PMQs: tax cuts and Mervyn King

The PM in PMQs is off being fawned on by the Wall Street Journal, so today Harman and Hague reprise Brown and Cameron’s usual do-nothing-party versus do-everything-badly-party routine.

Points of interest:

– Hague highlights the fact that the small company loan guarantee scheme, which was set to begin on 1 March, is still not working (he mentioned it last time he deputised)

– Jacqui Smith, sitting by Harman, appears at certain points in the proceedings to be chewing a frog.

– Is Harman embarrassed to mention the VAT cut, Hague goads when she misses it out of a list of government actions taken?

– No she isn’t. She is proud to claim it puts £275 back in the pockets of ordinary families – and I assume by that she means over the life of the cut.

Do they really believe this? It’s as if statistics have assumed an air of solid reality for them. For the nth time, there is no VAT on food, there is no VAT on children’s clothes, there is no VAT on rent or mortgage payments, there is a different and unaffected rate of VAT on fuel, gas and power. The “ordinary family” on its uppers who have stripped back their expenditure to the basics will have bugger-all back in their pockets. The rather-better-off family who have been meaning to get around to replacing the plasma screen with a surround-sound home cinema system are responsible for that entire £275. Such is the danger of averages. People forget that the average  case doesn’t actually exist – or at least, the law of averages is heavily against it.

– Harman tries to deflect repeated questions from Hague about Mervyn King’s statement to the Treasury select committee, that a further fiscal stimulus package would not work. What with? Inheritance tax, of course. The rest of the Harman-Hague questions descend (if such is possible) into a tit for tat on these two points.

Our Vince returns forcibly to King’s assessment – “a very British coup” which implies the government is now hostage to the Monetary Policy Committee’s better judgement. Where is the Prime Minister on this development? He is beaten off with the argument that the Prime Minister is working on a global level to resolve the situation, which sounds as pathetic as ever.

Ye-es, but what about working on a domestic level to resolve the situation? Both are necessary. Vince goes on to make a bold statement of the party’s tax redistribution policy and the green investment alternatives to the VAT cut. Rather than putting £12.5bn into the cut, the government should have invested in housing, infrastructure and green energy, and the best way to relieve the pressure on people feeling the pinch and put more money into circulation is to lower taxes on the low paid and raise them on the rich.

Harriet fails to answer any part of this, of course, but specifically, she fails to grasp the point about income tax cuts being a better way to put money into people’s pockets. In her answer she references the proposed raising of the upper income tax rate to 45% as a sign that the government believe the rich should pay their way. She hopes that Vince will support her on this, unlike the Conservatives (“Wooooooh!” the blue side hoots).

She really doesn’t get it at all. She thinks she can detect in Cable’s words about “the rich” the sign of a man who wants to tax them out of a sort of moral purpose. She either overlooks or cannot comprehend the extra advantages enjoyed by higher earners in the tax system, which are offensive to reason and logic as much as to morality. And she does not recognise the need to take the next step to make any sort of taxation meaningful – give it back again where it’s needed. Why, when we can spend it for them?

Also questions from Simon Hughes, Lembit Opik and Andrew Stunell, which I’ll link to when the text is up – and there was an interesting postscript to Adrian Sanders’ question about problems with South Devon College’s expansion funding last week. Justine Greening, the South London Tory, has a college in her constituency with similar problems, it appears, and wants the halted building schedule to resume as soon as possible to take account of increased demand.

For some reason Harman chooses to absolutely blow her top at this fairly innocent question. She shouts back that there was no further education funding under the Tories, and seems to imply that Greening is therefore not qualified to ask her question. It sounds like a particularly bitter and unwise pub rant that’s accidentally been relocated to the middle of the day at work. By the end of it Harman is generating so much directionless heat that Greening looks utterly disgusted, and even a little upset.

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This entry was posted in News, Parliament and PMQs.


  • Harman’s a bit thick but thinks that she’s not.

  • Andrew Duffield 25th Mar '09 - 10:14pm

    …and we should leave it at 15%.

  • Yellow Mellow 25th Mar '09 - 10:36pm

    £12.5bn is £12.5bn. Over the life time of the cut £12.5bn that would have come out of peoples pockets will stay in peoples pockets and thus stay in circulation. Its the trivial sums that are sort of genius. My VAT savings are 5p on a starbuks or 3p on a greggs pasty or 7p on my pack of Mand S tea lights etc etc.

    What use is that ? Bugger all. thats why it just disappears into my loose change pile and gets spent on a extra greggs pasty at the end of the month rather than saved for a rainy day.

    As a really quick way of getting hard cash into circulation in a way that will almost certainly NOT be saved its quite clever. the problems are

    1. As its borrowed money we should really have a better legacy than greggs pasties. A la the Green Road

    2. Its political useless for Labour because it has no feel good factor for Labour.

    3. poorly targeted as its very poor people that will spend money quickly.

    if you really want a fiscal stimulus send the very very poor cheques for £500. But there are no votes in that.

    In conclusion i think the VAT cut is a poor policy but not as poor as some people make out.

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