So, the Chancellor has given his Autumn Statement. Liberal Democrat reaction is likely to be at best mixed. Will people feel that the balance of tax and benefit measures is sufficient to support our claims that we are making the system fairer?
Osborne painted a fairly gloomy economic picture. The growth forecast is under 3% for the next 5 years. Austerity will continue way beyond the next election. It’s in that context that his measures must be judged.
Let’s take a brief look at the key points from a Liberal Democrat activist’s point of view:
The good – Lib Dem gains
Steve Webb’s Pension Triple Lock has ensured a 2.5% rise in the State Pension, more than earnings and inflation.
The tax threshold edges closer towards £10,000 as a further £235 rise is given from next April. In fact, we’re now at the point of no return. Because of legislation passed in the 1970s, I understand that the tax threshold has to rise to £10,000 by 2015. If we push really hard, it might happen before then. The additional rise today was a big surprise.
No removal of Housing Benefit from under 25.
No plan to remove benefits for the third and subsequent child.
Fuel duty rise planned for January cancelled. Environmentalists won’t like it, but it’s the only fair solution for rural areas where you have no choice but to drive because public transport is as good as non existent. I know that some people would put this in the “Bad” section, but I’m a highlander. And so is Danny Alexander. Tim Farron was also very vocal in calling for this measure.
Under Labour, a higher rate tax payer could put £250,000, a cool quarter of a million quid, every year, with tax relief, into their pension fund. Thanks to the Liberal Democrats in the Coalition, that’s been reduced to just £40,000.
Significant resources going into tackling tax avoidance.
Benefits will rise by only 1% for the next 3 years. If the reports in the press were right, the Tories wanted to freeze them. I am not sure cutting the spending power of people who have nothing is justifiable, particularly as higher rate tax payers will get the benefits of the extension of the tax threshold.
The rise in the tax threshold has to be taken with the effective cut in tax credits, which only rise by 1%. Tax credits are payable to poorer people who are in work, so cutting them does not seem to be consistent with the aim of making work pay.
No Mansion Tax. Osborne’s justification, that it would be intrusive, expensive and, get this, might encourage a future chancellor to bring in more properties to its scope, was greeted with Nick Clegg rolling his eyes and grimacing to indicate disagreement.
Departmental budgets cut, but this is to include more digital engagement. That requires technology that many poorer people may not have access to.
I expect many Liberal Democrats will be squirming at the language used by the Chancellor to describe benefit claimants. He talked about people getting up in the morning to go to work, while their neighbour on benefits is in bed. People are bound to feel that this language encourages scapegoating and resentment. It is to be hoped that no Liberal Democrat will use this form of language. Tim Farron has promised that he won’t, but then I wouldn’t have expected it of him anyway. Stephen Williams MP was very categorical on Radio 5 Live today in saying that this was Conservative language, and wasn’t what Liberal Democrats would use. My point is that in a joint Government statement, nobody should be saying these sorts of things.
Other measures in the Statement include:
- a cut in the Corporation Tax famously not paid by large corporations such as Starbucks, Google and Amazon
- action at an international level to try to change the way such corporations pay their taxes
- £3bn extra for schools, roads and infrastructure investment (the Scottish Government will receive £331 million in Barnett Consequentials)
- Ultra fast broadband extended to 12 more cities.
It’s a very mixed bag for Liberal Democrats. What do you think?
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings