David Laws, the Lib Dem chief secretary to the treasury, and the guy tasked with finding the public spending cuts in the years ahead, has just emailed Lib Dem supporters to outline his apporach to the task which awaits the new coalition government:
Dear Friend,
My Labour predecessor, Liam Byrne, left me a note saying ‘Dear Chief Secretary, There’s no money left.’ He may claim this is joke, but sadly it is all too true.
Labour have left the nation’s finances in an utterly ruinous state and we face a colossal task ahead of us. That is why today the Chancellor and I announced the creation of the Office of Budget Responsibility as well as the date for the emergency budget in six weeks time on 22nd June.
It is also why over the next week I will be working to identify £6bn of wasteful government spending that we can save in order to start to pay down the disastrous deficit left to us by Labour.
In addition to this, every new spending commitment and pilot project signed off by Labour ministers since the turn of the year will be individually reviewed in a bid to find additional savings. This is simply due diligence by the new coalition government in relation to some of the irresponsible decisions we have inherited.
I would like to give you my personal guarantee that whilst the decisions ahead will be tough I will always put social justice at their heart. I have, and I will continue to reject any proposals which would damage key services or put at risk those on lower incomes.
This is not merely a coalition of competent accountants. The challenge we face is how to address the deficit while protecting the quality of key services, making this a fairer country and ensuring that those on the lowest incomes are protected as far as possible from the actions that are necessary.
This will not be easy. But there is more chance of it being achieved with Lib Dem presence in HM Treasury than without it.
Best wishes,
David Laws MP
Chief Secretary to the Treasury
The Guardian’s Nicholas Watt has pursued the question, rightly asked this week of Lib Dems, about how the party can square the coalition government’s public spending cutting agenda with Vince Cable’s clear warnings before the election that to cut too soon in the way the Tories were suggesting would jeopardise the economic recovery.
Well worth reading in full the short article, but here’s the answer David Laws gave:
We were very clear that as soon as we were confident that the economy was growing again, and it was safe to start bringing down the deficit, we should start doing so.
What has changed our mind is not just about the compromises you have to make if you are working in coalition … but also the clear advice we have seen from the Bank of England and the Treasury that it would be responsible and safe to make this judgment without risking the economic recovery which is currently under way.
The second thing – to be frank – is the circumstances in the markets over the last few months where there has been a great degree of instability, where that has been contagious, spreading to other countries and where there has been a real concern that if the UK didn’t take early credible action then some of that contagion could spread to these shores. I think the action we are now taking will help to ensure there is credibility in the UK and will help to protect our economy.
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The Social Market Foundation (SMF) has welcomed today’s announcement by Chancellor George Osborne that he will hand responsibility for producing official fiscal projections to an independent statutory body. These plans are in line with SMF proposals published in December 2009. The new Office for Budgetary Responsibility (OBR) will have significantly more power and independence than when it was originally proposed by the Conservatives, and this evolution of the idea is welcome. But the government should go further to make the new body truly independent and authoritative.
Commenting SMF Director Ian Mulheirn said:
“The Conservatives’ original plan was for the OBR to scrutinise Treasury projections. I welcome the fact that the Chancellor has gone further and handed responsibility for the entire process of fiscal projection making to this new body. We argued that this was a necessary step for people to have confidence that government is not fiddling the figures. But we should still go further – the OBR will be still be staffed by civil servants within the Treasury who work for their ministers. What we need is an entirely independent body – just like the Office for National Statistics.”
The Conservatives originally wanted to find £6bn of cuts this year in order to stop the rise in National Insurance Contributions – and the Liberal Democrats attacked them for it. Now, the Conservatives are no longer committed to stopping the whole of the rise in NICs – they want to raise income tax thresholds instead (although not as far as the Lib Dems wanted to).
Since £6bn was originally given as the amount needed to pay for a policy which the Lib Dems opposed and have now managed to persuade the Conservatives to drop, could David Laws explain why the figure has been retained. It looks very arbitrary now.
(The Mark at comment 2 is not the same Mark as the Mark at comment 1. I’m the Mark at comment 2. Sorry.)
It didn’t take long for David Laws to become a Tory clone, backing Tory manifesto and policy. What a smug, self-serving and unprincipled person and without a sense of humour too. Not attractive.
Not all Lib Dems have advocated against earlier cuts, it was the membership who spoke against this when Nick Clegg called for savage cuts last year, and party members and MPs are entitled to their own views based on ideals and expertise.
Laws has also spoken for this ever since the negotiations began – Having now seen the actual spending plans left behind by Labour, I suspect has cemented his conviction.
‘Whilst the decisions ahead will be tough I will always put social justice at their heart’
What kind of social justice is it that increases the workers’ National Insurance Contributions but exempts the employers from increases and pays for their exemptions with cuts in public expenditure that will produce massive unemployment? Laws is already beginning to sound like every other Tory Pecksniff.
“What kind of social justice is it that increases the workers’ National Insurance Contributions but exempts the employers from increases…..?” Sorry Mack, but as an employer and a Liberal Democrat I thought the Tories had it right on this one – increasing the employer’s NI Contribution is a tax on jobs. I have struggled for the past two and a half years to keep my workforce intact in a situation where our liquidity has been eroded to less than zero and the bank hasn’t been any help. The last thing that I need right now is the cost of employing people made more expensive, so spare me the class war stuff. By the way, I pay national insurance as well.
these will always be Labours cuts, just as they left the instruction note – the money has run out (a long time ago)!
This contains an explanation from Laws: http://johnrentoul.independentminds.livejournal.com/400447.html
Saw this in the Guardian today:
http://www.guardian.co.uk/commentisfree/2010/may/17/keynes-danger-deficit-reduction
In the context of what has happened in Greece it’s understandable that there is a huge fear of the deficit, but cutting deeply and quickly is a huge decision. I hope to hell that this is being driven by balanced reasoning and not ideology. If they make the wrong call the consequences could be very long-lasting. Look what happened to Japan
‘So spare me the class war stuff.’
Of course you pay NICs too, Tonyhill, but if the perception of public sector workers is that they are the ones who are going to have to fund the the debt reduction through increased National Insurance Contributions and massive public sector cuts to their employment while bosses are perceived to get off scott free then class antagonisms will only intensify. If all those powerful businessmen who had publicly opposed the NIC increase before the election had been prepared to shoulder their reponsibilities and accept the increases they could have avoided the huge collapse in demand which is certain to come when the purchasing power of public sector workers collapses too quickly. If the private sector wanted to maintain stable demand it should have accepted the NICs increase on employers and persuaded the Tories to halve the deficit over the lifetime of the parliament. Despite the Tories’ ideologically generated scaremongering, this country is not in the same position as Greece.
P.S.
Osborne, before the election was very fond of saying ‘we’re all in this together. Doesn’t look like it now.
Personally, I think that this is definitely the most sensible approach:
http://www.independent.co.uk/opinion/leading-articles/leading-article-proceed-with-caution-1975106.html
I once held the view that Liberals, looking at life from their comfortable cerebral homes, were really soft-hearted Tories. Clegg and his gang have proved it to be true. Once again the poor are alone and its every man for himself, an age old Tory belief.
Mack, I don’t understand who you think pays for the employer’s national insurance. As an employee of my limited company I will pay any increase in national insurance on employees just like anyone else who works for the company. As an employer, any increase in the employer’s national insurance comes out of the companies profits. In the current economic situation there aren’t any profits, so that means the company makes a bigger loss and helps to drive it to insolvency. If that were to happen we all lose our jobs. Given that taxes need to rise and expenditure needs to fall it seems to me to be a better solution that we all pay more tax. Sure, there is a core of extremely wealthy people in this country, many of whom are no doubt Osborne’s chums, so “We are all in this together” coming from him is cobblers, but lower down the economic scale, where the vast majority of employers and employees are, we really are all in it together.
OK. Social Justice is it? Is there anyone keeping a log of anti-cut demonstrations so we can check?
Claire: don’t forget to add to the list the quicker and more generous increase in the state pension that the coalition agreement includes compared to what Labour had in their manifesto 🙂
“It didn’t take long for David Laws to become a Tory clone”
But surely this isn’t anything that’s happened recently? Reportedly, George Osborne offered David Laws a seat in the (Tory) shadow cabinet more than three years ago. Surely it shouldn’t be any surprise to see them working so closely together now:
http://news.bbc.co.uk/1/hi/uk_politics/6485101.stm
What’s the hysteria for?
Labour clusterbombed Iraq, then clusterbombed our national economy, shredding our ancient civil liberties in the process (e.g. the right to protest about Iraq and our national economy being clusterbombed). Now unfortunately we have to pay for it all. Send the bill to Tony Blair and Gordon Brown.
This is no ideological “Toryism”, nor is it a sell out of Liberal or Social Democratic principles, it’s just dire necessity, indeed the Liberal Democrat presence should assure that the costs will be born by those most able to bear them and not by those least able to.
An end to this economic experiment in Brownism has been called by the people; it must never be repeated, but first it must be flushed away. If the Lib Dems ever achieved their goal of a written constitution, I would hope that it would contain a clause requiring expenditure to be matched by taxation, or for deficits to be limited both in quantity and time.
Tonyhill, I was conscious that my remarks were becoming a monologue which is why I didn’t mention small businesses. I do understand the distinction between employer and employee contribution rates and the fact that employers’ extra contributions have to come out of profits but it must be said that not even all small businesses are unprofitable and in certain cases losses can be carried forward. However, please don’t think me intolerant and unsympathetic to your difficulties and the threat to your workers’ jobs. I certainly agree that down the economic scale we really are all in it together. If Labour had been returned and the NIC increase levied on all employers, I would have argued for a partial levy, a taper or deferment for unprofitable small enterprises or those small businesses employing less than a certain number of workers until our emergence from recession had strengthened. However, I do think it makes sense to levy the full NIC increase on those companies which are making huge profits instead of exempting them and paying for the exemption with premature, draconian cuts and public sector unemployment which will drastically reduce demand. That would be the real ‘tax’on jobs, to put it crudely. The issue between us is whether to address the deficit through taxation or NIC increases. But increases in personal taxation and VAT increases plus public sector cuts would surely reduce demand even further. This is what happened under Thatcher and I find it incomprehensible that the Lib Dems have entered into a coalition with a Tory party that is ideologically committed to pure free market economics and subscribes to the notion that unprofitable enterprises should go to the wall. Remember, the Tories opposed the bail out of Northern Rock and RBS. Now, supported by the Lib Dems, the Tories want to abolish Regional Development Councils. Recently, a small company in Hull which employed hundreds of workers and faced insolvency was supported by the local RDC for a period and is now trading healthily. Surely, this is the way forward? I don’t want to see a return to the eighties. That’s why I am arguing, as Vince Cable once appeared to be, that to achieve social justice the deficit should be addressed with moderation.
Can we presume that LibDems have now abandoned the general right of privacy with regard to private correspondence. Even I’m surprised at how quickly LibDems are dropping their liberal principles.
toryboysnevergrowup – Ouch!