Posts Tagged cuts

Fairy tales on the economy

The tooth fairy of the cutsThe Tories are making progress with their arguments over the economy. The message has trickled down even to primary school children. Yesterday, six year old Niamh Riley offered David Cameron her tooth fairy money after hearing about the country’s economic situation.

I heard about it and I wanted to write a letter. I wanted him to get the letter with the pound to make the country better and pay for jobs.

Is there a better way to sum up Tory economics than this? David Cameron, the personification of the vested interests of the rich, telling us the cuts must come first and taking money directly from children.

Actually, he rejected the pound, but that seems pretty inconsistent given this week’s assault on child benefit.

Jeff’s made the case here that their move is a good idea, despite the widely shared concerns about the fairness of the specific proposal. Don Paskini, one of Labour’s brightest bloggers, has argued that the winning tactics for Ed Miliband would be to tackle the specifics and accept the principle. Tactically, perhaps, but on the principle I disagree with both, however progressive it may appear to being taking money away from the well off.

I’ve got four reasons for this position, even assuming the specifics are sorted out. First, means testing is inherently expensive. The savings will be partially offset by the cost of paying civil servants to work out who shouldn’t get child benefit. Second, child benefit gives a massive swathe of society a buy-in to benefits. It’s an incredibly powerful message, that benefits aren’t simply for the “others”, the people they read about in the Mail with their massive taxpayer-funded houses.

Next, although some have used child benefit for fine dining or other decadence, many find their partner gambling or drinking away money that they need for childcare, and that’s not just driven by class or income level. Some parents with partners on bigger incomes are in exactly the same position, and child benefit gets a little way past that problem.

Finally, it doesn’t look like the result of any considered and comprehensive policy on the public finances. A responsible government would look at the debt, current spending and current revenues, and start to prioritise. What are the most vital or cost-effective parts of our public services? What are the most progressive ways to raise funds? What will the economic impact be of cutting staff numbers at a particular rate, or of raising additional funds in a certain way?

They should be identifying the most obvious waste – like vast defence boondoggles and the damaging Afghan war – and cutting them first. Child benefit for anyone simply isn’t anywhere near the cut-off on that list, , even those on the civil list (who perhaps for equity should also also have a £26k limit on their income). Next, they should be looking at the most progressive ways to raise more money without damaging the economy, starting with taxing banks and bankers’ bonuses, or looking at (bear with me) Land Value Tax. Again, increasing VAT shouldn’t have featured there. As the Lib Dems told us before the election, it’s one of the most regressive taxes going.

That information should then have been plugged into projections about the deficit to estimate the optimum approach for tackling it. One thing the Tories are right about is this: paying ever-increasing interest on the national debt isn’t a good long-term use of taxpayers’ money. At the end of a long bubble like Labour’s property/cheap oil boom the national finances ought to have been in credit, which would have made it easier to invest in the lean years as Keynes knew. Leaving those regrets aside, though, can the cost-cutting and revenue options there allow deficit reduction now? Probably not without incurring other social costs too high to bear. More likely in a year or two, probably, but it’s hard to say without all this information being provided.

We should have been shown a review of this sort, a Domesday book of the British public finances. It’s a big job, sure, but if that’s not what the Treasury is for, then what really is its purpose? Telling tall tales to children?

Tags: , , ,

Will the Lib Dems pay for being a Tory shield?

On MitB, I regularly whacked the Lib Dems for everything I could think of.  But given we’ve started afresh, with a blank canvas and a promise of positivity, that has to stop.  Which is a shame – there isn’t much more fun in the blogosphere than baiting Lib Dems.  Nevertheless, I’ll try to get through a post without dissing them too much.

I think one of the most surprising things that came out of the Conservative-Lib Dem coalition was, for me, the fact that the Lib Dems took on the role of Secretary of State for Scotland.  I was a little surprised that they didn’t give it to Alastair Carmichael, who acted as Scotland spokesperson during the election debates (and, in my mind, was a very able performer, even – and I don’t think its unfair to say – outshining Alex Salmond in the event at the Hub) when they did get the position.  More surprised that they gave it to Danny Alexander, and then Michael Moore after Alexander’s move to the Treasury, but then I don’t know that much about internal Lib Dem personalities and cliques.

Anyway, I was more surprised that they took on the role – though I guess the Conservatives didn’t really give them much of a choice (with only one MP in Scotland, the role was probably odds-on to go to a Lib Dem).  For me, the Conservatives must be delighted with this – and the fact that they have a Lib Dem in the Treasury too – for the simple reason that, although the policies that are being enacted (and for “policies” read “cuts”) are pretty much Tory ones, they can point to the Lib Dems and say it is them who is doing it.  In essence what Scotland has is a Lib Dem “Governor General” who fronts for the Tories in Scotland – providing a shield for them and their unpopular cuts up here.  The Tories must be delighted.

But… I said I’d be positive, so here’s something:  I can understand why they took the job.  I think pre-Nick Clegg and the TV debates, the Lib Dem vote was in free-fall.  There were some polls in which they had fallen below 15% nationally – and, indeed, they were squeezed out of the Lab-SNP and Con-Lab narratives in Scotland.  The Clegg effect kept them at 2005 levels.  But because of the two narratives here, they do need a handle on why they remain relevant in Scotland – and I think the fact they have the Secretary of State for Scotland gives them that opportunity.  Now it may be that relevance is symbolic – that Michael Moore can say what he likes in the Cabinet room and no one will really listen – but it does look to the public like they have a role to play.  And that, in elections, is important.

So yes, on the surface, having a Lib Dem Secretary of State for Scotland gives the Tories a nice shield in Scotland.  But on the other hand, it also delivers something for the Lib Dems too – a measure of relevance (which, arguably – and I’m sure you’ll debate the point – they may not have without it).  Everyone’s a winner.

But what about the voters?  Will they see it the same way?  “The Lib Dems have the guy running Scotland in the Cabinet, therefore we must vote for them” is one way they could look at it.  Alternatively, the “Lib Dem Scottish Secretary is a front for Tory cuts in Scotland – we must punish them by voting against them” is another potential view.  So how will that go?  I guess time – and the full force of the cuts – will tell.

Tags: , ,