PMQs: Nick tackles Gordon on Obama’s tax cutting policy

Both opposition leaders were able to make play with Obama’s victory at PMQs today. David Cameron compared his “novice” status to that of Obama, and Nick Clegg asked why the Prime Minister – who had minutes earlier compared his own government’s priorities to Obama’s – did not adopt Obama’s policies on cutting tax for lower and middle income earners.

Clegg has an increasingly clear record as the Cato of British politics on the subject of tax cuts. It has been a regular topic for him at PMQs all year, often associated with fuel poverty or food prices, and as we pointed out last week, commentators such as the Spectator (and Guido, it seems) are beginning to notice. It could turn out retrospectively to be a gamble on a similar scale to early opposition to the Iraq war. No reason, of course, why we should assume that will automatically translate into poll increases (Vince Cable’s perspicacity is now legendary, and that hasn’t been noticeably rewarded at the polls either, insofar as one can judge why polls move). But Obama’s election could significantly alter the odds in favour of the gamble’s succeeding, acting as a cultural boost to the currency of the very idea of tax cuts.

Here’s the exchange in full:

Nick Clegg: Mr Speaker, I’d like to add my own expressions of sympathy and condolence to the family and friends of the soldier from the Royal Ghurkas Rifles who tragically lost his life in Afghanistan this week. And of course on behalf of all Liberal Democrats to join in congratulating Barack Obama on his extraordinary victory as the new Presidents of the United States, and to wish him luck because the hopes and expectations that people have of him to change America, to change the world, are immense.

Now, the Prime Minister just said that he shares lots of policies with the new President Elect, so he will be aware that the central policy which Barack Obama fought on in his election was to cut taxes for people on low and middle incomes, paid for by the very wealthy. Why won’t he do the same here?

The Prime Minister: Mr Speaker, what Barack Obama did not fight on was a policy for £20bn in public cuts, and that is the effect of the policy of the Liberal party.

Nick Clegg: Mr Speaker, the fact is that he, this Prime Minister, has fixed things so the millionaire – the millionaire pays less in tax on their capital gains than their cleaner does on their wages. He’s not learning from Barack Obama, he’s copying the Conservatives who want to cut more taxes for millionaires and not an extra penny to anyone else. So will be cancel his special tax breaks for the very wealthy to put more money into the pockets of hard-pressed families right now?

The Prime Minister: Mr Speaker, I think he is a bit behind the times. We raised capital gains tax from 10%, at the same time we took action on domiciles – non-domiciles – in the UK. But I have to remind him that a tax and spending policy must add up, and if he’s going to propose £20bn of public spending cuts – if he’s going to propose £20bn of public spending cuts – then he’s out of touch with the British people.

In my opinion, Clegg is still paying the price somewhat for putting any sort of figure on the party’s redirected spending plans. As things stand, he is exposed to the accusation that his sums don’t add up, and were he to protest that there is already a perfectly good tax-neutral package for cutting the basic rate to 16p which costs nothing at all in redirected spending, it would presumably be perceived as backing down from his wider promise to look at cutting taxes generally. Putting a figure – even a maximum figure – on the sum by which this might be done has put him in a position where he must either refuse to make a full shopping list of redirects, or else supply one which is bound to go out of date. Still, he did his delenda est carthago, and the point was made.

One minor technical point: Gordon Brown is disingenuous to suggest capital gains tax has been raised. It has been commuted from three separate rates – 10%, 20% and 40%, same boundaries as income tax – to one rate of 18%. No doubt overall this has the effect of raising the revenue level or they wouldn’t have done it, but where that extra burden is actually falling isn’t clear.

Watch again on the BBC iPlayer.

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15 Comments

  • Elizabeth Patterson 5th Nov '08 - 5:27pm

    I am pleased to hear Nick going back again and again to variations on the same question on taxation.

    Perhaps in time Brown will actually answer instead of misleading the House with his answers.
    My understanding is that we are not proposing cuts in existing public services as Brown always says in his replies.

    Cuts in extravagant new projects in the pipeline, reducing escalation of civil servants and departments to pre-Blair levels,fairness in taxation as between rich and poor,these are not reductions in public services.
    Brown also always misleads on the increase in Winter Fuel payments.
    He says “we have increased the payment to £400 for those over eighty.” According to the gov. website this sum is for two people over eighty in the same household.
    The payment for a single person over 80 is £275, according to the website.
    I thought it was a serious offence to mislead the House!

  • I would have liked if Mr Clegg pre-empted the PM’s response (given it’s obviousness), he may come off better.

  • Sorry I meant he may have answered the question.

  • Clegg's Candid Friend 5th Nov '08 - 5:51pm

    “In my opinion, Clegg is still paying the price somewhat for putting any sort of figure on the party’s redirected spending plans.”

    Eh? £20bn is the figure he’s put on cuts in spending, not on “redirected spending plans”.

    Some of it is meant to be redirected, some of it is meant to be filling the fiscal “black hole”, and some of it is meant to be going towards cuts in income tax.

    It’s anybody’s guess how much or how little of the £20bn cuts would end up being redirected to other spending.

  • David Allen 5th Nov '08 - 5:59pm

    Further to CCF’s comment, you’ll note that Gordon declared roundly that:

    “Mr Speaker, what Barack Obama did not fight on was a policy for £20bn in public cuts, and that is the effect of the policy of the Liberal party.”

    And Nick replied. But Nick said nothing to contradict what Gordon had just said.

    The only inferences one might reasonably draw are:

    (a) he was too slow to see the danger, or else,

    (b) he was happy to accept that we stand for £20bn public spending cuts.

  • Alix Mortimer 5th Nov '08 - 6:18pm

    He did use this line last week, in response to the exact same jibe: “This country is in much worse shape than I feared if it has a Prime Minister who cannot tell the difference between redirecting and cutting public money.” Seem to recall it got a good cheer too. I agree it would have been a perfectly good comeback a second time. No harm re-using good material.

    CCF, I agree. The reason I said “any sort of figure” is that I knew £20bn specifically would be inaccurate. Without being able to name an actual figure, I did have to make it clear that he has indicated a maximum level. “Any sort of figure” has to stand in for the figure we don’t know, which could be anywhere up to £20bn. I suppose you could say my problem in communicating this is symptomatic of the wider communication problem.

  • David Allen 5th Nov '08 - 6:27pm

    Hmm Alix. It seems to me that Nick’s clever line says “When I’m being ambiguous, you can’t tell what I mean, can you, Gordon, you dolt!”

  • Alix Mortimer 5th Nov '08 - 6:32pm

    @Elizabeth, well spotted. I do wonder how often people make slips on close technical stuff that goes totally unnoticed, or at least unchallenged. Maybe it’s worth our assembling a file of the stuff for a post. Gordon on tax is bound to be a good hunting ground because for a long time he felt himself inviolable there.

  • Alix Mortimer 5th Nov '08 - 6:33pm

    Did I mean “inviolate” just then?

  • Clegg's Candid Friend 5th Nov '08 - 7:27pm

    “Invulnerable”?

    But anyway, it’s obvious that when Labour wants to attack the Lib Dems, this is going to be high on the list of the weapons of choice – so the party needs to have some kind of coherent and effective response ready.

  • Hywel Morgan 5th Nov '08 - 8:05pm

    I had to look up the classical allusion. As the Wikipedia link says “Cato held no public office, but continued to distinguish himself in the senate as the persistent opponent of the new ideas.” and that he strenuously urged the desruction of Carthage I’m not sure it’s a good analogy for Nick’s future direction.

  • David Allen wrote:

    And Nick replied. But Nick said nothing to contradict what Gordon had just said.

    The only inferences one might reasonably draw are:

    (a) he was too slow to see the danger, or else,

    (b) he was happy to accept that we stand for £20bn public spending cuts.

    Or (c) the questions are scripted in advance and he was determined to stick to a simple point rather than get bogged down in detail. Perhaps he’s learned his lesson about using big figures to make a point!

  • David Allen 6th Nov '08 - 7:15pm

    Rob, I don’t think you just stick to your script and ignore what the guy has just said to you. What if he accused you of stealing the spoons? You have to deny “false” accusations – if you don’t want them to stick.

    Alix, you and I have suggested alternative ways in which Nick could prevent the £20bn figure from sticking to us (and, arguably, getting misinterpreted). I think we’re wasting our time, sadly. The evidence is that Nick doesn’t want to drop the £20bn.

    Nor does Gordon! He repeated it three times again this week. He keeps saying it. He obviously thinks it’s a vote-loser for us, so he wants to keep on hanging it around our necks at every opportunity. I’m afraid I think he’s quite right.

  • Clegg's Ardent Admirer 7th Nov '08 - 3:00am

    in its current form the policy is a presentational disaster and the fact this article is forced to quote the Spectator and , Dear God, Guido as prominent suporters is an indicator of that.

    1. While we don’t have a published list of £20bn of what the cuts are goig to be the policy doesn’t get passed first base.

    2. Even when we have that there is still no decision on what proportion is going to be redirected spending and what is going to be net tax cuts.

    3. while the PSBR is rocketing we’ll be open to and entirely guilty of the charge of borrowing to pay for tax cuts.

    All this fiasco has achieved is validate the “they’ll say anything because they’ll never get in ” narritive, obscure the perfectly well costed revenue neutral Green Switch 16p basic rate and give the Tories political cover to promise tax cuts nearer the election.

    I repeat my often stated view that this shambles will not survive a general Election campaign and has badly damaged our credibility with political journalists in the mean time. ( for example a scathing Jon Pinnear piece i heard the other day )

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