincts, we could lose the election".  He writes: "A group of like-minded Members of Parliament – the Centre-Right Steering Group – have been coming together in recent weeks to question the path the leadership are taking and to scrutinise their policies".

The steering group brings together some of the main groups on the centre-right of the Party - including Cornerstone and the No Turning Back Group.  It is likely that some of its key members will have been aware of Leigh's article in advance of publication.  And David Cameron is acutely aware that views of his leadership on the Party's centre-right range from the loyally critical to the contemptuously hostile: hence his recent appointment of John Hayes, who co-founded Cornerstone with Leigh, to Downing Street as his Parliamentary Private Secretary.

Signs of economic recovery and of progress in the polls, and attempts by the Prime Minister to reach out to his right (such as the masterminding of James Wharton's EU referendum bill) seem to have done nothing to pacify some of Cameron's critics, for whose grievances he must take some of the blame.  I believe that Leigh is right on some points (same-sex marriage, HS2) and wrong on others (tax and spending).  David Cameron isn't going to tear up his election pledges, and un-ring fence aid and NHS spending.  So to suggest that he does is a waste of breath.

In which case, the economies that Leigh wants - and for which he has such a keen eye in his role as a former Chairman of the Public Accounts Committee - wouldn't be enough to deliver tax cuts on the scale he implies.  The Government would need billions of pounds in savings, not millions - and to find them, it would need drastically to re-think the role of state, along the lines set out by Harry Phibbs set out recently on this site, and pursued by Liam Fox in a recent speech in which he praised our Local Government correspondent.

I am all for such a re-think - ConservativeHome is one of the few centre-right publications to have run a series on how to scale back public spending further - but, when it comes to cutting spending, much of the right is all mouth and no trousers.  All in all, Leigh's worry about "a percentage of our people [peeling] away to the right" is absolutely correct but, if such imagery is to be used, David Cameron must worry no less about the Party's appeal to the centre.  Successful conservative leaders abroad, such as Stephen Harper, appeal to both at the same time.

The leitmotif of this site since it was set up has been that to campaign on such Tory staple issues as tax and Europe is necessary but not sufficent.  To maintain power, it must recognise that most of the seats it needs to win and hold are urban and suburban ones in the midlands and north, where the public sector is larger, selling a scale-back of the state is more difficult, and voters (as they are elsewhere) are at least as concerned about, say the NHS as the EU  - to put it mildly.  Leigh places an electoral stress on the issue that the polling evidence doesn't justify.

But in doing so, he sends an important message to Downing Street.  Only a majority Conservative Government can deliver the In/Out referendum to which David Cameron is committed.  The promise of the latter has satisfied some of the Prime Minister's former critics on the EU who simply want Out.  But it hasn't quelled the appetite of many of his backbenchers for a major renegotiation, and Leigh's views are an eloquent expression of them.  If Cameron delays setting out his own view until late next year, he risks a destabilising row about its scale and ambition during the run-up to an election.  Better for him and everyone else to have it sooner rather than later, rather than let the matter drift through inertia and irresolution.