Opinion: Genuine progressives should suggest cuts

When I think of the coming spending review, I’m reminded of a migraine I had last year, which continued, not for days, but months. These cuts will hurt, and they’ll last for years. But it’s one thing to acknowledge that the cuts will be excruciatingly painful, it’s quite another to treat any cut as right-wing and regressive.

Continuing to borrow more and more isn’t progressive, it’s deeply selfish. Every year we delay cutting, compound interest racks up our debt, and we leave a bigger deficit and deeper cuts to the future.

Some economists argue that, to help the recovery, we should delay, and reduce the deficit more slowly. Others think the opposite. But neither opinion is left-wing or right-wing. While I’d prefer the deficit to be sorted out over six years rather than four, slowing the cuts down won’t mean fewer cuts, it’ll just leave the pain till later.

And if delay means we hit a future crisis with our finances still in a mess, the country won’t have the option of a stimulus package, and we’ll bequeath the future a far worse situation than we’re facing now.

A lot of state spending is geared towards helping the poor, so significant cuts are bound to hurt them. The challenge for progressives is not to eliminate the pain for the poor, but reduce it where we can.

There are some measures that a progressive Lib Dem would prefer, such as a review of Trident. The Lib Dems can hold their heads high that they took the political risk of proposing this sensible policy. That it won’t happen in a balanced parliament is not our fault, but because Labour and the Tories would stop it.

For myself, I’d like to pay for the raising of tax allowances by raising income tax. But the Tories wouldn’t allow it, and, seeing that Labour cut income tax during their 13 years, and their manifesto promised not to raise it, they would not either.

Some policies, which sound progressive, would make life worse for the poor, not better. Raising taxes on high earners sounds painless, but if this results in less tax revenue and more unemployment, then it will hurt the poor, not help them. The last thing a progressive should want is smaller tax revenues which lead to even deeper cuts.

There are some policies Labour might agree to, but the Tories won’t allow. For example, employee’s national insurance is income tax by another name. Labour raised it to get around their commitment not to raise income tax. Maybe, under a Lab/Lib Dem coalition, a further small rise might have been possible. But we have to deal with the present parliamentary arithmetic, not the parliament we might prefer.

Some policies which appear to be regressive, aren’t. Raising VAT was embarrassing for the Lib Dems. But the commonly held belief that VAT is regressive is a myth. VAT isn’t as progressive as income tax, but it’s much better than council tax, the taxes on tobacco and alcohol, and many other taxes which have gone up in the last 13 years.

Some progressives are tempted by taxes on businesses. But if businesses are too heavily taxed, some will move abroad, which will lead to higher unemployment. We need to be very careful that tax policy doesn’t lead to more people in poverty.

On the face of it, employer’s national insurance is a more progressive tax than employee’s national insurance: make the rich owners of business pay more, and spare the employees. In fact, we should do the opposite. When there are very high levels of unemployment, we should encourage wage reductions, so that there are fewer redundancies. Taxing employers for the wages they pay keeps the wages the same, but reduces the money available to employ as many people. Arguably, progressives should campaign for employer’s national insurance to be cut.

Although the specific measures announced in the emergency budget have received a lot of publicity, the plans for the spending review were much more important. They involve much larger sums of money.

The biggest cuts will fall on welfare, and here we have a real dilemma. On the one hand, cutting middle class welfare sounds progressive. But many on the left fear that, if those benefits are reduced, then political support for the welfare state will be undermined.

But how can we resist cuts to middle class welfare, if the alternative is cuts to the benefits of the poor? Perhaps some readers of Lib DemVoice have opinions on this.

There is a great deal of political support for public services which the middle classes use, such as health and education. Progressives should instead champion the spending which doesn’t benefit the affluent, but which is vital for the poor, such as social services and benefits for the unwaged.

Too much of the debate about public services assumes that we can afford the best. At a time when public finances are in crisis, gold-plated services in one area mean severe cuts elsewhere. For this reason, I regard the ring-fencing of the NHS budget as a terrible decision. It may be politically impossible for Cameron to break his election pledge. But if there are ways to reduce its impact, perhaps by using NHS money to fund some health-related areas of social services, then progressives should encourage this, and denounce those who might try to make political capital from it.

Many of the new regulations introduced by Labour in the last 13 years were done for the best of motives. But each regulation carries an administrative cost, both for the state, and for the rest of society, particularly small businesses. If that cost leads to those businesses employing fewer people, and to government administrative spending which could otherwise be diverted to more progressive work, then should we look again at some of those regulations?

One pound in four of public spending is borrowed, so severe cuts are inevitable. If progressives argue that everything should be protected equally, we are copping out of the debate. Nor should we assume that the Conservatives will refuse to listen to progressive arguments. Cameron’s rhetoric has been that the affluent should bear the bigger burden.  The last thing he wants is for his party to be stuck with the nasty party image.

Progressives shouldn’t carp from the sidelines. If anyone is vehemently opposed to a policy, they should speak out, but if they refuse to acknowledge the funding crisis and the horrendous dilemmas this government faces, they will appear to be in denial, or dishonestly scoring political points.

To help protect the poor, we need to start thinking, and speaking out, about alternatives. It’ll be hard. We’ll get abuse from others who claim to be progressive. But it’s the best way to influence the debate and the direction of government policy.

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124 Comments

  • This whole “progressive” stuff is starting to get stale.

    You can justify any action as long as you use the utterly meaningless term “progressive” in the definition.

    It’s like prefixing Labour with “New”.

  • Anthony Aloysius St 19th Jul '10 - 1:09pm

    “Raising VAT was embarrassing for the Lib Dems. But the commonly held belief that VAT is regressive is a myth.”

    You still give credence to that, after the IFS told you how inaccurate their data were? Amazing.

  • VAT is a regressive tax. In this sense it is in reference to the economic term of a regressive tax, the tax does not increase as the taxable base increases so it is most definitely not a progressive tax.

    I have to agree with Ian at the moment, the term progressive is being bounded about so much at the moment that it has entirely lost its meaning. In the past it was used to refer to a movement for political reform. But it is now used by the Labour party as an alternative for socialism because they seem scared to use “that” term.

  • Andrew Suffield 19th Jul '10 - 1:32pm

    In this sense it is in reference to the economic term of a regressive tax, the tax does not increase as the taxable base increases so it is most definitely not a progressive tax.

    Firstly: a tax that is “not progressive” does not have to be regressive. It can be neutral with respect to wealth. A regressive tax is one where rich people pay less than poor people, which VAT certainly doesn’t do.

    Secondly: VAT does increase with expenditure, due to the exemptions. It’s mild compared to income tax, but it’s there.

    Overall, VAT is more or less evenly distributed with respect to wealth. Which is obviously neither good nor bad.

    You still give credence to that, after the IFS told you how inaccurate their data were?

    You trumpeted that report until it was clear that it didn’t support your prejudice, so now you’ve switched to trashing it. Have you considered going into politics?

  • ROB STEVENS 19th Jul '10 - 1:40pm

    In the late summer the new Labour leadership will lead this campaign and put forward the arguments which the LD side of the coalition- if they were indeed ‘progressive’- should already be putting themselves.

    The silence on behalf of the yellow side of the coalition (notwithstanding Simons best efforts which have thus far come to nothing) is deafening and damaging.

    Oh and on VAT take another look at the IFS report as just a start: plenty of other economists out there who go even further in their ‘condemnation’ (no pun intended) then the IFS do.

  • Andrea Gill 19th Jul '10 - 1:43pm

    “In the late summer the new Labour leadership will lead this campaign and put forward the arguments which the LD side of the coalition- if they were indeed ‘progressive’- should already be putting themselves.”

    Thanks for that laugh. “See no deficit, hear no deficit, speak no deficit” is all Labour are capable of carping on about & it would be shameful to side with them in their denial.

  • Anthony Aloysius St 19th Jul '10 - 1:45pm

    Andrew

    “You trumpeted that report until it was clear that it didn’t support your prejudice, so now you’ve switched to trashing it. Have you considered going into politics?”

    Oh dear, oh dear. Haven’t you already posted enough falsehoods on this subject?

    What I pointed out about the IFS work was that:

    (1) On the conventional classification of households by income, it showed the effect of raising VAT, expressed as a proportion of income, was regressive – just as expected.

    (2) On the alternative classification by expenditure, the data had the very strange property that in the “poorest” decile, income was on average 200% greater than expenditure! George Kendall emailed the IFS to ask why this was, and they replied that it “is likely to be due to measurement error and/or because they happen to have very low expenditure in a particular week in a way which might not reflect consumption”.
    https://www.libdemvoice.org/opinion-making-vat-fair-20066.html#comment-132588

    In other words, they believe there is a systematic error which results in the expenditure of the households in the lowest expenditure decile being underestimated by a factor of three! Clearly, these data are so inaccurate that nothing can be deduced from them either way.

  • Andrew,

    The tax “rate” does not increase as expenditure increases, it remains the same. For a tax to be a progressive tax the rate of tax, not the amount paid must increase. So VAT is most definitely not a progressive tax.

    It should also be taken into account of the proportion which people spend on VAT taxable goods. The richest are unlikely to spend as much of a proportion of their income on taxable goods.

    You could argue that as certain “necessities” are not taxable there is an element of progressiveness to VAT from the very poorest to those who are buying taxable goods. But this is a very weak argument.

  • James from Durham 19th Jul '10 - 2:03pm

    It is absolutely clear that VAT is regressive. The more prosperous members of society don’t spend all their income so don’t pay as much VAT. Suggestions otherwise only lead us to question the motives of the writer.

    As far as paying down the deficit, the paradox of thrift has been well known for decades. We saw the effects in the 1930s of obsessing about balancing the budget in a deep recession.

    As for cameron, to say that he does not want to be labeled with the “Nasty Party” tag is quite different from saying that he is not concerned for the financial wellbeing of his party’s donors and backers.

  • Good article, thought provoking.

  • david thorpe 19th Jul '10 - 2:32pm

    I do think all Lib dems on all wings of the party are progressive and have been suggesting cuts.

  • Andrea Gill 19th Jul '10 - 2:51pm

    @David Thorpe – I suspect the article was talking about Labour?

  • Great article. a pity so many people decided to have the usual absurd article about VAT rather than thinking about what you said

  • Ok – here’s a suggestion. Start by halving the defence budget. That would save 20 billion a year.

  • A bit confusing this.Progressive should suggest cuts, yet you admit cuts are going to hit the poorest hard. You speak as if your party were not co-conspirators in the hammering the poorest in society are about to take.If there are alternatives shouldn’t Clegg and Cables be making the case loudly? I’m amazed at how quickly the Lib Dems have aped the language of Thatcherism-” freedom means you get sod all from the government”.

  • Andrew Duffield 19th Jul '10 - 4:15pm

    There are only 3 returns to production, so just 3 fundamental areas it is possible to tax; wages, interest (both earned wealth), or economic rent (unearned / common wealth). Taxing either of the former – via income or trade (i.e. value added) – passes cost to the poor, stifling productivity in the process. Such taxes are always regressive.

    Taxing rent, on the other hand, in its various guises – the return to naturally occuring advantage, community-created benefit or any other form of monopoly privilege (i.e. value removed) – is impossible to pass on, stimulating production and allieviating poverty. Such taxes are always progressive. Once upon a time, Liberals knew this.

  • Paul McKeown 19th Jul '10 - 5:01pm

    a) Housing Benefit – just a license to print money for the Buy to Let Spivs. At £280 p/w for a single person or £400 p/w for a Family, it would be possible to mortgage close to two properties at commercial rates. Let central government provide access for local government to borrow against built or bought and improved properties, keeping half of the savings achieved from the Housing Benefit budget.
    b) Salary Review – have the NAO review all public service salaries over 100K for value. This would include all salaries paid from the public purse, including those placed at arms length, such as Quangos, the BBC, etc. Where the NAO found the salaries incommensurate with the value to the taxpayer, reduce the salary to a level recommended, or cull the post. Pass primary legislation as necessary. The taxpayer has a right to expect value for money.
    c) Bars, restuarants, etc., in the Palace of Westminster. Privatise them, apart from one kept for visiting dignataries etc. Let Weatherspoons feed our tribunes, I’m sure the company would be delighted to drive down the market rate for Krug, Chateau d’Yquem, etc.
    d) Grace and Favour Residences. Sell them off, except for the barest number needed to entertain foreign high profile visitors in the national interest.
    e) BBC. Privatise Radio 1. It provides content indistinguishable from that provided by commercial radio. Consider the same for Radio 2.
    f) Reduce payment to the EU, by insisting on genuine reform to CAP. The last time CAP payments were to be reduced, Britain that objected, as it had many large commercial interests that received huge payments from the EU, essentially for owning their own land. This included Prince Charles and suchlike.

  • Stuart Mitchell 19th Jul '10 - 5:31pm

    Scrapping the pointless AV referendum would save us a few tens of millions.

  • I agree that Housing Benefit needs to be capped at a sensible level. However reducing Housing Benefit by 10% to people who have been unemployed for a year is vindictive and spiteful. It’s just a recipe for increasing homelessness. It is indefensible particularly while we are still subsidising massive bonuses in the financial sector.

  • Paul McKeown 19th Jul '10 - 5:47pm

    @Stuart Mitchell

    Why not scrap the electoral process altogether and institute permanent Labour government?

  • Paul McKeown 19th Jul '10 - 5:49pm

    @AndrewR

    If you cannot find housing for 90% of £280p/w in London, then you simply aren’t trying.

  • Andrew Suffield 19th Jul '10 - 6:09pm

    The tax “rate” does not increase as expenditure increases, it remains the same. For a tax to be a progressive tax the rate of tax, not the amount paid must increase. So VAT is most definitely not a progressive tax.

    It should also be taken into account of the proportion which people spend on VAT taxable goods. The richest are unlikely to spend as much of a proportion of their income on taxable goods.

    You seem to be trying to argue both sides at once here. Either the tax rate is the only thing that matters, or you should consider other factors like exemptions and purchasing habits. Pick one. It’s not regressive either way; if you just look at the rate it’s dead neutral, and if you consider exemptions and habits it’s so slightly progressive that it might as well be neutral.

    On the conventional classification of households by income

    The conventional definition of ‘progressive’ is that the tax rate scales with the thing taxed. Measuring a tax on expenditure based on income is nowhere close to that, and is obviously wrong, particularly since it says that the idle rich are in the lowest decile!

    I can’t be bothered to repeat the rest of the rebuttals of the same tired old deceptions.

  • Stuart Mitchell 19th Jul '10 - 6:11pm

    @Paul

    I think you’ll find that it’s the Tories and Lib Dems who want to do away with elected representatives on the grounds that it saves a few quid.

    Even pro-AV campaigners (or at least many of the ones here) freely admit that AV is rubbish and they’re only backing it for long-term tactical reasons. The referendum is a colossal waste of money.

  • @Paul McKeown
    Someone who has been unemployed for a year is unlikely to have the resources to move house. How are they going to pay the deposit? How are they going to pay the rent while their new claim is processed? I fell into exactly this trap when I graduated in 1990 and was homeless for several months. My family were not in a position to help. Their business had been crippled by 15% interest rates and they had lost their house. I wonder if you any idea how bad things get for people under Tory governments. However well-meaning members of the government may be they don’t have the slightest idea of the problems the poor face or how to help them.

    In case you think I’m some rabid socialist out to steal your money and spend it on “benefit scroungers” I’m now firmly ensconced in the middle class – I own my flat outright and am in the top 10% of earners. Few people in this country pay the amount of tax I do. I would far rather it went on preventing people becoming homeless than subsidising the guy along the street who works for RBS and lives in a 800k flat.

  • Stuart Mitchell 19th Jul '10 - 6:36pm

    This guy makes some interesting points on the VAT debate :-

    http://www.taxresearch.org.uk/Blog/2010/07/12/is-vat-regressive-and-if-so-why-does-the-ifs-deny-it/

    Does a pretty good job of pointing out the flaws in the IFS report.

  • Anthony Aloysius St 19th Jul '10 - 6:38pm

    Andrew Suffield

    I’m afraid the “deceptions” are coming from you – as we saw on the other thread where you simply invented a number of things that weren’t actually in the IFS presentation.

    But surely it must be self-evident even to you that if the average data on expenditure for that bottom 10% of households are inaccurate by as much as a factor of three (!) , not only is the whole system of trying to classify households by expenditure a nonsense, but the estimates of the amount paid in VAT are going to be wildly inaccurate too. Obviously no conclusion at all can be drawn from data like that.

  • David Allen 19th Jul '10 - 6:46pm

    There’s an element of game playing here, isn’t there? Anybody can suggest a savage cut. It’s the details of how you implement it in practice, and whether that works well, badly or appallingly, that really matters. And there, of course, we old-fashioned Lib Dems face a Catch-22.

    If we don’t step up to the plate and offer cuts, the Right response is “You are copping out, you can’t cope with the deficit, so you can’t argue with what we are doing, so Osborne wins!”

    If we do step up to the plate and make bold suggestions, like Andrew R’s “halve the defence budget”, the Right response is “You haven’t a clue how to do what you say, you can’t cope, so you can’t argue with what we are doing, so Osborne wins!”

    Anyway – I would start by not imposing massive bureaucratic reconstructions in health and education. Those are bound to cost a lot of money, which we are told (by those whose cause it suits) that we do not have. I would get out of Afghanistan long before 2014 – Obama rightly said if it didn’t work by 2011 it was never going to work, we should persuade him to hold to that. I would raise green taxes on oil and flying, cut spending on transport infrastructure projects, and promote all forms of non-travel meetings. And I would take an axe to the qualifications industry. Too often, a great deal of money is wasted on “education” and training as a purely positional piece of goods, whereby the educators devise ever more complex course and qualification requirements to provide themselves with work to do, and then sell them by ensuring that their courses are compulsory for those who need to gain access to work opportunities.

  • Paul McKeown 19th Jul '10 - 6:56pm

    @AndrewR

    You make the mistake of thinking that I’m some out of touch plutocrat. What I found annoying about the Conservatives is that you get the likes of Boris Johnson’s brother, an obvious Etonian twerp, gradually sidling his way from the cheap seats up to perching precariously in the aisle by the Front Bench.

    Your point about the Conservatives inevitably being malign is not borne by history. For the period from the end of the second world war until Thatcher, the Conservatives were very willing partners in our welfare state.

    I understand very well what ordinary rents are and the problems faced by those in need. In general a single room rent in most of London should be £300 pcm or thereabouts, not £280p/w. Your point about deposits is well made, though. My original point was that the whole of Housing Benefit is a scam to enrich the Buy to Let mob at the public purse. As I said, let local authorities build or buy and improve properties for social rent. This would completely obviate the need for Housing Benefit and save a fortune.

  • Paul McKeown 19th Jul '10 - 7:00pm

    @Stuart Mitchell

    “Rubbish”?

    No, better than pure majoritarian, as it allows preferences to be stated.

    Better than STV, AV+, AMS? Clearly not, as it is in general, not close to proportional.

    I think you need to develop a sense of perspective.

    If you oppose AV because you feel that damages the Liberal Democrats, that’s your own irrational folly and not susceptible to argument.

  • Stuart Mitchell 19th Jul '10 - 7:28pm

    @Paul

    Believe it or not, one of the reasons I am opposed to the *referendum* is because I believe it will damage the Liberal Democrats. But the main reason is that I think it is an unjustifiable expense at a time when the government is telling kids they have to be taught in portakabins because there isn’t the money to rebuild burnt down schools.

    If the referendum actually offered a proper choice then it would be worth it, even now. But you are the one who has lost all sense of perspective – you are willing to throw away tens of millions of pounds on the (small) chance of adopting a system which most experts agree will produce election results virtually identical to FPTP.

    The “stepping stone” argument – and let’s face it, it’s the only pro-AV argument we ever actually hear – is fatuous. Whatever the outcome of this referendum, I think the public would be extremely brassed off about having to pay for another one in a few years time.

  • Barry George 19th Jul '10 - 7:52pm

    @ AndrewR

    I wonder if you have any idea how bad things get for people under Tory governments.

    I really don’t feel people do. It is always the weakest link in the chain that breaks when the government slashes expenditure. In this case it will be the poor, the unemployed and the disabled.

    @Paul McKeown

    Housing Benefit – just a license to print money for the Buy to Let Spivs

    Really ? Have you ever tried to rent a property when you are unemployed ? If you are under 25 then you get £50.95 a week to live on.

    You have to pay your electricity, Gas , Water , TV License, Part of your council Tax, feed yourself, keep yourself clean and go to job interviews out of that money.

    Then to add insult to injury , you want to take 10 % of these peoples housing benefit away which could well be half your weekly income..

    Congratulations. If you get your way then you will be making thousands of people homeless.

    I don’t know if you have ever seriously looked at the properties being rented out by the by to Let Spivs ? They won’t touch the unemployed with a bargepole. Almost without fail they say NO DSS and if it doesn’t say that then when you ring to ask you are told straight away that they don’t want to know.

    They can’t get a deposit from you because you don’t have one. They have to wait 3 months for any rent and in a massive amount of cases the council refuses to pay 100% of the rent so they don’t get their money.

    The Housing market is seriously difficult for the unemployed as it is. Please don’t make things worse…

  • Barry George 19th Jul '10 - 7:56pm

    For the record…I am way over 25, I am employed , I own my own home and have no need for housing benefit. But I have been there and I suggest those that think its a gravy train try it for a few months… It’s not a pleasent way to live

  • Paul McKeown 19th Jul '10 - 7:57pm

    @Barry George

    If you actually read my post, I suggested scrapping this Housing Benefit nonsense once and for all.

    Let local authorities build or buy and improve properties for social rent.

    Much cheaper than mainlining money into the veins of the Buy to Rent mob.

  • Barry George 19th Jul '10 - 8:08pm

    @Paul

    So you want council houses back ? Sorry the Tories sold them all off the last time they were in power, That’s why we have the idiotic and fragile rent housing market we do now.

    Hey I am all for cheaper housing for the poor. Just make sure you get that BEFORE you go messing around with housing benefit. People need to survive whilst the homes are made available.

    The idea of cut first and spend later may work well in some government departments but in Housing, Disability benefit, the unemployed , education and the NHS you are risking a complete collapse of the system if you propose to cut first and spend later.
    .

  • Barry George 19th Jul '10 - 8:18pm

    @ George

    Another thought provoking article. Thank you.

    the 10% housing benefit loss after a year. I need to read up on how it’ll be implemented, but, like you, I am really troubled by it.

    Yes me too … really ,really troubled.

  • Paul McKeown 19th Jul '10 - 8:21pm

    @Barry George

    Yes, bring back “council houses”.

    It can be done at a fraction of the apparent cost of Housing Benefit, even at commercial secured lending rates, never mind those that apply to central government borrowing. Shifting that particular deadweight portion of the current account deficit onto secured government borrowing has to make sense. I know I must be simplifying a complex topic, but makes sense? Or?

  • Barry George 19th Jul '10 - 8:33pm

    @ paul

    Yes I hear you loud and clear and if such a proposal was on offer then I would certainly we be in strong support of it.. However I tend to agree with George.

    I’d love that. I fear neither Osborne, nor Darling nor Brown before him, would allow that.

    It’s a great idea but I think it will go in the pile of things that will never happen in a Conservative led Government..

    More generally, I support the view that the deficit reduction is way to fast and is not necessary on the scale being proposed by the government over the period of this parliament.

    It’s all good and well getting the Liberals to propose cuts but in doing so are we merely feeding an unnecessary ideological psychosis.

    We genuinely believed pre election that such cuts on such a scale are not necessary and I have yet to be suckered in by the propaganda that now informs us that we have changed our mind.

  • Barry George 19th Jul '10 - 8:36pm

    @Paul

    Oh and Mea Culpa for misinterpreting your initial post…

  • Paul McKeown 19th Jul '10 - 8:51pm

    @Barry George

    No problem

    As to this idea that you and George K have regarding this being some sort of sacred Tory cow, I don’t know, this current lot seem rather different and much less ideological than those during the last 18 years of Conservative government. They seem, dare I say, pragmatic, to a fair degree. And they, like Alistair Darling amongst others, seem, justifiably in my view, very worried about the deficit.

    A measure that could transfer a large amount of deficit spending into bonds maturing over 15 to 40 years, must surely be one that they might consider? Of course bonds do bind future governments into paying for things they have not agreed to, and may actually dislike, but the economic case here seems arguable, indeed strong. The deficit is a bloody mess, why not transform part of it into something socially useful and less expensive to the tax payer?

  • Paul McKeown 19th Jul '10 - 8:55pm

    @Barry George

    And those bonds for “council houses” would surely cost less than normal government bonds, as they would be backed by the value of the properties borrowed against?

  • Barry George 19th Jul '10 - 9:06pm

    @ Paul

    As to this idea that you and George K have regarding this being some sort of sacred Tory cow, I don’t know, this current lot seem rather different and much less ideological than those during the last 18 years of Conservative government.

    I think that the Liberal element of the coalition has tempered what the Conservatives say and how they approach the electorate. But ultimately a leopard doesn’t change it’s spots and the policies being enacted are, in the main, stereotypical Tory ideology.

    I am not claiming the deficit isn’t real. But as you point out, there are many way’s to tackle that problem. There are also many possible time scales to work from and at the end of the day these choices are basically ideological.

    A measure that could transfer a large amount of deficit spending into bonds maturing over 15 to 40 years, must surely be one that they might consider?

    I don’t think they will, they are too busy telling us that the cuts must be made now. Another sensible idea though Paul

  • @Paul Mckeown – they wouldn’t have a lower interest rate than normal government borrowing as that is backed by the Govts ability to print as much money as is needed to pay them back.

  • Paul McKeown 19th Jul '10 - 9:17pm

    @SMcG

    It depends surely on whether the markets believe that there is a real risk of default or not? If securitised, then even that risk is removed?

  • @paul – no because there is no default risk on UK govt £ denomionated bonds, they can always be repaid with (possibly worthless) currency. And in any scenario in which the UK govt was not paying back its bonds other assets certainly anything as immobile and difficult to sell as public housing) would have little value.

  • Paul McKeown 19th Jul '10 - 9:27pm

    @SMcG

    Okay, you sound like you know what you’re talking about. Useful that! 😉

  • @Paul , thanks, but I can assure you that in 30 years membership of the LD it rarely gets me anywhere!

  • Anthony Aloysius St 19th Jul '10 - 10:01pm

    George:
    “I never gave much credence to the powerpoint presentation quoted in the other thread. It was not a report, just a rushed set of slides. Rather, I give credence to the report “

    But haven’t we already agreed, from a comparison of the chart on p. 11 of the presentation with figure 10.2 of the report, that the report and the presentation are based on the same data?

    You keep trying to make out that the presentation can be disregarded because it was “rushed”. You suspected previously that the data had been mislabelled. But when you enquired the IFS confirmed that that wasn’t the problem. The problem was with the accuracy of the data, not with its presentation. And the problem with the accuracy of the data is not a minor one – I repeat, they are saying that the average expenditure in that bottom decile is out by a factor of _three_.

    How can you give credence to the report, when the expenditure data it is based on are so seriously flawed?

  • Anthony Aloysius St 19th Jul '10 - 11:33pm

    George

    Sorry, but I don’t agree. When someone admits that their data are as inaccurate as this, it can’t just be swept under the carpet (or off into another thread) as a matter of detail, or a technicality.

    The average figure for expenditure in that bottom decile is – according to the IFS’s reply to you – out by a factor of three. That is a huge error. Unless there is some way of correcting for it, it must invalidate any conclusions drawn from the data. Unfortunately I can’t see in that report any indication that the error exists, let alone any indication that it has been corrected.

    Do you really not see the problem here?

  • Anthony Aloysius St 20th Jul '10 - 1:22am

    George has replied to my post on a different thread – he says he won’t continue the discussion, and refuses to talk about it on this thread, which – after all – is where he raised again the issue of whether VAT is regressive. He claims it would be “extremely boring” to do so.

    I’ve been fairly restrained in my comments so far, because I thought George was genuinely open to reasoned argument, and I wanted to give him the benefit of the doubt. Evidently I was mistaken.

    Let’s be clear. If the IFS can’t estimate household expenditure better than to within a factor of three, their report clearly isn’t worth the paper it’s written on. And if George Kendall knows that, and still persists in quoting their conclusion, without so much as giving the reader a hint of the serious problems with their methodology, then he is being less than honest with us.

    In fact, as David Allen says, this is game-playing. It’s grasping at any argument, and any statement, that can be made to support the party’s position, no matter how flawed and how fallacious they may be. George Kendall probably thinks he is doing his duty by the party. But in fact he is doing no favours to anyone – to the party, to us, or to himself.

  • Alex Sabine 20th Jul '10 - 3:45am

    I agree with the general thrust of George’s article: that it’s about time self-styled ‘progressives’ paid more than lip service to deficit reduction and offered their own alternative suggestions for cuts where they disagree with the coalition’s policies.

    This applies in particular to the Labour leadership candidates, who seem to be in denial about the debt explosion they presided over and in several cases are backtracking on even the limited deficit reduction envelope sketched out by Alistair Darling (I’m reluctant to dignify it with the term ‘plan’, since there was no such thing and they shamelessly ducked the spending review).

    But I fear it also applies to some coalition critics within our own party who seem to think deficit reduction can be finessed and trimmed and targeted so that it doesn’t hurt anyone we don’t want it to, and hits only the better off. Unfortunately, given the distributional impact of public spending, that is a chimera – although we can and must try to mitigate the effects on the poorest, as George says.

    One of the ways to do that is to be more hard-headed about cutting middle class welfare, but instead Lib Dems too often remain wedded to it and in some respects want to increase it – eg the benefits of abolishing tuition fees would go mostly to the better-off, and even left-of-centre Labour MPs like Ed Miliband, Ed Balls and Peter Hain (indeed even the NUS!) accept it is pie in the sky.

    On the scale and timing of deficit reduction, as George says: “Continuing to borrow more and more isn’t progressive, it’s deeply selfish. Every year we delay cutting, compound interest racks up our debt, and we leave a bigger deficit and deeper cuts to the future.

    “Some economists argue that, to help the recovery, we should delay, and reduce the deficit more slowly. Others think the opposite. But neither opinion is left-wing or right-wing. While I’d prefer the deficit to be sorted out over six years rather than four, slowing the cuts down won’t mean fewer cuts, it’ll just leave the pain till later.

    Very good points. My only quibble is that the coalition does in fact plan to sort out the deficit over six years not four, if by that you mean eliminate the structural part of the deficit. It aims to reduce the structural deficit from a peak of 8.7% of GDP in 2009-10 to 0.3% of GDP by the end of the planning horizon in 2015-16 (at which point the actual borrowing of 1.1% of GDP will be almost all cyclical).

    The structural deficit on the current budget (ie excluding capital spending) is forecast to decline from a peak of 5.3% of GDP in 2009-10 to a surplus of 0.3% of GDP by 2014-15. This is the government’s preferred measure but it is a less demanding one than eliminating the overall structural deficit, which it expects to take slightly more than one extra year. But even the current budget takes five years to return to balance.

    So depending on which measure you prefer this is a five-year or six-year programme, and at the end of it we will still be running an annual budget deficit, which means the stock of national debt will still be rising. Not one penny of the national debt will have been paid off, although debt will have stabilised and finally begun to fall as a share of GDP. So this is stiff medicine, yes, but hardly the deficit masochism it has been caricatured as.

    “And if delay means we hit a future crisis with our finances still in a mess, the country won’t have the option of a stimulus package, and we’ll bequeath the future a far worse situation than we’re facing now.”

    This is a key point which is often overlooked by people who espouse lopsided pseudo-Keynesianism. One of the reasons we can’t afford a fiscal stimulus now (and couldn’t risk a bigger stimulus in 2008-09) was that we had hit the buffers in terms of the projected deficit and debt levels that the markets felt were manageable.

    If you believe in Keynesian pump-priming in a recession and discretionary fiscal stimulus, it follows that you need to create the headroom to do this and take aggressive action to reduce deficits and debt once the economy is growing again.

    In the UK case this will necessitate running budget surpluses for years to come – after Osborne’s 5-6 year repair job is completed – so as to get debt levels back down to pre-crisis levels and thus make possible a fiscal stimulus the next time a recession looms.

    If we go into the next downturn still burdened by a structural budget deficit and with national debt above 70% of GDP (which is where it is forecast to be in 2014-15), we would be unable to respond by loosening fiscal policy should that be felt necessary.

    A Keynesian economist who actually understands Keynes, Roger Bootle of Capital Economics, emphasised this point in his book The Trouble with Markets (which despite the title is broadly pro-market by the way). He suggested a long-term debt target as low as 20% of GDP; even getting back to 40% (roughly the pre-crisis level) is going to take 20 years on current projections…

  • Rob Sheffield 20th Jul '10 - 6:46am

    “But what would Labour do” ??!!

    Its tiresome to read the same old excuse/ retort all the time when subjects such as cuts/ regressiveness crop up. Pat Macfadden spoke eleoquently on this the other day (see below): prepare for a sustained and focussed onslaught on many fronts from late September onwards- the end of the ‘phoney war’ !

    ******
    1) The government’s narrative has mostly succeeded in framing the economic agenda.

    Their main point is an accusation that Labour was profligate and economically incompetent in Government. That by our actions we made the recession worse, not better. And that we left a huge problem for the incoming Government, requiring them to take drastic action. It is claimed that the Government’s actions are born out of necessity, not choice. They don’t really want to be making these cuts or imposing these taxes. They simply have to. And this argument is used to absolve the Government of all responsibility for their decisions. Everything from the VAT rise to the cancellation of new schools is blamed on the previous Labour Government.

    (2) Labour must challenge the ‘there is no alternative’ argument

    McFadden argued that the Coalition’s argument is founded on an argument which denies there are political and policy choices.Labour should mount a strong defence of the choices it made in responding to the recession, and challenge the “absurd”, unfounded argument that the UK faced the risk of a Greek-style default. This amounted to an attempt by the Coalition to evade responsibility and ownership for its own choices in power, by arguing that everything it has done was unavoidable because of its inheritance from Labour. The new Government on the other hand has chosen to put Britain at the head of a new drive for austerity. It has chosen to cut faster and cut deeper than we would. It has done so with no accompanying plan for growth or for jobs. We know from the Treasury’s own figures their plans will destroy jobs in the public and private sectors. And yet they make huge assumptions about the private sector stepping up to the plate and creating millions of jobs with no plan for how it is to be done. This is faith based economics, with the Conservatives in the role of the High Priest and the Lib Dems displaying the zeal of the convert. It imposes enormous pain on the country and takes a huge risk with our future. It cannot be blamed on the Labour government because it is based on judgements which the Conservatives and Lib Dems have shared. And therefore they must take the responsibility for the pain that those choices will inflict.

    (3) Labour will be ‘tuned out’ by the electorate if it is perceived as having nothing to say but ‘fight the cuts’

    Yet McFadden warned his own party that it would not be credible if it took refuge in a purely oppositionist stance, and withdrew from its own acknowledgement that it would have had to reduce the budget deficit in power. Unless we absorb that I believe there is a danger of being tuned out by the electorate. By contrast, acknowledging it increases the chance of our fight against what the government is doing being heard. “Fight the cuts” is a tempting slogan in Opposition, and there are indeed some that must be fought. But if that is all we are saying the conclusion will be drawn that we are wishing the problem away. As the pain of Government cuts bites, public opposition to them will grow, but people will still want to know what we would do differently – and they won’t believe us if our answer is just that we could make it all go away.

    (4) The Labour leadership contest now needs to move on to focus more on the future than the party’s record in government

    Of course it is right to acknowledge where we went wrong in Government. After all, as one wise local member said to me, if we had all the right answers, how come we lost? And all of us could pick decisions or positions adopted that damaged us or we disagreed with – though we would not all pick the same things. But the bigger point is that going through each difficult decision taken in Government and telling people it was all a mistake or even contrary to our values is in the end not leadership. Leadership is and always must be about the future. And our economic story is the foundation of this future, everything from tax and spend to skills and trade.

    (5) What is the vision for the UK’s economic future – and what role must government play to pursue it?

    McFadden acknowledged that Labour had been “late to the game” on developing an effective political economy and account of the role of government. But he warned that the Coalition risked leaving itself unable to will any credible means for public policy objectives it claims to share – rebalancing the economy, promoting high skills, and managing the transition to a low carbon economy – because it lacked a positive account of the role of government in promoting growth, beyond getting out of the way.

    There is an essential role for Government in a modern industrial economy. It is about creating capability, ensuring the right infrastructure is there, ensuring the right skills are there, the right planning environment, the right research excellence and having the will to make it happen.

    And yes, that will require Government funding in some cases. Markets may produce good outcomes in the round but they won’t always get every decision right. The new Government have talked a lot about what they won’t do in these areas but have said next to nothing about what they will do. They seem to ignore the role of growth in getting the deficit down and the government’s role in rebalancing the economy.

  • Barry George 20th Jul '10 - 3:47pm

    @ George Kendall

    Clearly, the sooner we clear the deficit the better. It’s racking up more and more debt, which, if not paid, will result in billions in extra interest payment in the coming years, which will only make the deficit worse. And putting it off to the future won’t make it go away.

    However it is the method of cuts that concerns me. It’s based on an assumption that the unemployed will find work, that the disabled will suddenly be proved well enough to work, That the savings in Housing Benefit won’t be off set by the cost of housing homeless people in B&B’s. That the NHS is in need of a financial scalpel. That six hundred thousand public sector jobs will need to go and those people will all find new employment. Even down to the assumption that kids will continue to go swimming now that it is no longer free.

    I simply don’t buy it. I don’t wish to be seen quoting Labour but their fear of a double dip recession does seem to be plausible realism.

    It seems that you have bought into the idea that slashing public expenditure rather than raising taxes is the way forward. I disagree. It is the weak and vulnerable in society that we need to protect. Those that are dependent on public services are by its very definition ‘dependent’ on them.

    Also it is worth remembering that despite the very compelling propaganda that tries to persuade us that the Labour party are responsible for this recession. Facts inform us that it actually started on Sept. 15th 2008 when Lehman Brothers in the United States filed for bankruptcy. It was the subsequent collapse of the banking system that put us in the position we are in now. It was followed by huge ‘loans’ to the banks to save them. So is it too much to ask that the Banks take a fair share of the cost in helping us out of this hole.

    My preference is for something a bit closer to what Darling would have done

    Delaying the deficit reduction will postpone the loss of public service jobs

    I Agree with you there…

    I’d favour a slowdown in the repayment of the deficit, from four to six years. But frankly, this is an arbitrary figure

    When you have politicians who by definition are ideological creatures making ‘arbitrary’ decisions, they will, without fail, turn out to be ideologically based… I respect what you say George, but you say yourself that you would prefer six years. Some would like longer, some shorter.. It’s ideological. And when you are talking about the welfare of the British economy it’s important to recognize whether our leaders are being truly candid with us.

    George Bush managed to convince the American people(and Blair) that war in Iraq was necessary. However with hindsight I am sure you would agree that it was ideological.

    The wrong ideology can do a lot of damage and I am old enough to have suffered greatly the last time the Tories had the driving seat.

    That isn’t being leftwing, that’s deceit.

    I wasn’t aware that being on the left of the party required a defense. Just because the right of the party has control of the reigns it doesn’t make the left of the party any less valid. Balance is important but I am not going to start excusing myself for being a little to the left of the current party line.

    If a second election had produced a further hung parliament, as is quite possible, we’d be where we are now, but in a much deeper hole. Having refused a coalition once, it would probably have taken the country in a terminal tailspin to form one then, and no one should wish for that.
    I’m sure you think differently. But that’s why, for all my reservations, I support the coalition.

    I have argued before on this site that I believe our hand would have been stronger outside the coalition so I won’t repeat myself. I think it would have made the Conservatives look weak if they went for a second election after being out of power for 13 years and that they would have needed to work much harder for sensible legislation if they depended on our support in a less binding arrangement.

    Of course the major advantage of supporting policies we agree with and making concessions when it was in the countries interest would have given us one major benefit…

    We wouldn’t have to defend Tory Policies that we clearly don’t agree with and we could stand up honestly and be Liberal Democrats instead of the left toe of the government. We could ask pressing questions in parliament and the populous would not view us as liar’s who said one thing on the economy when we asked for their vote but now we vote for the very things we argued against.

    My position may not be a popular one with members but it appears to be reflective of the electorate if the polls are used as evidence… however time will tell.

    The party is loosing its identity as it is being swallowed up by the right and people really don’t know what they are voting for if they vote Liberal again

    I hope that changes…

  • Paul McKeown 20th Jul '10 - 3:56pm

    @Barry George

    Are you genuinely proposing to raise taxation by £160,000,000,000 per annum?

    Can you guarantee that this will not dampen growth or deepen the recession, that it will not cause capital flight, that any proposed tax hikes will actually raise more money at all?

    Labour were not prepared to do this during the last 13 years, but depended instead on a property boom aided by dangerously high levels of consumer credit…

    You may be right that the Liberal Democrats need to stake out a clearer identity, but surely that must include rational economic proposals, too?

  • Barry George 20th Jul '10 - 4:07pm

    @ Paul

    Are you genuinely proposing to raise taxation by £160,000,000,000 per annum?

    Huh ! why do you assume that kind of money needs to be raised per annum ? You were only talking yesterday about bonds over a 40 year period as a posssible solution.

    How quickly we pay back the debt is an ideoligical choice. It may well turn out that supporting the economy through this hard time may well put us in a better position to approach the problem. Major countries including the United States have not given up on this idea..

    Someone once gave an anology on this site that what the government was doing was akin to ‘paying of the mortgage early whilst not having enough money to feed yourself. Idiotic when you think about it , but that’s what we are doing.

  • Paul McKeown 20th Jul '10 - 4:10pm

    @Barry George

    “Major countries including the United States have not given up on this idea..”

    Surely, the USA is the only major economy still following the pump priming route?

    And, I rather suspect, that the eventual fall of the USA as the world’s economic superpower will be found in its extreme levels of indebtedness.

  • Barry George 20th Jul '10 - 4:24pm

    @ Paul

    Oh how the world has changed since May.. Funny I seem to remember we believed the same thing until then… But June and July opened our eyes because… er, well ,you know , because the Tories said so…

    Sorry , not buying it Paul… It’s ideoligical…

  • Paul McKeown 20th Jul '10 - 4:30pm

    @Barry George

    Sorry, Barry, but I never believed this twaddle over 6 billion. That was merely a grain of salt on the first peanut of the deficit. Vince Cable it seemed to me never really believed it, nor did Alistair Darling either. We need to dramatically reduce the deficit. Questions regarding the rate and the means are in order, but any idea that the UK could continue to ignore economic gravity whilst almost all our major trading partners are chopping away at government spending like lumberjacks on acid is just not plausible. We would simply be setting ourselves up as the next target for the markets to attack.

  • ROB SHEFFIELD 20th Jul '10 - 4:44pm

    @McKeown
    “whilst almost all our major trading partners are chopping away at government spending”

    Neither China nor USA are doing anything of the sort.

    Furthermore- as the recent NAO report suggests- announcing cuts and frightening peoples ‘rational expectations’ (into a double dip) is totally different from actually succeeding in ‘chopping away’ at programs, tasks, public consumption and regulations crucial to a modern, advanced, research and knowledge based 21st century capitalist economy.

    Europe has also been talking a ‘slash and burn’ game under a weakened Merkel being held hostage by the FDP automatons: but we will see whether the European social (democrat) model in 2-3 years time is intact or not.

    In your wet dream it would be in ribbons. Somehow I don’t think so…

  • Barry George 20th Jul '10 - 4:49pm

    @ Paul

    Vince Cable it seemed to me never really believed it

    Your implying that we didn’t really believe our own manifesto commitments ! That (If true) is a very serious allegation that we misled the electorate with ideas that we didn’t actually believe.

    It seems that the only way to justify the u-turn is to either wrap ourselves up in knots of pseudo logic or to admit that we were dishonest to the electorate.

    I like to believe that the party was honest about its pledges on the economy as it applies to the principle of Occam’s razor. I firmly believe that if you find yourself needing to massively overcomplicate your position then you are probably jumping through rings of fire at someone else’s benefit.

  • ROB SHEFFIELD 20th Jul '10 - 4:53pm

    For those worried about the notion of being ‘progressive’- from YouGovs commentary today:

    “The honeymoon is over. Actually, it was never that ardent in the first place. Many voters withheld their judgement. But now, views are hardening up; and while more people still approve than disapprove of the Government’s performance, the gap has narrowed sharply in recent weeks. Over the past four weeks, the coalition’s approval rating has slipped slowly but remorselessly. Our latest figures report a net rating of plus four (approve 41%, disapprove 37%). In just over two months, the coalition’s rating has declined to levels that were not reached for almost three years under Tony Blair.”

    “The figures for the Liberal Democrats are more striking. Among those who voted Lib Dem on May 6, opinions are divided: just 40% approve of the coalition’s performance, while 36% disapprove. No wonder Lib Dem support has slumped since the coalition was formed. Indeed, of those who voted Lib Dem on May 6, just 46% would vote for the party if an election were held now, while 18% would vote Labour, 9% Conservative and 5% for other parties; 22% are ‘don’t knows’ or ‘won’t votes’. To be sure, the Lib Dems have picked up some support from voters who like their involvement the coalition, but there are too few of these to offset the deserters. Overall, Lib Dem support is down by one-third since the election.”

  • ROB SHEFFIELD 20th Jul '10 - 5:01pm

    “that would mean in our 3 way marginal seat that went Tory that it would go back to labour.”

    And in sheffield central we’d have a whopping majority rather than in double figures 🙂

  • Paul McKeown 20th Jul '10 - 5:05pm

    China is not reducing government spending because it is has high growth, huge foreign reserves and a very favourable trade balance. The United States of America has the world’s reserve currency, but it is a question as to how long that that will remain so, perhaps not many decades more, given trade imbalances and enormous indebtedness.

    Europe is rather more than Germany, as anyone with an ounce of geographical awareness would attest. Ireland has had its sovereign debt downgraded twice, the second time only days ago. Greece has had its creditworthiness reduced to junk levels. The governments of Spain and Portugal have pushed through extreme austerity measures. Italy is following suit. They all have similar levels of deficit to our own. The Netherlands, a country with much safer levels of debt and deficit than our own, is cutting government spending very heavily. Most other European states are doing similarly. As are almost all governments across the globe, except for a few exceptional cases.

    David Cameron might well become “Double Dip Dave”, but, frankly, significant risks lie in any economic path at the moment. A deepening of the recession may well be inevitable, whatever the course taken. For that I lie the blame at Gordon Brown’s economic mismanagement, whereby deficit spending in the years of fat, has left little room for manoeuvre in the years of lean. Frankly, Gordon Brown can lay less claim to being the high priest of Keynes than John Redwood. Keynes would have been horrified at the current levels of debt and deficit.

    If you wish to talk of “wet dreams”, then I think you should examine your own subconscience. It is there that that you might find lascivious thoughts, not elsewhere.

  • Barry George 20th Jul '10 - 5:09pm

    @ Paul

    but, frankly, significant risks lie in any economic path at the moment.

    On that point I agree , I just support the opposite significant risk 🙂

  • Paul McKeown 20th Jul '10 - 5:12pm

    @ROB SHEFFIELD

    I couldn’t care a fig about polls. The only polls that count are the one that took place in May past and the one that will take place in May 2015. In the meantime the coalition will govern in the national interest. Frankly, most people that support the Liberal Democrats doesn’t give a damn about polls. At some time during every parliament since 1974 the polls have had us bumping along at 8 – 12%. Who cares, during the General Election, the numbers will be back around 20% again, perhaps higher. I don’t really understand how Labour thinks that it will gain re-election, as it falling back on its core vote, trades unions, a confection of gender and racial disaffection, and an attempt to draw lines across the kingdom from southwest to northeast. A recipe for failure.

  • Paul McKeown 20th Jul '10 - 5:20pm

    Basically you can’t scare a Liberal Democrat with a poll; they are used to being unpopular. And trying to influence a Liberal Democrat with a poll shows that you have no argument of substance to present.

  • ROB SHEFFIELD 20th Jul '10 - 5:23pm

    “I couldn’t care a fig about polls.” ad nauseam

    Well don’t you know that is exactly what Labour people were saying since 2006…..

    The reason for the coalitions declining numbers is the growing perception that this government is NOT for the national interest but- to get back on thread topic- is ideologically REGRESSIVE in almost all it is doing (OK OK: aside from binning cctv and speed cameras; closing prisons and giving human rights to islamist terrorists).

    There is a reason it took three years for Blairs Labour to fall to the level of approval it has taken the coalition 2 months to reach…

  • Paul McKeown 20th Jul '10 - 5:33pm

    @tony

    Unrepresentative? Commanding a majority not only in parliament, but for the first time in many decades a majority in the popular vote? That would be rather different from the last Labour government then, which, fraudulently in my view, thought 35.2% of the popular vote on a 61% turnout was a mandate to govern, rather than a mandate to change the electoral system.

  • David Allen 20th Jul '10 - 5:40pm

    @Paul McKeown

    “Are you genuinely proposing to raise taxation by £160,000,000,000 per annum?”

    Well, first of all I think you’ve put three more noughts in than you should have done, so I’m not as impressed as you wanted me to be.

    But secondly: you can cut the deficit by X billion by slashing government spending, which puts (mostly) public sector workers out of work. Or you can cut the deficit by X billion by raising taxes, i.e. by slashing private spending by X billion, which puts (mostly) private sector workers out of work.

    “Can you guarantee that this will not dampen growth or deepen the recession?”

    No in the case of spending cuts, no in the case of tax rises. Judging how fast to cut the deficit is tricky, that we all know. Cutting too fast may bring the dreaded double-dip, cutting too slow may spook the bond market. But this has very little to do with the decision as to whether to cut private spending (i.e. raise taxes) or cut public spending.

  • Paul McKeown 20th Jul '10 - 5:44pm

    Your comment “(OK OK: aside from binning cctv and speed cameras; closing prisons and giving human rights to islamist terrorists)” prettty much sums up Labour’s attitude to liberty. At best an optional extra, but, more often than not, an inconvenience which should be squashed. Very unpleasant. The people should be liberated by the elites that seems to be mentality; freedom of discussion, unity of action, only freedom of discussion is sometimes moot, too.

    There is nothing more regressive than a deficit of £160,000,000,000. It enslaves future generations for our inability to make difficult choices or for our unethical desire to featherbed our current generations. It is furthermore a huge threat to our economy.

    Anyone that believes it right to pass down enormous debts to future generations for what amounts to current account spending rather than genuine investment suffers an ethical blindness. Anyone that thinks the current deficit is sustainable is living in denial.

  • Barry George 20th Jul '10 - 5:44pm

    @ Paul

    Commanding a majority not only in parliament, but for the first time in many decades a majority in the popular vote?

    Now that’s not strictly correct. I am not aware of any Liberal Democrat voter who voted for anything other than our Manifesto. I am sure the same applies to Tory voter’s

    It is true that the two parties combined gained a majority of the vote but it is a non sequitur to assume that the public gave a mandate to the parties to form a coalition and govern outside of their manifesto pledges based on simply adding the votes for the two parties together…

    The people voted for a minority Conservative government, held in check by two major opposition parties who they would have to liaise with. The people never voted for a coalition and to be fair they never voted for us to be part of the government at all.

  • Paul McKeown 20th Jul '10 - 5:46pm

    @Dave Allen

    The deficit is 160 billion. That is 160 followed by nine noughts.

    The debt is 900 billion. That is 9 followed by eleven noughts. It will reach 1.4 trillion by the end of this parliament. That is 14 followed by eleven noughts.

  • Paul McKeown 20th Jul '10 - 5:50pm

    But secondly: you can cut the deficit by X billion by slashing government spending, which puts (mostly) public sector workers out of work. Or you can cut the deficit by X billion by raising taxes, i.e. by slashing private spending by X billion, which puts (mostly) private sector workers out of work.

    “Can you guarantee that this will not dampen growth or deepen the recession?”

    No in the case of spending cuts, no in the case of tax rises. Judging how fast to cut the deficit is tricky, that we all know. Cutting too fast may bring the dreaded double-dip, cutting too slow may spook the bond market. But this has very little to do with the decision as to whether to cut private spending (i.e. raise taxes) or cut public spending.

    Nothing more than I said. I added though, that Gordon Brown never raised taxes to support the deficit when the economy was booming, so I suspect that the answer is clear. Drastically raising taxes would not work.

  • Paul McKeown 20th Jul '10 - 5:52pm

    @Barry George

    “The people voted for a minority Conservative government, held in check by two major opposition parties who they would have to liaise with. The people never voted for a coalition and to be fair they never voted for us to be part of the government at all.”

    No. Actually they voted for 650 MPs. In the final analysis no one is this country has ever voted for a government. The idea is a myth.

  • Paul McKeown 20th Jul '10 - 5:57pm

    So David Allen:

    £160,000,000,000.00

    Count it. That is the amount by which our government spending exceeds revenues raised every year. Add it to the national debt:

    £900,000,000,000.00

    Apply compound interest. This year. Next year. The year after that.

  • Barry George 20th Jul '10 - 6:05pm

    @Paul

    No. Actually they voted for 650 MPs….

    That only serves to add weight to my point. The coalition was a party decision and it can not be argued that we have public support for it… Well unless you want to go looking around in the poll’s, but you have stated your dislike for them…

    We made the pact, not the electorate. We now need to justify our decision with action. Our efforts so far are not being recognized and are in fact being torn to shreds…

    We need to change our thinking or the party will suffer badly at the local elections.

  • Paul McKeown 20th Jul '10 - 6:10pm

    David Allen:

    The easiest way to picture the numbers is this:

    To balance government expenditure, the average tax bill would have to rise by £6,400 per annum, an amount that would drive most people on twice the average salary close to insolvency.

  • @Paul McKeown

    The line that it’s all Gordon Brown’s fault because he was running a deficit is mostly just a bit of political messaging cooked up in Tory HQ. I hope you don’t really believe it.

    There have been very few postwar years when we didn’t run a deficit. The last Tory govt for instance ran one for 16 of the 18 years they were in power. An analysis by the IFS showed that before the financial crisis the public finances were in much the same position as they had been after 11 years of Tory govt. Look at the figures – the deficit pre-crisis was running at a historically modest 2.8% or so. Round end of 2008 everything goes haywire as private debt becomes socialised and tax receipts drop off a cliff. Brown’s real failure was not to regulate the financial markets though to be fair he would have faced massive resistance even if he had wanted to.

    Greece is partly in the mess it is in because the markets don’t believe they can deliver their austerity package. I expect we will be in the same position in 12 months or so. We are proposing to cut at a level that even IMF don’t think is wise. Michael Portillo,who as you probably know is a former Chief Secretary to the Treasury doesn’t think cuts on this scale are deliverable. I think the debate is going to look very different in a years time – quite possibly in ways none of us expect.

    btw, I think you do need to worry about the polls for two reasons a) the Lib Dems are in govt now. Referring to historic dips in Lib Dem support after previous GE’s when they became invisible to the media is rather beside the point. b) Tory numbers are going up while Lib Dem numbers go down. That clearly represents some sort of problem even if it is just presentational. To my mind it was a mistake to bind the party so closely to the Tory agenda.
    The Tories clearly feel emboldened to go faster and further than they would have done without their human shields.

  • Barry George 20th Jul '10 - 6:17pm

    @ AndrewR

    The Tories clearly feel emboldened to go faster and further than they would have done without their human shields.

    Well said. The argument really is that simple…

  • ROB SHEFFIELD 20th Jul '10 - 6:41pm

    “Any suggestion of cuts which wouldn’t be ideologically regressive?”

    Sorry- for the moment I am enjoying oppostion too much (I am seeing why you must have been so cheerful for the last three years and- contra- so miserable now).

    Come back to this in two months when a post new labout leader has been elected and we have a new shadow cabinet machine-gunning policy retorts 😉

    I reckon this government is going to be an easier target (for a focused opposition) than Brown (or Major for that matter) ever was 🙂

  • Paul McKeown 20th Jul '10 - 6:52pm

    @ROB SHEFFIELD

    “There is a reason it took three years for Blairs Labour to fall to the level of approval it has taken the coalition 2 months to reach…”

    Yes. Labour had a very favourable economic climate in which it was able to make all sorts of spending promises. It has now run away and left a disastrous economy in which a whole host of unpopular measures will have to be taken. No doubt it will spend the next five years decrying every unpopular reduction in (the increase in) government spending and will pretend that it wouldn’t have done pretty much the same. That it is dishonest is not surprising, merely disappointing. I doubt that it will win the next General Election, but it seems to believe that its political advantage lies in ostrich imitation. I have faith in the electorate: it has a good nose for a fake. And that is currently Labour.

  • ROB SHEFFIELD 20th Jul '10 - 6:53pm

    And the REGRESSIVENESS continues- LES tonight:

    “The Tories have been accused of “changing their tune” on elderly care reform as it emerged the Government was not ruling out introducing a compulsory levy. ”

    “Labour’s proposal to force everybody to contribute towards the cost of future care was savaged by Andrew Lansley, now the Health Secretary, before the general election. A mooted levy on estates was branded a “death tax” by the Tories, who put up posters featuring a gravestone inscribed “RIP Off”.
    But it was disclosed that the coalition’s new Commission on the Funding of Care and Support would be allowed to consider all options, including a compulsory levy.”

    Plus: just watching tv news item on the impact on front line policing (beat officers) of the ideological cuts.

  • David Allen 20th Jul '10 - 6:53pm

    “The honeymoon is over. … While more people still approve than disapprove of the Government’s performance, the gap has narrowed sharply in recent weeks. … In just over two months, the coalition’s rating has declined to levels that were not reached for almost three years under Tony Blair.”

    Back in May, the coalition put on an impressive performance. A seemingly comprehensive and fair agreement was negotiated in a friendly, co-operative and businesslike manner. Cameron and Clegg showed off their easy public-school charm. The idea that political opponents could sink their differences and work together brought an upsurge of optimism and support from the public at large.

    There is, of course, nowhere to go from there except down. That would be true, to some extent, even if the partnership had carried on with the “liberal conservative” one-nation style of government, harking back to Macmillan, that it had seemed to promise. It is all the more true now that it has ripped off the veil and declared itself as a radical reforming right-wing government that will go where even Thatcher feared to tread, take the axe to welfare, and privatise health and education.

    Ed Miliband, who I expect will be Labour’s next leader, is no political genius. But he won’t have to be. He should be capable of kicking the ball into the kind of open goal that the coalition in general, and the Lib Dems in particular, are giving him. In two years’ time, he will be winning byelections with massive swings, and telling the voters that nobody with a social conscience should support the coalition. The Tories will grimly hang on to their core vote, but we won’t.

    It’s going to be painfully obvious, in two years’ time, that we ought to leave the coalition. It’s going to be painfuly obvious that we shouldn’t have stayed in it that long. In the words of Fairport Convention – if you’ve got to go, go now.

  • Barry George 20th Jul '10 - 6:55pm

    @ George

    If it’s ideological, it’s not leftwing or rightwing.

    Sorry George the terms are not mutually exclusive. You surely can’t deny that left and right wing ideology exists ?

    As for my suggestions for cuts… As I stated above I am reluctant to feed an ideological psychosis.

  • David Allen 20th Jul '10 - 7:18pm

    “To balance government expenditure, the average tax bill would have to rise by £6,400 per annum, an amount that would drive most people on twice the average salary close to insolvency.”

    Well, most of that £6400 is what the average tax bill has fallen by, since the crunch. Of course it hasn’t fallen evenly, that’s why an average isn’t helpful. The Chancellor was creaming off a fraction of all those massive City bonuses. The rest of those ill-gotten gains are still out there somewhere….

    But yes, it may not be practical to fully restore tax receipts to their pre-crunch levels. It may also not be practical to make cuts to the extent that Osborne would like. So we should just get over this hysterical overemphasis on eliminating the deficit, and adopt policies that will work. The bond markets will be more impressed by a careful plan that we can stick to, rather than a grand-scale deficit reduction programme that doesn’t achieve its aims.

  • ROB SHEFFIELD 20th Jul '10 - 7:39pm

    https://www.libdemvoice.org/browns-silence-on-megrahi-absurd-says-clegg-right-says-steel-15954.html

    More progressive/ regressive; liberal/conservative dualisms de jour
    *****************
    Andrew Suffield
    Posted 24th August 2009 at 4:59 pm | Permalink

    And let’s not forget that all the evidence against him has been discredited as lies or fakes, he was probably innocent all along, and he’s been let out on compassionate grounds as an *alternative* to an appeal which he would not have lived long enough to see the end of (estimates were that it would take two or three years; he’ll be dead in less than one).

    Basically the whole thing was a tragic miscarriage of justice, and the actual guilty party got away with the crime. Funny how little attention that’s been getting in the news.

    David Allen
    Posted 25th August 2009 at 12:26 am | Permalink

    All the participants in this sordid business are posturing. All of them clearly know things they don’t want to admit to knowing. I don’t pretend to know what those things are (I don’t like know-it-all conspiracy theorists!), but I can tell when people are blatantly dissembling.

    Why wasn’t Megrahi released on compassionate grounds on condition he stayed in Scotland? That could well have saved a lot of embarassment. Ernest Saunders made a “miracle recovery” from terminal Alzheimer’s. Plenty of people live for ages with prostate cancer… Release to house arrest in Scotland is the obvious compromise solution. Why did we not go for that?

    I suspect the answer to my question is, “Because Gaddafi offered some sort of deal. As he has, many times before. And we agreed the deal. As we have, many times before. That deal required Megrahi to reach Libya.”

    With the grateful benefit of hindsight it would appear that David was right and Andrew woefully wrong…

  • ROB SHEFFIELD 20th Jul '10 - 7:45pm

    RE: Progressiveness and swinging early ideological spending cuts-

    C4 news just now: Cable and Wireless blame speed and scale of public spending cuts for massive fall in profits. Lose a fifth of their share value in one day.

    Two of my part time MSc students- working for a private sector property consultancy in Leeds- have this week been put on ‘risk category’ for redundancy. Regeneration and renewal funding- whether physical or social enterprise (what price a big society)- has been savagely and nonstrategically culled.

    = The idea that the private sector will save us continues to look more and more raggedy.

  • ROB SHEFFIELD 20th Jul '10 - 7:58pm

    The “Evil Ashcroft”- for it is he- on the LD squeeze identified in his populous poll of 6,000 voters and already explained by Peter Kellner in todays; YouGov commentary pasted in earlier.

    What price a ideological-cuts based coalition?

    “Writing exclusively for ConservativeHome Lord Ashcroft describes the results of a new Populus opinion poll that he commissioned in marginal constituencies. The survey confirms the trend we have seen in numerous other polls: The Liberal Democrats are being badly squeezed in these early days of the Coalition government.

    Six findings are worth emphasising:

    1. Labour would gain 16 to 28 Tory-held seats where they are in second place, if the election was held today.

    2. The Liberal Democrats would lose 19 to 30 seats that they currently hold where the Conservatives are second.

    3. The net gains under First Past The Post would be +28 for Labour and +2 for Conservatives.

    4. Under AV the net gains would be +16 for Labour and +3 for the Conservatives.

    5. 21% of the 6,000 voters in the Populus/ Ashcroft poll said that the Liberal Democrats were having a “significant” impact on the Coalition’s policies. 51% said “some” influence. 23% said “virtually no” influence.

    6. In terms of attacking the Coalition Budget there is tactical advice for Labour. By 59% to 39% Labour is losing the argument on timing of cuts with majorities in all categories of marginal seats saying that it is right to start cutting now. Labour would be on much stronger ground if they focused on the impact of cuts on “ordinary hardworking people”. Only 32% of voters think George Osborne’s adjustments are fairly distributed. 64% think “ordinary” families are bearing the brunt of tax rises and cuts. “

  • Paul McKeown 20th Jul '10 - 8:17pm

    @Rob Sheffield

    Again, ad nauseum, no one is interested in opinion polls. We had a General Election in May, we will have one in May 2015. Until then it is expected that polls will be very unfavourable, given the difficult decisions that will have to be taken, given the continual campaign of negative propaganda that Labour will put out (irrespective of the real damage that the propaganda may actually do to the economy), given the ridiculous 40% manoeuvre that Osborne is trying to pull in the theory that if he asks the impossible, spending departments might try harder and if he terrifies the public, it will be delirious when the real cuts are published. No one is interested. There will not be a General Election for another 5 years.

  • Barry George 20th Jul '10 - 8:41pm

    AndrewR said…

    There have been very few postwar years when we didn’t run a deficit. The last Tory govt for instance ran one for 16 of the 18 years they were in power.

    David Allen said…

    So we should just get over this hysterical overemphasis on eliminating the deficit, and adopt policies that will work.

    Exactly the point and exactly what the party needs to do in order to reinstate its identity with the public.

  • Paul McKeown 21st Jul '10 - 1:31am

    @tony
    On the contrary, I rather suspect that it is Labour that is dying on the vine. After 13 years it has managed to leave a wrecked economy. That will not be forgotten for at least a generation by those voters in the south of England who believed the false promises of “prudence” that Labour made. Without being able to win seats in the south of England, Labour will be unable to form a parliamentary majority. Those voters, when the time comes, will need an alternative to the Conservatives for whom they voted at this election. Their choice will be the Liberal Democrats.

  • Andrea Gill 21st Jul '10 - 2:55am

    @Barry George – so you seem to be under the delusion our manifesto pledge was somehow opposed to deficit reduction, suppose calling for savage spending, public sector & pensions cuts, and timing cuts based on the ECONOMY and circumstances rather than political dogma, probably wasn’t REALLY what Lib Dems meant when we said, uh, all that.

    Personally not willing to sign up to that loony deficit denial club…

  • Rob Sheffield 21st Jul '10 - 3:19am

    “That will not be forgotten for at least a generation by those voters in the south of England who believed the false promises of “prudence” that Labour made.”

    That’s not what the geographical tabs in the recent polling are ALREADY saying: so much for a generation ! Pure hubris.

    Moreover it is the here and now and your family, your kids schools, your elderly parents care, your GP and hospital quality, the number of police on the streets, the ability of the local council to enforce planning controls and environmental protection, roads not being repaired, bins not being collected for 3 weeks at a time, that the consultancy your brother started collapses, that the part time work-life-balance job in the public sector your partner got has been slashed etc etc etc etc

    12- 24 months of this governmental ideological regressive ‘platform’ and the “Brown years” will be a distant memory: not least because pre 2007 crunch (and the ensuing worst depression since the 1930’s and its associated costs both public and private sector) the structural deficit was **TWO** per cent.

    How many more times??!! At least the voters are more receptive to the truth then a bunch of orange tinted apologists for Georgie and Dave.

  • Barry George 21st Jul '10 - 3:58am

    Andrea…

    I do love to read your comments, they do make me laugh. It seems every one is ‘deluded’ or a ‘thoroughly stupid voter’ or ‘fictitious’ or a ‘troll’ , or ‘idiotic’ … well I could go on for hours..

    You can’t seem to say anything on this site without resorting to Ad hominems and the creation of straw men. Do you have any understanding of a logical debate ?

    Personally not willing to sign up to that loony deficit denial club

    See there you go again, implying that I deny the deficit… Another one of Andrea’s magical mystery non sequiturs. Where you dream them up from, nobody knows.

    I could resort to your usual level of communication and retort ” if you had bothered to read what I said….” but I will instead politely inform you that you are incorrect and that I do not deny a deficit. I in fact discuss it at length in this thread…

    So it would be a bit loony for me to deny it exists… Hmm maybe ‘poisoning the well’ was your intention 🙂

  • Paul McKeown 21st Jul '10 - 8:04am

    @tony
    “you really think, may 5 will see the lib’s mullered”
    Possibly, but I’m sanguine about it. Anyone that thinks that this will influence central government policy is a fruitloop short of a curlywurly. It certainly is no guarantee of good governance in Wales/Scotland/local councils concerned. Again, if people wish to shoot themselves in the foot, they are free to do so.

  • Paul McKeown 21st Jul '10 - 8:36am

    Anyway, back from trolling along about Muller Ice and whether LibDems are best buried or cremated.

    I noticed the following article in the Guardian: http://www.guardian.co.uk/culture/2010/jul/20/culture-department-staff-redundancies-cuts . It would seem that Jeremy Hunt has already prepared the budget for the DCMS, in which cuts of 35% – 50% are outlined.

    I have a suggestion, though. Why not simply merge the DCMS into BIS, thereby reducing the number of government departments, which should save some further money. Isn’t the cabinet unwieldy as it is, and isn’t the DCMS with a budget of two billion sufficiently small that it is a natural candidate for merger?

  • Paul McKeown 21st Jul '10 - 8:43am

    Sorry that should have been 5 billion pounds.

  • Paul McKeown 21st Jul '10 - 9:07am

    And for that matter roll International Development into the FCO.

  • Barry George 21st Jul '10 - 2:32pm

    @ George

    He is not someone who regards “cutters” as suffering from an ideological psychosis.

    Ah , there seems to be a little misunderstanding between us.

    There has been a deficit for most of the post war years, it is not something new.

    I do not regard the majority of people suggesting cuts, such as you, as suffering from ‘an ideological psychosis.’

    I merely believe that by doing so you are feeding the ideological psychosis of the Conservative right who are even going so far as to examine 40 % cuts in all departments.

    I do not disagree with the idea that the deficit must be paid back. After the Second World War our debt to the United States was 4.34 billion dollars and that was in 1945 so I dread to think what that figure would be in today’s market. But we didn’t panic then…

    We should attempt to tackle the debt in sensible and long term way and not risk a double dip recession caused by these sweeping cuts that are being proposed by the rabid right.

    My point is that these sweeping cuts are not Liberal Ideas, they are Conservative. They will hurt, they will punish the vulnerable and we should stay well clear of encouraging them in their crusade.

    The party is fractured and damaged enough and the Tories want us to be the justification for their ideological psychosis. The public appears to be apportioning blame in our direction so maybe we should be pursuing our manifesto pledges and leave the Tories to dig their own hole on the economy.

    Thanks for the link btw, I will give it a good read…

  • Barry George 22nd Jul '10 - 6:44pm

    @ George

    I don’t think the deficit reduction in the post-war years is a useful guide

    We didn’t finish paying back our war debt until a few years ago. So how far ‘post’ war do we need to examine in order for it to be ‘useful’ ?

    We have almost without exception had a deficit every year since the war. Being in debt doesn’t justify the ‘hysterical overemphasis on departmental cuts.

    I imagine that most of us have some debt. However we don’t suddenly stop all expenditure required for our survival. That would be reckless.

  • Barry George 25th Jul '10 - 7:47pm

    @ George Kendall

    I fear the answer is 1975-2005

    That’s interesting. If you look at the deficit as a percentage of GDP, then the debt in 2005 was not dissimilar to the debt in 2010.

    http://www.debtbombshell.com/images/uk-budget-deficit.png

    This isn’t some previously unheard of position. We as a country have almost always been in debt. And if we look at what’s happened to Ireland after their slash and cut policies we could learn some important lessons.

    Double Dip Dave will live up to his name as unemployment and the economy bites. We should be distancing ourselves from these cuts not sanctioning them at this perilous time.

  • Barry George 25th Jul '10 - 7:49pm

    sorry typo , ment to say ‘the debt in 1995

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