Danny Alexander MP writes… Budget 2013: putting Liberal Democrat principles into practice

Today’s Budget delivers Liberal Democrat policies to help families with the cost of living and invest in the future of our economy, while making responsible choices to deal with the financial problems Labour left us with.

The announcement that the Coalition will increase the personal allowance to £10,000-one year ahead of schedule-is a huge victory for the Liberal Democrats. At the last General Election, we made big tax cuts for people on low and middle incomes the centre piece of our manifesto. We have delivered that promise-helping deliver a strong economy in a fairer society, so everyone can get on in life.

The increase of £560 is worth an extra £112 to 24.5 million working people – giving a total income tax cut for working people by April 14 of £700. Our tax cut also means that by April 2014, we will have lifted 2.7million on the poorest incomes out of income tax altogether. We have also scrapped another of Labour’s fuel duty rises, so filling up your car will be £7 cheaper than under Labour’s plans.

Today’s Budget also delivers on other long held Liberal Democrat ideas that will help families with the cost of living. Yesterday, Deputy Prime Minister, Nick Clegg, announced plans for parents to get up to £1200 off the cost of childcare for each child. Steve Webb’s Single Tier Pension will now be introduced a year earlier in April 2016. Hundreds of thousands more people, including a number of those women affected by the increase in the State Pension age to 66, will now benefit from getting a single, simple pension above the means test. We’re also bringing forward by a year Andrew Dilnot’s proposals, championed by Norman Lamb and Paul Burstow, to bring an end to unlimited social care costs by introducing a cap on reasonable costs of £72,000 from April 2016.

We’re taking the necessary steps to invest in our economy by supporting house building now and providing a £3billion a year boost to capital spending from 2015-16. Our announcement of a £5.3billion housing package demonstrates the Coalition’s commitment to building our way to growth by delivering more support for home ownership and affordable housing that will deliver a much needed boost to housing supply and make the dream of home ownership a reality for as many households as possible. During this Parliament and the next, we will be investing a greater share of our national wealth on infrastructure than the last Labour Government. Vince Cable’s Industrial Strategy has also been given £1.6billion to support strategies in 11 key sectors. From this fund, the Aerospace Technology Institute, which was launched earlier in the week by Nick and Vince will provide a total of £2.1bn of R&D support over 7 years.

We’re doing all of this while sticking to our tough but necessary plan to deal with this country’s financial problems. Britain can’t afford unfunded giveaways – unlike the last Labour government, we have made sure everything is paid for.

Cracking down on corporation tax loopholes, new tax agreements with Jersey and Guernsey, and plans to tackle off-shore pay agents will raise over £4.6billion in new revenue over the next five years and protect against over £1.5billion that would be otherwise be lost. We will also save nearly £2.5billion over the next two years from departmental budgets to recycle into more productive capital spending after many departments generated bigger underspends than usual. Health, overseas aid, and the schools budget will all be exempted. The road to recovery is longer than we had hoped, but it remains the right road. This budget demonstrates that we will be unflinching but not unthinking. We are sticking to the plan to reduce the deficit, but we will not chase targets.

After campaigning for decades to build a stronger economy in a fairer society, Liberal Democrats should be proud that this Budget is putting those principles into practice.

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14 Comments

  • Bill le Breton 20th Mar '13 - 5:46pm

    I do not wish to be mean spirited but some deckchairs have been rearranged into some better positions … but there’s still that iceberg up there. The team on the bridge are still yelling there is no alternative as the wall of ice speeds closer.

    This budget offers the country a very, very slow recovery – with the added uncertainty that the system remains in place that could squash it almost as soon as it has started if the hawks on the MPC get their way. That is a dereliction of our responsibility to the British public to provide growth and opportunity.

    If offers the Party the pleasure of going to the electorate in 2015 with the economy set to grow by less than 4% in nominal terms according to the OBR (i.e. not adjusted for inflation of 3%???) That is a cavalier gamble with the reputation of a Party which has its roots in several hundred years of history.

    It maybe that the electorate in 2015 will see an expansion of the economy in real terms from 0.6% growth to 1% growth as a sign of progress. But such a policy of despair is so many, many life chances lost.

    We knew we’d get continued fiscal austerity, but we were told we’d get aggressive monetary policy. However, that OBR forecast for anaemic NGDP growth, the rise in the pound confirms that monetary policy will still be too cautious, too tight.

    We funked the opportunity to set the Bank a level target for NGDP growth of 5% for the remainder of the life of this Government. Instead we have given our brand new Governor of the Bank of England a halter round his neck at the other end of which are a set of jubilant MPC hawks. http://cdn.hm-treasury.gov.uk/ukecon_mon_policy_framework.pdf

    This is an alternative.

  • Why aren’t you chasing targets? Perhaps because you don’t want more egg on your face…

    My family has swallowed pay freezes, service cuts, increased pension contributions, uni fees for my daughter, redundancy for family members ….. all apparently in the interest of clearing the deficit by 2015…. but apparently targets don’t matter any more. It seems this government sets great store by such targets – wasn’t the coalition set up to avoid market panic and subsequent credit down rating? – until the targets are missed in which case they don’t seem to matter any more. So glad we took the hit for the greater good.

  • @ Bill le Breton

    “This budget offers the country a very, very slow recovery”

    And you think there was ever a “quick recovery” on offer? Sorry, but that was always a pipe dream. Will all the stuff that happened in the run up to 2008 that was never going to happen. Look at even the best run countries like Germany. They are in recession. Even the US is growing very slowly when you take off the effects of population growth.

    @Simon
    “My family has swallowed pay freezes, service cuts, increased pension contributions, uni fees for my daughter, redundancy for family members ….. all apparently in the interest of clearing the deficit by 2015…. but apparently targets don’t matter any more.”

    Everyone is hurting. Everyone is peed off. The problem is, just applying a big sticking plaster of even greater government borrowing isn’t going to solve the UK’s difficulties, much as we would like it to. The only thing we can do is shift around what we spend government money on to make it more effective. This is what the budget was about, and I believe it does take us at least some way in the right direction.

  • @RC
    Yes i suppose one could say “we’re all in it together”

    Perhaps my point was too oblique for you so I’ll make it again in another way …. It is galling in the extreme to hear politicians announce measures that have such a detrimental affect on our living standards in order that we ‘hard working ordinary families’ make sacrifices in the pursuit of apparently vital targets (clearing the deficit, keeping credit ratings) only to be told a couple of years later that apparently such targets are no longer of much importance.

  • I can’t get worked up about this budget, the Labour deficit shambles was always going to take forever to clear up, and the Eurozone chaos makes it hard for business. Labour remains otiose, which is why their budget response was a personal attack on the Chancellor – and since the Standard leaked the detail early, the old argument that there wasn’t time to digest the detail won’t cut it thisntime.

    Whilst I am glad that the £10k tax threshold will arrive ‘early ‘ I think that Danny’s view that it is agreat victory for the LDs probably only really extends wihin the westminster bubble.

  • Bill le Breton 20th Mar '13 - 7:44pm

    RC, What drives the economy? Nominal spending. Who controls nominal spending? The Central Bank. What does the OBR say nominal spending will be in 2015? The recovery is slow, slow, slow because of the Bank’s timidity and that has just been reinforced in the review of the framework I linked to above.

    The contrast between the feeble vision for monetary policy stemming from the Quad via the Chancellor this afternoon and Bernanke’s press conference this evening says it all: $85 billion a month until he hits his growth target.

    Until we give monetary policy a l’outrance an opportunity we shall never know what is possible. You can’t go very fast or very far with the handbrake on!

  • “Who controls nominal spending? The Central Bank”

    You really need to give up on this obsession with nominal GDP. If inflation is high, all of the nominal GDP growth disappears in price rises, with no output growth. That is a large part of our problem. Household real income and purchasing power aren’t rising because of high inflation due to imported energy and food price rises.

    You can’t control the output of an economy by forcing up nominal GDP arbitrarily. It just doesn’t work like that. Look, not wanting to boast, but I’ve got an economics degree from Cambridge and I’m telling you that you can’t.

  • Danny doesn’t say anything about Liberal Democrat principles in his article. Therefore the headline is misleading. There is a difference between Liberal Democrat policies and liberal democrat principles. I have always supported increasing the personal allowance rather than cutting the rate of income tax but not really thought about why this might arise from liberal democrat principles. Maybe this fits into our principles because it has to do with fairness (equality, the freedom that comes with more money) and a progressive tax system because once you earn above the increased personal allowance everyone get the same amount of tax cut. Those earning more do not gain more and the value of the cut is more for those earning less because it is a greater proportion of their salary. However now we need to increase it to the minimum wage level and do the same for National Insurance.

    Danny may be correct and helping families with the cost of childcare is a long held Liberal Democrat view. However I don’t believe it has anything to do with liberal principles because we should not be subsidizing wages. The Tories and Labour may support that but we don’t. We believe in controlling power and not helping it. Also this help extends to those earning £300,000 p.a. We should not be giving help to people who do not really need it especially when we are cutting benefit payments (in real terms) to those on much lower incomes. There is no fairness is those policies being carried out at the same time.

    I am not sure that if this was a Liberal Democrat government we would be helping people buy houses rather than using the money to build houses for rent which is the area of the housing market in most need and which would stimulate the economy more directly.

  • Bill le Breton 21st Mar '13 - 9:55am

    RC you continue to believe that the shorty run aggregate supply curve is identical to the long run aggregate supply curve. The OBR Report has new things to say about the output gap and the size of the structural deficit.

    It is clear that HMG wants its new Governor to raise nominal income and believes that its change to the regime – to a Bernanke/Evans Rule type regime – gives Carney sufficient scope. My argument is that Bernanke can rely (as he did yesterday) on the support of ten out of his eleven colleagues.

    Carney will have the task of arriving at the Bank with huge changes in structure to oversee + a monetary policy regime so lacking in clarity that there is enormous potential for inflation hawks (like you) to hold him back. Even the conservative King could only muster two other votes for further stimulus last month.

    The Quad lacked the moral and political courage to make the decision for Carney (as he had requested) – delaying the potential for monetary policy to do the ‘heavy lifting’.

  • A Social Liberal 21st Mar '13 - 3:07pm

    What does a family on the minimum wage care for the childcare allowances this budget has promised? According Barnados it will not help at all after the shift to the universal benefit. I fail to see how this is a Liberal act since it benefits the vulnerable not at all.

    I do welcome the raise in the personal allowance, I argued for this on the doorstep and still support it now. But it is the only part of the budget that is Liberal. How are the mortgage promises going to allow the poverty stricken? How is a loan for the deposit on a house going to help them? At the same time as those who can afford to buy houses are being offered the afore mentioned breaks, the vulnerable face having their children forced to share bedrooms, being forced to move from the homes they have loved (if not owned) and even being removed from the areas they have lived in all their lives.

    I turn to shale gas. How is support for such a contraversial way of gaining energy Liberal? There is evidence that this way of exploiting the land can contaminate the water table. If fracking goes ahead and the water table suffers then it will destroy vast areas of Lancashire and Yorkshire. Of course, if the Liberal policy of decision making being carried out at regional level were followed then fracking would not happen. Indeed, if the coalition policy of Localism were nothing more than mealy mouthed words then planning permission would never be given. But neither policy is in place and so unfortunately this disgraceful extraction method will soon begin, no matter for the consequences.

  • Richard Harris 22nd Mar '13 - 12:35pm

    @RC
    “everyone is hurting”.
    So incorrect it’s just laughable.

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