With annual borrowing of £160bn and a massive blank where Labour’s plans for deficit reduction should have been, this was always going to be a tough Budget – arguably the toughest since the 1980s. Some extraordinarily difficult decisions have been made to avoid an even worse crisis. Foremost amongst these was the decision to raise VAT from 17.5 to 20 percent.
Through the election campaign, all three prospective Chancellors were asked about VAT, and we all answered in exactly the same way: we have no plans to raise it, but we cannot rule it out. In fact, that was my position almost a year ago, when the true scale of the crisis became apparent.
That remained my position until shortly after the election. However, when the Office for Budget Responsibility reported that the structural deficit was £10bn higher, I realised that we had to act decisively, and that this meant adjusting our plans.
No decision to raise tax is taken lightly, but VAT is more contentious than most. One reason is that VAT is often denounced as if it were the most regressive tax of all. However, the truth is more nuanced. As a proportion of expenditure, it is in fact mildly progressive, as the IFS have recently explained. This stems from its exemptions for certain essentials, such as food and children’s clothing, which take a bigger chunk of the spending of poorer households.
VAT is far less damaging for growth than most other taxes, like those on income or employment. It is preferable to even steeper spending cuts that would hurt the vulnerable or damage our ability to grow the economy. Restoring sustainable growth is the essential remit of the Ministry I head, the Department of Business, Innovation and Skills.
There are other far more regressive taxes, and our raising VAT has enabled us to do something about them. For example, under Labour, the poorest decile suffered a 90% rise in council tax, compared to 75% for the richest, which is why we have sought to freeze council tax in England for next year. It also let us increase significantly the Child Tax Credit, fund a £1,000 increase in the income tax allowance and triple-lock annual increases in the state pension – while all the time setting a course that returns the public finances to surplus.
All of these are achievements that strongly reflect the values of Liberal Democrats. There was no way that a responsible government could evade the tough choices that Labour’s mismanagement had forced upon us. But, as Nick explained and I fully endorse, by playing our part we have ensured that the decisions made were guided by fairness – and that includes raising VAT.
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141 Comments
Nonsense. VAT is regressive. Saying black is white doesn’t make it so.
What was wrong with National Insurance? Couldn’t you cut corporation tax to, say, 26% instead of 24%?
Shouldn’t the title to this read “Vince Cable tows the Conservative Party line”?
I see the IFS destroy the myth spread around yesterday by the coalition that the Budget was “progressive”. It seems the only part of it that was “progressive” were the measures in it left over from the previous government. It also pointed out that in the coalition nice colourful analysis of the budget showing that it was “progressive”, they did not use all of it’s own measures to formulate the figures, or cherry picking as it’s known.
24 hours is a long time in politics, the myth of the “progressive” budget didn’t even last that long.
http://redrag1.blogspot.com/2010/06/red-rag-ifs-weighs-into-tory-budget-it.html
This (the IFS) is a welcome observation, though maybe begs the question why raising VAT to contribute to cutting the deficit wasn’t party policy at the election. Maybe because of the complexities of the arguments?
Saying that VAt is not regressive doesnt make it so – claiming that black is white will only get you killed onthe next zebra crossing. In fact, the richest 10% only spend £1 out every £25 on VAT, whilst the poorest 10% spend £1 out of every £7 on VAT. Hows that for regressive?
P.S. Did you know that there is no VAT on yachts? I wonder how much that would have raised? Maybe George Osborne wants to buy one of his own.
Nonsense. You put cutting income tax (a progressive tax) ahead of VAT (a regressive tax). Oh and of course cutting corporation tax – not seen as a tax for promoting growth. Tory poodle!
VAT isn’t as regressive as people seem to think. Only items that are non-essential are VATable things like food are exempt and domestic energy is at a reduced rate. If it had (as had been rumoured) been extended to all items, making it more like a sales tax, then it would have been regressive. Admittedly VAT isn’t a progressive tax but (in its current form) its broadly proportional.
VAT has only been incraesed following the additional 10 Billion in structural deficit (which needs resolving), the increase in revenue is only going to be 15% and it does make our VAT closer to the rest of Europe. The other alternatives of increasing the basic rate of tax would or not reducing corporation tax are bold ideas *but* suffer from the side effect of reducing the UK perceived location as a good place for investment.
Hmmm… I would recommend a quick browse of this pdf from the IFS, which shows us that it’s a bit more complicated than that
http://www.ifs.org.uk/budgets/budgetjune2010/browne.pdf
You can’t way up the loss by the poorest group by the gain of another group (e.g. pensioners) and call it ‘fair’. The very poor will get poorer – VAT, housing benefit, the pegging to CPI. You are just buying the older vote at the expense of families and the young. I am a pensioner but I have children – and it is their future I care about. How dare you sacrifice the young for the old – that is what war generals in the first world war.
Yes look at the IFS evidence Vince.
“VAT is often denounced as if it were the most regressive tax of all. However, the truth is more nuanced. As a proportion of expenditure, it is in fact mildly progressive, as the IFS have recently explained. This stems from its exemptions for certain essentials, such as food and children’s clothing, which take a bigger chunk of the spending of poorer households.”
Yep. You can just hear the cries from Gasworks Terrace…. ” Hooray for goodol’ Vince and his not at all regressive VAT rise. Lurvly man. Gawdbless’issoul”.
http://www.libdems.org.uk/latest_news_detail.aspx?title=Nick_Clegg_reveals_Tories%E2%80%99_%C2%A313bn_VAT_bombshell_&pPK=62148b9d-a713-4049-a3fc-e6907319cf31
Can we please nail the myth that income tax or NI are somehow progressive. Taxes on employment (including VAT, which is levied on service provision as well as goods) are always regressive. This is because they are passed on to the end consumer in the price of the goods or services supplied, with most harmful incidence on the poor. VAT in the UK is marginally less regressive due to exemptions, as Vince says. However, there are much better taxes available – as Vince also knows – which are genuinely progressive, stimulate economic activity and cannot be passed on – or be evaded by the rich. Precisely why a Tory-led government will never entertain them.
Public sector pensioners are going to get poorer (already not the gold-platted – average £4-5000) by pegging it to CPI not RPI – over time the pension will be worth little and we will be on welfare. Where then is the incentive to do grinding teaching and nursing jobs. Oh no it is only bankers who need incentives in gambling our money. Did a lot about that didn’t you Vince – 2 billion is peanuts to bankers – pathetic.
“Through the election campaign, all three prospective Chancellors were asked about VAT, and we all answered in exactly the same way: we have no plans to raise it, but we cannot rule it out.”
Sadly, all that proves is that at least two of them are liars.
“Oh no it is only bankers who need incentives in gambling our money.”
Yes, they won’t be hit by the rise in the rate of Capital Gains from 18% to 28% will they? Or the new bank levy, for that matter?
This budget is regressive, and I really don’t like a lot of it. But we shouldn’t completely lose our heads about it and forget the good things in there – one of which is the rise in CGT.
Will Mr Cable be denying the rumour (from “senior Lib Dems” according to the Financial Times, and from Ed Miliband and Peter Hain talking about the Lib-Lab discussions) that he didn’t believe cuts should be delayed even as he said it to voters? If not, what were the reasons for this other dishonesty on top of VAT?
Foregone Conclusion,
The City breathed a sigh of relief about the changes in CGT and the bank levy – they were much much less than they feared, and if that is the price of them getting their cuts in corporation tax then it is “a price well worth paying”. Banking share prices soared on the news – does that tell you something?
The bank levy raises £2 billion a year. They will pass this onto their customers, whilst making profits that exceed that many times over. Parts of the banking industry is nothing more than a leech on our economy at times, and if anyone deserved the term “the unacceptable face of capitalism” then it is them.
I should say that all of these accusations of “treason” are ill-placed. Ironically, a lot of our woes are going to come from both of the two parties sticking with manifesto commitments:
– Our raising of the tax threshold, which costs rather a lot of money. I like it as a policy, but if that was the reason we had to institute the VAT cut, I’d rather leave things as they are.
– The Tories’ promise to protect the NHS and International Development, which deepens the cuts in other departments (without those exemptions, each department would probably have to find 14% of cuts rather than 25%!)
Say what you want about VAT (and the increase MUST be viewed in balance with the measures in the budget aimed squarely to protect the poorest in society) is at least a tax that cannot be evaded.
It was also interesting that 28% CGT was the level estimated to bring the most revenue, as Danny Alexander explained on Newsnight last night – this was based on advice from all Treasury officials. Funny that Labour never took notice of this advice…
*and the increase MUST be viewed in balance with the measures in the budget aimed squarely to protect the poorest in society*
But the *poorest* are going to get clobbered.The poorest (those on benefits and carers) have been given nothing in the budget while having their income cut in real terms.
http://www.carersuk.org/Newsandcampaigns/News/Budgetreaction
@ Andrea G
Whats been funny is the amount of times the Treasury advice has been quoted since May. Seems that the treasury has suddenly become this infalliable oracle, though was unable to predict the Finnacial crisis in 2007.
Just saw this
http://shirazsocialist.wordpress.com/2010/06/23/government-bases-policy-on-daily-mail-web-archive/
Now I am worried not only the Treasury but the Daily Mail/Sun advice used 😉
I have a genuine questions to Lib Dems out there…
I am a Labour Supporter, I’ll get that out up front. I can’t help thinking that this budget will hit people on lower incomes and will leave the better off not too bad. Alongside the ease of which Senior Lib Dems are so comfortable with a Coalition that challenges their core beliefs while leaving the grass roots less keen, if I were a Local Lib Dem Councillor in a Northern City I would fully expect a total backlash at the next council elections.
Does anyone else share this view?
I post this with the deepest respect.
GarryK – as a local Lib Dem councillor in a northern city, I don’t know what’s going to happen next year and there could well be a backlash. Unfortunately, we’ve been living well beyond our means for too long. Labour planned 20% cuts across the board, and it was clear that even that wasn’t enough to get us out of the hole we’re in.
The Lib Dems could play Labour’s game – the “oh, now we’re in opposition it’s not so bad, we don’t really need all those cuts and tax rises, we can jut wave a magic wand and it’ll all come right.” tactic. For all I know, it might be a vote winner, but it wouldn’t be the right thing to do.
This is so depressing. What is the point of the Liberal Democrats any more?
>Where then is the incentive to do grinding teaching and nursing jobs.
Oh, I dunno: how about because you want to help people, rather than for what’s in it for you?
Those of us in the private sector who’ve seen wages frozen, or cut, every year for years now, and pension projections that suggest we might as well stick the money under the mattress (while we pay, effectively, into the pension pots of public sector workers*), and faced threats of redundancies and then, surviving the cuts, have been left with (grinding) ever-bigger workloads, would like to see all these nice rich bankers pay for the damage they’ve caused as well.
Maybe if the last government had regulated them properly in the first place…? Or listened to Vince when he was warning of the crash to come?
No party was totally honest before the election about cuts/taxes, because as soon as anyone suggested anything, it cost support from voters. All parties knew there would have to be unpopular decisions after.
As for ‘our children’ – if we don’t deal with the deficit now, it won’t go away – and they’ll be the ones paying for it.
Low-paid public sector workers will get a guaranteed pay rise. We’ll all pay less income tax. Food and children’s clothing are zero-VAT-rated, domestic fuel/power is 5%. So the big, regular outlays for those on limited means won’t change.
And it’s no use blaming 1/3 of the government for not producing a 100% nice budget. What would an all-Tory government have done? What would a Labour government have done, come to that?
* Research undertaken by the insurance company Axa (March 2010) found 61 per cent of private workers felt it was unfair that they would receive less of a pension than those working in the public sector.
Lets not forget the worldwide economic recession was due to the private sector.
@ Iain
Thanks for that honest response.
I have another question. Among the grass roots, what %age do you think are seriously thinking the Coalition has been a mistake, and would rather have seen a Minority Tory Administration? Personally, I could never have compromised to the level that Nick Clegg has. Maybe I’m too stuck in my Ideology.
By the way, I know what ever party won in May, tough choices had to be made. It’s a dirty job but someone’s got to do it!!
“Hmmm… I would recommend a quick browse of this pdf from the IFS, which shows us that it’s a bit more complicated than that
http://www.ifs.org.uk/budgets/budgetjune2010/browne.pdf“
The trouble is that if the IFS is saying the package is on balance regressive even on a rather narrow calculation of its more easily quantifiable effects.
On top of that, the BBC says:
Of particular concern to the IFS were the planned cuts in public services, which Mr Chote predicted would “more than reverse the entire increase that we saw under Labour”.
“[The cuts] are likely to hit poorer households significantly harder than richer households,” he explained.
http://news.bbc.co.uk/1/hi/business/10393585.stm
Only a couple of weeks ago Nick Clegg was talking about using all his authority to protect the most vulnerable. I think we’re starting to get an idea how very little such statements are worth.
@Iain Roberts: “The Lib Dems could play Labour’s game – the “oh, now we’re in opposition it’s not so bad, we don’t really need all those cuts and tax rises, we can jut wave a magic wand and it’ll all come right.” tactic. For all I know, it might be a vote winner, but it wouldn’t be the right thing to do.”
Completely agree, our local (Labour-led) council announced 20% cuts last autumn and got a LOT of stick for it, but I am pretty sure they’re now rather relieved because it is going to pay off in the long run.
“Low-paid public sector workers will get a guaranteed pay rise.”
Which based on the current rate of inflation will represent a cut in real terms for anyone earning more than about half of the minimum wage!
@Anthony Aloysius St
Page 18 in the IFS report makes for very depressing reading.
Your name? Tony Hancock?
Andrea – what do you mean VAT can’t be avoided? Have you never had a tradesman offer you a cash discount? Stop preaching nonsense.
We opposed a VAT rise last month because it is regressive and we should have opposed one now. However we are more content to cut corporation tax. Those of us with principles are being drowned out by the unscrupulous career politicians.
“Page 18 in the IFS report makes for very depressing reading.”
One reason it’s depressing is that the Treasury document argued that the VAT change wasn’t regressive because it was more appropriate to group households in terms of expenditure rather than income. That made the indirect tax changes look more progressive.
But it omitted from that chart the changes in direct taxes and benefits. That IFS chart shows why. The lowest decile by expenditure actually loses money from these changes, and the second lowest sees no gain. The gains from direct tax and benefit changes are for the higher-income deciles, and are greatest in percentage terms for the 7th and 8th deciles.
Someone talked of a “possible” backlash. Oddly enough it won’t be the Tories that get it.
Why do you think that the Tories will be interested in a deal if they get a majority?
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley’d & thunder’d;
Storm’d at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.
Well 59 anyway. Save your party.
“Low-paid public sector workers will get a guaranteed pay rise.”
>>Which based on the current rate of inflation will represent a cut in real terms for anyone earning more than about half of the minimum wage!
Which isn’t great, but it’s what private sector workers have had to put up with for years. Plenty of firms have got workers to take unpaid leave (effectively a pay cut) , had to put up with short-time working (ditto), in order to keep jobs.
If you don’t want to cut spending and don’t want to put up taxes, how do you cut the deficit? Increase the 50% top tax rate to 90%? Tory backbenchers would vote for that. Lot of them didn’t want CGT to go up at all.
Cassie,
Bin men empty bins for £12,000 and care assistants risk assault for £14,000 – what do you earn
@GarryK
Thanks for the honest and thougtful posts, I wish more inter-party dialogue were this civilised instead of the usual trolling (which I’m sure some LDs engage in too!)
As for your questions, I can’t answer with any confidence (would be nice to see another LDV members survey), but based on unscientific anecdotal evidence I’d say about 30% are reasonably happy, 30% are fairly unhappy but sanguine about what can be expected given a) the economic situation and b) the fact we only have 57 MPs to the Tories’ 300+.
The remaining 30% are properly unhappy (though so far no one I know has actually left the party). Having said that, the really unhappy are mostly those who prefer the ease if opposition and would probably have been unhappy with a 100% LibDem budget too. Every party has a certain amount of members who prefer placard-waving to actually making the tough choices of government, but I think we have more just by virtue of being the 3rd party.
As for our vote at the next locals, I wouldn’t even like to hazard a guess atm! Ever since tbd Blair years and especially since Iraq a fair share of our vote has come from disenchanted Labour voters, who will probably drift back to you now. On the other hand, a substantial portion of our support also comes from liberal conservative types who have been nervous about voting for us recently due to our perceived proximity to Labour. I expect our vote to increase in this category. What the net effect will be is anyone’s guess right now!
>Cassie,
Bin men empty bins for £12,000 and care assistants risk assault for £14,000 – what do you earn
About the same as a bottom-of-the-scale teacher, if it’s any of your business (and there’s no scale based on how long you’ve worked there any more) But then I worked hard for O-levels, A-levels, a first class honours degree, and a professional qualification afterward. And there are graduates working in our place on £17k. Who also lost a week’s pay last year.
I have written to the Guardian asking that they apologise for their pre-election support for the Lib Dems.Judging by their editorials,they,like many other people, feel they’ve been had.
Vince if you had the guts to say during the election campaighn that :we may have to put up vat if we merged with the tories: but you sit there blaming it on labour ,borrowing is down ,the public will let you know about this at the next election by kicking as many turn coat lib dems ass poss,your not even blushing,Clegg even said :thanks :for the tax increase threshold, What did the lib dems get out of this deal
andy
i FOOLISHLY voted Libdem for the first time in my life. I actually believed that the VAT bombshell was true, and can’t believe how Clegg and Cable now think they can fob us off with ‘the financial hole was bigger that we thought’ Do you think we are children? The Libdems will be wiped out at the next election and I feel sorry for those who have worked for this party for many decades, only to become a Tory cover.
I have voted Lib Dem for the last four elections, which is all my voting life. I will never vote Lib Dem again until Nick Clegg has gone. Though not a member, I have in the past and did at the last election help deliver leaflets through letterboxes. I did not deliver leaflets and try and convince people in my workplace to vote Lib Dem for the party then to get into power and back policies that we were supposed to be fighting against. I was asked quite pointedly by one of my work colleagues if I felt let down by what has happened. I feel more than let down. The budget was nothing short of a disgrace and anything gained by the party over policy seems minuscule compared to the Tory policies in there. To then be told today by the IFS that yet again we have been hudwinked, and the budget is not in fact progressive but regressive, after being told by Nick Clegg the opposite all last night, it is getting beyond a joke.
Tonight was the final straw for me, Cleggs performance on Face the Audience was nothing short of arrogance. Telling a public sector worker who was due to get a £2100 lump sum pension and then £2600 a year that it was a gold plated pension was only worsened by the fact that he turned his back on the questioner who asked why he said he wouldn’t raise VAT before the election and now has. He then looked in the other direction and mumbled that he didn’t.
How the hell has it come to this and how the hell did that become leader of our party?
I actually live in Cleggs constituency and will campaign at the next election to get rid of him.
Maybe once he has gone, we will get our party back.
I believe that this first `Coalition Budget’ required to be very tough, as it was a mother of necessity brought about by the terrible mess that Labour has left the Economy in with a £156 Billion balance of payments deficit and a further unexplained £12Billion `black-hole’.
Had Labour been re-elected were preparing an equally tough paying down of the `National Deficit’ first Budget with £44Billion unspecified `Cuts’ .But they had made no detailed plan and probably would have included a modest increase in VAT that will yield £13 Billion, over 4 years.
If the paying down of the highest in the EU sovereign debt, was the key golden rule in this emergency `Coalition Budget’ than there must be a true to the heart set of principled Liberal Democrat core values and progressive measures in all further consecutive `Coalition Budgets’, over the five years of this Parliament.I believe these will be there.
I see the continuing progressive tax allowance increase to £10K as deliverable and will take 4 million out of tax altogether, over 4 years.
There has to be a series of `Green Switch’ taxes to reduce man`s exponentially increasing carbon footprint, including an airlines targeted green tax on all flights that do not have full passenger inventories.This is good for personal health and will rebalance with gravitas placed on a greener economy with further green jobs in alternative safer cleaner energy markets.
Vince Cable will eventually make a real difference to the important task to put progressive Business Economy measures on the Government agenda that will combine Liberal Democrat core values and principle.
I believe that Vince Cable`s star will rise in the ascendant, as our sage and economics guru and inspire a new open for business sense of fiscal confidence for Britain`s trading global partners, over the next five years of this `Coalition Government’.
I find that this just gets worse and worse, it is an utter betrayal, every time something is said it means a chock on the recovery.
admiting that there is a public sector pay cut.
admitting there is an increase in pensions to come.
admitting the extra amount for pensioners is zero
admitting that middle earners are goingto be hit (tax credits)
hicking up VAT
cutting benefits
this is going to be viciouse, the cuts will lead to unemployment, leading to increased expendeture, leading to bigger deficit, leading to cuts leading to unemployment……
please please please just get of this ride.
Welfare is going to be hit hard again by the coalition, the poorest will be made homeless and will die of starvation. While the bankers who caused the economic crisis will have their pockets lined with huge tax free bonuses. Sounds fair and progressive to me.
“Welfare is going to be hit hard again by the coalition, the poorest will be made homeless and will die of starvation. While the bankers who caused the economic crisis will have their pockets lined with huge tax free bonuses. Sounds fair and progressive to me.”
I had to repost this quote. Made me laugh when I thought it was ‘funny’, then made me laugh even harder when I grasped it was ‘serious’. I live in hope that the voting booth is still out of reach, WAY out of reach.
A VAT rise is progressive. Like it or not the rich have, as a matter of definition, and will spend, more money than the poor. This, and the zero rating of essentials such as kids clothes and food, means that those who consume most will always end up paying proportionately more VAT than the less well off.
Overall I think the budget was as good as we could have expected after the irresponsible Labour splurge.
I find it absurd to discribe this budget as good, it was not, it is a budget that will damage the economy, it will have a very negative effect on consumer demand, will have a very negative effect on employment, will generally stifle thedemostic ecomomy and it will do this when our largest trading partner is also contracting.
I fail to see how a second home grown and nurturedreccession can now be aviodedand fear that it will make the first dip seem trivial.
Shocking!
Absolutely shocking…
As a naturalised British citizen I now truly regret giving my first vote
to Lib Dems.
I have lived here long enough to go trough the disappointments of Blair’s empty
promises, wars and missed opportunities of last Labour government but these new developments in British politics and re-emergence of old Tories tactics will never stop to amaze me…
Reducing the benefits and welfare of the working class people for the benefit of big business and the boys at the top clearly underlines the that this is not just a economic budget but also one full of class ideology fuelled by the millionaires club in the cabinet.
The clown that calls himself Nick Clegg will never again as long as I live get my vote!
Lib Dem has made a big mistake by getting in bed with Conservatives that will take a long long time to repair.
Maybe never after this fiasco… who knows?
Only thing I know is that this is not what I have voted for when I said:
Yes, I like the sound of Liberal Democrats.
I like what they stand for and their attitude towards social justice and fairness in society.
This budget will not affect me much and I am big enough, old enough and foreign enough to take it on the chin but that is not the point.
It stinks, it’s regressive, counter productive, too fast and too big for the fragile economy, punishes the poorest in our society and it’s unfair towards the millions of hard working people in this country.
Good to see that daddy’s banks and businesses can still rip off this country and set up even bigger trust funds for our future policy makers.
Shame on you mister Clegg!
Shame on you my Liberal Democrats!
Expected this from Tories so no surprise there.
I hope you find some enjoyment in your new coalition government because I have a feeling these actions have taken Lib Dem party away from the whole generation of progressive voters.
To this new Lib-Con government I can only say:
Enjoy it my new misguided friends.
You will have to pay for it sooner or later as we are paying now!
Working Class Hero
Album: John Lennon/Plastic Ono Band
As soon as you’re born they make you feel small
By giving you no time instead of it all
Till the pain is so big you feel nothing at all
A working class hero is something to be
A working class hero is something to be
They hurt you at home and they hit you at school
They hate you if you’re clever and they despise a fool
Till you’re so fucking crazy you can’t follow their rules
A working class hero is something to be
A working class hero is something to be
When they’ve tortured and scared you for twenty-odd years
Then they expect you to pick a career
When you can’t really function you’re so full of fear
A working class hero is something to be
A working class hero is something to be
Keep you doped with religion and sex and TV
And you think you’re so clever and classless and free
But you’re still fucking peasants as far as I can see
A working class hero is something to be
A working class hero is something to be
There’s room at the top they’re telling you still
But first you must learn how to smile as you kill
If you want to be like the folks on the hill
A working class hero is something to be
If you want to be a hero well just follow me
A working class hero is something to be…
@ Not millionaire abserloutly.
thing is the Lib dems will start paying the price for this within a year ordanery hard working lib dem councelers will start lossing local elections, not becouse they have done a bad job, not becouse peeople don’t like them , no becouse of what the national leadership has done. The great strength of the Lib dems, the bedrock of their success is about to dissapear strip mined by the power crazy, well healed leadership, shame on you for letting it happen for a pocketfull of mombles.
I predict a riot
Yeah Tony, riot or not Lib Dems have miscalculated this scenario.
No doubt about it, party is going to feel it sooner rather than later.
Shame for all the good activists who put a lot of work into it over the years and all the voters who believed that
Lib Dem really stood for something different and more honest in British politics.
Generation of Lib Dem voters lost because of broken promises and greedy leadership…
Off to bed, enough of politics for today.
Tomorrow I’m starting a riot 🙂
Maybe Vince should have digested yesterday’s Institute of Fiscal Studies briefing on the budget before contributing. It seems to shows conclusively that the poor have not been protected and that we are witnessing and participating in a massive spin exercise to sell the Budget. I am going to do nothing to argue the case for this budget amongst colleagues and voters and I suspect I will not be alone.
Filthy filthy lib dem hypocrites. The sooner the next election and the death of this unprincipled, self serving, morally bankrupt party the better.
There’s something really strange going on. On last night’s Newsnight Paul Mason showed a Treasury pie-chart of spending in the economy. This is the basis for the budget forecasts. The piece of the “pie” that previously represented “housing” was magically doubled to 20%, “investment” triples and, most bizarrely of all, the piece that represented “government spending” (about 25% of overall spending) has now been replaced by a category called “exports”.
it’s here, at 25mins in
http://www.bbc.co.uk/iplayer/newsnight
It was wierd, and Paul Mason made no attempt to explain it beyond saying that the government believed that canada had used a similar model to get out of recession in the ’90s, but he looked as puzzled as I was watching him describe it……
I said this 22nd June 2010 at 2:36 pm – https://www.libdemvoice.org/the-budget-so-what-did-you-make-of-it-20028.html#comment-128953 – before reading this topic.
The VAT increase will push up the real cost of living, bring forward major purchases and create a consumer spending dive in 2011. Growth figures are wildly fantastic as the double dip recession is now a certainty.
Lib Dem leaders are in a tough position but I can see a lot of voters either staying at home or voting for other parties; I hope it isn’t the end but would not be surprised if we lost a lot of seats both nationally and especially in local government. A tradegy where I have known many hard working Lib Dem Councillors who now need more than ever to campaign on their personal / local records and not try to excuse the Westminster Government actions.
I too am disappointed in our leadership reverting to the usual spin, all politicians sound the same when in power. The first one to go “off message” and show some backbone, Vince how could you allow your principles and prophetic insights to be destroyed in a few weeks, may get my support?
Sorry, must have been distracted as I watched the prog last night..
The chart showed the drivers of growth in the economy in the last ten years, and “government spending” was miraculously replace with “exports”. The most frightening thing was that it was somehow done by 2013, effectively 2-3 financial years to produce an export miracle to save the economy…..
The rest of the piece was an interview with a Japanese economist who said we were making exactly the same mistake they did in the 80s and they are only now coming out of recession…..”you don’t cut government spending when the private sector is deleveraging” were his words, and that is exactly what we are prpoposing to do…
It was quite frightening actually.
watch it here …25 minutes in to about 32 mins.
@Beau Nash
Two LD councillors in my neck of the woods are trying work out how to/if they can label themselves somehow to differentiate with Coalition. They are facing elections next May and are increasingly glum. Not helped at all by Nick on the Today programme- sympathetic as I am he struggled and came over poorly I suspect.With Nick tied to Cameron we seem increasingly un-led. Anyone else feel that?
I’m a Lib Dem member, let me get that out there first. But I must say that the Lib Dem members of government are really not covering themselves in glory. It seems to me that the U-turns on immediate deficit reduction and the VAT rise suggest one or both of two things: either the Lib Dems were mind-bogglingly wrong on these major issues, or they were unnervingly dishonest. The former is preferable morally, but worrying in terms of competence and coherence of liberal ideology. The latter would suggest that they have absorbed the very worst aspects of the last Labour government. Either way, our Lib Dem representatives are worrying me.
The rise in VAT will hit small retailers.
Seems the poor do have some uses:
http://www.metro.co.uk/news/832534-budget-2010-benefits-to-be-cut-to-pay-for-other-service-says-vince-cable
@Philip,
Yes and I fear the NI rebate for new businesses with up to 10 employees won’t help much. Most new businesses are usually smaller than 10 people, certainly small retailers are.
The debate over whether VAT is regressive or not completely misses the point, as this presumes that “the consumer bears the tax”.
As a bit of basic maths and logic, backed up by looking at the accounts of businesses before and after the cut from 17.5% to 15% and back to 17.5% will show, VAT is in fact a tax on gross profits (i.e. underlying profits plus wages, out of which interest and dividends are paid) and is by and large a reduction benefits the producer and is not “passed on” (and vice versa). Because of various quirks, VAT is a far, far more economically damaging tax than corporation tax or income tax (National Insurance is not quite as bad as VAT but worse than income tax or corporation tax). Let’s also not forget that VAT raises nearly three times as much as corporation tax.
Further, VAT is a tax on productive activity, and if you tax something where supply is price elastic, you reduce the amount of it. Taxes on land and building values are not economically damaging of course, because supply is price inelastic (or completely fixed, in the case of land). Therefore the least-bad tax is a tax on land values (or on land and buildings.as in the case of Business Rates or Domestic Rates in Northern Ireland).
Council Tax is indeed regressive, but it is regressive to property values rather than to incomes, so what is sorely needed is to replace it with a flat tax on values (like in Northern Ireland), or at the very least have Bands A all the way to Z, where homes in Band A pay £100 a year and homes in Band Z pay £10,000 per year.
Vince is making a gallant attempt to justify the impossible. Lib Dem policy before and at the General Election opposed cuts on this scale. We are being asked to accept that it is desirable to eliminate the budget debt and to start the task of running down the National Debt in THIS PARLIAMENT regardless of the risk to the economy and the legitimate aspirations of millions of people to improve their lives. There is no accepable economic imperative. If Vince was so very sage about VAT how comes that the party campaigned against it? If we trace Vince’s political carreer it is possible to argue that his views have been variable and correlated with public recognition. Oh dear, Vince, when this is all over and the tears wiped away what will you correlate to next?
Is the IFS wrong to state that VAT is a mildly progressive tax?
I’m not exactly happy about the rise either (I’d rather load the highest taxes onto pollutors and force non-domiciled residents to pay a proper level of tax, and scrap Vat-free newspapers for a start) but we’re the minority in a Tory-Lib Dem coalition and they get to do their style of economic thinking and sell it to us.
We need to grit our teeth, stick to our philosophic principles and loudly proclaim as a membership what we don’t like and what we’ll be campaigning to scrap at the next general election.
Not that anyone will read this, as the Tinpot Army are out in full force. Off to the members forum. 🙂
I’ve read most of the comments to get a feel of what people are thinking. I still can’t understand why VAT is regressive as food, children’s clothes and books are exempt and domestic fuel is at only 5% still. The one thing about VAT is that, if the price is not right, you can choose not to buy and not pay the tax.
The one thing that has really disappointed me about our LibDem Ministers, including Nick Clegg, has been their lack of honesty. They were brave enough to join the government as a minority partner and save the country from ruin. But why do we have to say the opposite now of what we said before? Vince Cable told the electorate that there would have to be cuts and/or tax rises without being specific. So we should be saying “Yes we did say the Tories were going to put up VAT. Well we are the minority partner in the Coalition and we were not able to stop them. Being in Coalition means making compromises and we are prepared to be judged on the compromises we make, the parts of our manifesto we got through that we would not have got through and we will be judged on the results”
As a local Councillor up for re-election next year, like all LibDem Councillors, I’ll fight on my record. I have found that if you are well known and work hard, you are (most times) forgiven for making unpopular decisions. Keep putting out those Focuses!
Anthony Aloysius St
I would presume Nick used all his authority as he said he would in protecting the poorest. Everyone in the room smiled, gave him a biscuit and carried on regardless.
@willie black
“A VAT rise is progressive. Like it or not the rich have, as a matter of definition, and will spend, more money than the poor. This, and the zero rating of essentials such as kids clothes and food, means that those who consume most will always end up paying proportionately more VAT than the less well off.
Now that is logic that you can only stand back and admire.
I think you need to look at the definition of “proportionate” and apply it to context.
Someone has £60 a week with no surplus, now has £59.00 in real terms. Someone with £1000 a week and £400 surplus, now has only £380 surplus.
Therefore, what is the proportional impact? The latter may pay more VAt, but is the impact as proportionate as in the former case?
It is not about proportions, its about bottom lines and the real impact on those least able to defend themselves’.
Plus ça change, plus c’est la même chose.
@ David Pollard
“The one thing that has really disappointed me about our LibDem Ministers, including Nick Clegg, has been their lack of honesty. They were brave enough to join the government as a minority partner and save the country from ruin. But why do we have to say the opposite now of what we said before? Vince Cable told the electorate that there would have to be cuts and/or tax rises without being specific. So we should be saying “Yes we did say the Tories were going to put up VAT. Well we are the minority partner in the Coalition and we were not able to stop them.”
The reason they don’t do this, I believe, is because it isn’t true. I believe the Lib Dems of this coalition government do now believe that VAT and immediate deficit reduction are essential. They have changed from what they campaigned on. I wrote earlier on that this is one of my biggest concerns about our leadership. If they are now right, it means they were comprehensively wrong before. But then surely I should question their judgment? Or maybe they were only electioneering and saying things merely to triangulate themselves against the Tories? Then surely I should question their honesty? Either way, the leadership does not inspire confidence. I’m surprised more Lib Dems aren’t worried by this.
There’s no VAT on (for example) private school fees, houses, pensions or savings – things which feature much more highly in the “spending” of the rich than the poor. That’s why the zero-rating doesn’t make VAT progressive.
I agree with you about how badly our ministers are doing at representing a Lib Dem line. I watched the gruesome Dave’n’Nick show on “Face the Audience” last night (full marks to them both for doing it, mind). I was getting quite annoyed at the way Nick Robinson kept interrupting Clegg; but then when NC was invited at the end to tell us what difference LDs had made to the budget, he refused to do it, and it was Cameron who interrupted to point to a Lib Dem policy that had made it into the budget. :x:
I’m not optimistic about the spending review at the moment.
TO ALL LIB DEM MPs & COUNCILLORS:
As David Pollard says “As a local Councillor up for re-election next year, like all LibDem Councillors, I’ll fight on my record. I have found that if you are well known and work hard, you are (most times) forgiven for making unpopular decisions. Keep putting out those Focuses!”
From my 25 + years experience these are the proven methods for success; I would add – where we are successful we campaign all year round, not just at election times.
It is the job of the elected representative to hold the administration (civil servants, local government officers) to account for their many maladministrations, inappropriate and often criminal actions, not protect them like some sort of sacred cow. I hope, after gaining as much knowledge as possible from being on the inside of government, we withdraw from the “coalition” and continue to support or oppose government policies according to Liberal Democrat philosophy but always with a degree of pragmatism.
Vince , a tough decision but the right one. No other way to raise £13bn to easily. Most items the poor buy are zero rated anyway.
How many people on this set of comments are actually ( or ever were ) LD supporters I wonder. Mostly labour idiots i suspect.
Good think the latest poll shows 62% of LD voters think we are right to support the budget, only 17% don’t.
Lets look at the overall effect of this budget – over the next 5 years as a result of this budget the top 10% will be 0.5% worse off, while the bottom 10% will be 2.5% worse off. The corresponding figures for the tax changes announced by Labour were 7% worse off and no change. And all of this is before taking account of the impact of the yet to be identified expenditure cuts. And these are not my figures they are those produced by the IFS.
As anyone who wants to see Labour’s budget proposals were progressive and the Condems were very clearly regressive, and there is a choice as to how deficits are reduced. There is also a choice as to the timing – and lo and behold the markets that teh present regime worship are now getting concerned about the impact on growth of governments cutting deficits too quickly.
If there are any LibDems with principles and backbones remaining who wish to continue in politics they should tear up their membership cards forwith and join the Labour Party/Greens/Liberal PArty (you see there is always a choice when it comes to politics). For those that wish to remain may I suggest that their party now needs a certain rebranding – how about “New Tories”?
Utterly scurrilous for “Gonzo” Cable to refer to the same old same old which the two wanna-be chancellors and Darling said in the campaign: “Not ruling VAT rise out.”
That phrase didn’t figure on the Lib-Dems’ posters.
Amusing he quote the OBR’s more nonsensical revisoon of the deficit, and ignores the fact that according to the OBR this foolhardy budget will increase inflation, increase unemployment and cut growth when the converse were required, in the first two cases urgently.
@Quietzapple
‘ that according to the OBR this foolhardy budget will increase inflation’
Have you the link?
ummm
I actually kind of feel sorry for these leader ( well would do if it was not for the fact that they did it) Day by day they are getting into a deeper and deeper hole there is no win for the Lib Dem leaders, either they do as they are told by the Tories and sell it to the party, in which case the lib dem party becomes a thatcerite party. Or they pull the plug on the deal with the Tories the whole thing falls apart and they go into oblivian draging the party with them for the next fifty years, a tough chioce indeed.
It is important in politics as in life to tell the truth. As football is in our minds, Vince’s obfuscation brings to mind all those phoney dives and professional fouls – some of them very nasty and others sly. When caught out the best thing to do may seem to quote someone who cannot easily be questioned. Vince Cable told the House of Commons that after the General Election result Gordon Brown arranged for him to meet the Governor of the Bank of England (interesting!) and that Mervyn King had advised him that immediate action had to be taken to cut the deficit. Consider it; Mervyn King is not responsible for fiscal policy. If Vince had asked him would SOME fiscal action be helpful to the stabilty of the currency he would certainly had answered that it would. He was not asked, according to Vince, his opinion about the SCALE or NATURE of these cuts. And he has no political responsibility. One thing is for certain is that the answer is not checkable by anyone. It is a matter of concern that Coalition ministers lie blatantly. How foolish do they think we are? And how long can they keep it up?
And perhaps a little reflection is needed regarding the taxation of banks. The markets clearly think that the Condems have gone easy on their friends in the financial sector if the price of bank shares are anything to go by. Yes they will pay £2bn in the levy – but this is actually peanuts in relation to the relief they get from corporation tax as a result of the losses they incurred for which the poor old tax payer was required to pick up the tab – if you look at the last set of RBS accounts alone you will see that they have recognised an asset of £5bn in respect of the benefit of such tax losses and have an unrecognised asset of a further £2bn. Put the measly £2bn levy in to perspective.
However, I suspect that is not the end of the Tories gameplan – guess what is going to fund the inheritance tax and other tax cuts for the well off just before the next general election (and to which the LibDems if they still exist will raise no objection) . Yep you’ve guessed it – the proceeds from selling off the banks.
@SB The link to Quietzapple’s comment on the OBR is here
http://budgetresponsibility.independent.gov.uk/d/pre_budget_forecast_140610.pdf
Paragraph 3.46 (on page 26)
CPI inflation has generally surprised on the upside relative to forecasters’ expectations over
the past 18 months. CPI inflation has increased since September 2009, reaching 3.7 per cent in
April despite a significant output gap. The pass-through of higher import prices and the reversal
of the VAT cut have boosted inflation. Oil prices, driven largely by rising emerging market
demand, have also contributed to the rise in inflation and the futures curve suggests that prices
may continue to rise, although remain relatively subdued compared to recent highs. Identifying
the relative role each of the factors above has had on past inflation is uncertain. This raises the
uncertainty over inflation’s future path. Nevertheless, we expect that these factors will continue
to place upward pressure on prices, so that inflation remains above 3 per cent in the near term.
I dont know but they have to lie, cheat steal to keep the deal going if that is what it takes, the Tories know this and the only outcome is the demise of the Lib dem party
….unless they take of the uniform, and leave the show
@ DM Andy
Thanks 🙂
Funny how the LibDems ideas in the election re VAT now didin’t appear to be all that well thought through. Hasn’t one of the main criticism’s of LibDem policies in the past been that they are that well thought through and could never be implemented in practice. Hmm must remember for future reference!
I hope everyone here has read the IFS link that Vince Cable’s article provides.
ie this one http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf
It is I find rather fascinating to find out how the VAT sums add up. Up until now I had argued that VAT is regressive, but the IFS article shows that reality is much more complicated. For example a lot of people on low income are students, often from wealth backgrounds and they spend more on consumer items than other sections of low income people who mostly buy items at 0% VAT.
So the good news is that there are good arguments that VAT is not regressive. On the other hand read further down and you find out that cutting VAT as Labour did in office worked very well as an economic stimulus policy, despite the opposition from Nick Clegg and Vince Cable!
I remain concerned that the IFS has reported back that the net effect of the budget is regressive, albeit for reasons other than VAT.
I think another debate we need to have is whether “shrinking the state” is actually what is regressive. Prima Facie that appears to be the case, and perhaps what we should be alarmed about.
Im not a economist just someone trying to make the household budget balance each week.
Can someone answer this for please?
If I understand this right a lot depends on this new budget of working is that intrest rates remains low. So if inflation does rise this will make intrest rates also go up? Making my income even smaller in real terms?
Yes, the decision would have been tough for any party that had gone in; however, the difference was that Labour would have spread the cuts over longer years and thus avoid the stinging pains of it. And any ‘real’ adult who earns and manages his income can tell the difference in paying a debt outrightly and spreading it over a longer period. Isnt this the core formula for buying/owning a home and paying mortgages? If anyboy thinks it is better to cut and slash quickly, why dont you just go on and pay all your income to your mortgage at once and see what happens?
The funny aspect is that Nick Clegg has played the ‘old party’ more than all the ‘old parties’ put together. Its completely alright to blame the previous government and finding £10b more hole, etc. But arent we all tired of listening to the blame than getting the solutions? How is it that the same Treasury that adviced and worked with the previous government has now identified this same holes it never mentioned and yet, the present government continue to trust and work with them. I would suggest that top officials in the Treasury be relieved of their position ‘for coniving with the previous government’ if that is the truth.
And finally, it is an eyesore and an undeniable deciet that the same Vince Cable that told the electorate how they could mend the deficit without raising VAT, by raising tax-free money to £10k, and time without number assuring that fast cuts arent anything near sensible, has today turned against all they once preached. But the reason is clear: Nick Clegg, like his Conservative colleageus are ambitious career politicians. So never mind, they may probably not contesting the next election… They simple have achieved what they personally wish and I praise them for that.
I think that what is useful is to learn from them is how to be ambitious and achieve your goals… dont worry who suffers in the process. Where is the math book Vince Cable used to work out all his sums before the election? And why should anyone trust him if the sums he did before the election has now turned out to be rubbish? I would take it he cant be trusted now either.
And Ed Miliband have rightly said in the Commons, “it takes a long time to establish a just and honourable reputation; but it takes a very short time to damage same”.
Vince Cable: Why the VAT rise had to happen . . .
Because ‘Call me Dave’ told me it had to!
@ geoffrey
a lot can be said about VAT and how it affects who surly the important thing here is that what is being said is different, by the same people, that is it is Spin by Vince or nick or whoever, that they are doing this for the sake of the coalition that the Tories know it and that the Toriesknow that they can make them do it again and again and again.
The longer it goes opn the more like Thatcher the lib dems become, the only way out is to pull the plug on the deal and the sooner this is done the less bad for the Lib dems
@tony
Did you actually read the link? The IFS does not spin for anyone.
Read the link and let me know why it is wrong, otherwise you are the one who is doing the spin.
Lib Dem member here…Couple of points of major points of disagreement with this post (and the budget).
Firstly, cutting the deficit (which there is broad agreement on) is not the same thing as balancing the budget. There is no sensible economic reason to push so hard to ‘break-even’ as a country in 5 years.
Secondly, the way the deficit is being got at is unfair. Less unfair than it would have been with just a Tory government? Probably… but the IFS and other evidence clearly suggests the poorer you are, the more you are having to bare the burden of this and that is deeply troubling.
Thirdly, this won’t work. Massive budget cuts and indirect tax rises will cost jobs which in turn will cost more jobs. Cutting this hard and this fast will mean more people for the government to look after… and the deficit will balloon.
@davepollard
I still can’t understand why VAT is regressive as food, children’s clothes and books are exempt and domestic fuel is at only 5% still. The one thing about VAT is that, if the price is not right, you can choose not to buy and not pay the tax.
With respect Dave, Vat is regressive or not and it doesn’t matter whether you understand it or not.
And it is regressive. The poor spend most or all of thier income on essentials and if tax on spending rises 2.5% thye are 2.5% poorer…immediately, and having to cut something essential out.
The rich do not spend all of their income and they can easily afford to be 2.5% poorer in any case, and do not have to cut anything essential out.
The Lib Dems knew that before May 6th. They seem to have “forgotten”.
To quote Nick Clegg We will not have to raise VAT to deliver our promises…Let me repeat that: Our plans do not require a rise in VAT
Liar.
Mixed up italics. Sorry.
@Braveheart
“The poor spend most or all of their income on essentials and if tax on spending rises 2.5% they are 2.5% poorer”
As has been pointed out by several people, many “essentials” — most food, children’s clothes, books — are VAT-free, so it ain’t that simple. But as I pointed out earlier, there are plenty of VAT-free items that figure more highly in upper-income household’s budgets too, so the zero-rating doesn’t swing it as convincingly as Vince and his remaining fans may like.
More relevant still is your remark that “The rich do not spend all of their income“. Rather like waiting for the political tide to bring CGT rates down again before realising their gains, the rich can afford to postpone their spending (or indeed bring it forward — expect a bumper Christmas and a New Year crash).
@geoffrey
I am not saying the IFS spins maybe I am saying that if you change your stance (even if in hindsight that was guarded non comital from VC and condimnation for considering it from NC) and then appeal to the authority of the IFS that this is spin (the use of the IFSA report not the report) to justify the abandoning of a position.
the contingent truths or falsehoods of the authorative report are exactly that contingent the saleant point is that the shift in position favours one party in the coalition to the detrement of the other in such a way as to make it crystal clear that one party is increadably weak and innefctual within the coallition that party in this case being the lib dem.
this is one of the first examples there well be many many more.
Don’t overlook the fact that fuel charges will go up from 5% VAT to 6% January 2011
Vince, I 100% agree.
None of the parties ruled out increasing VAT in their manifesto or at any point during the campaign, despite being invited to on numerous occasions.
The Lib Dem argument against the Tories was, if I recall correctly, that there was a hole in the Conservative economic plans which would require a VAT increase (or another tax increase of a similar size) to fill. By contrast the Lib Dem plans didn’t have a hole in them, subject to the Labour Government’s figures being accurate and the economy not deteriorating. But they reserved the right to increase taxes taxes (VAT among them) if necessary.
What we’ve ended up with is a situation where (a) the Labour Government’s figures weren’t accurate (surprise surprise), and (b) there is a compromise economic package between the Cons and Lib Dems. Various Lib Dem tax increases such as the mansion tax, restricting pension tax relief to the basic rate, changing the taxation of benefits in kind and extending the scope of Stamp Duty Land Tax have proved unacceptable to the Tories and we’ve ended up with a VAT increase instead.
That’s a change that’s entirely explicable. Essentially both parties had a VAT increase as an option if required. Events, and rejection of alternatives, required it.
It is also, given the dire hole the Labour government have left us with, the right thing to do.
Now can everyone see Clegg sold us out?
I’m not saying labour is an alternative, not for me anyway.
I am not going to bother voting for anyone next time. There is no point as they all lie.
I don’t get any satisfaction from the turn of events and point scoring is such a hollow victory in the light of what is coming.
Someone posted that the “poor will starve”. Maybe a tad over the top but there will be a choice for some of eat or heat ; or the mother on benefits going without in order to ensure her children eat properly. Of course it happened under labour, but not to the extent it happened before or is about to happen again.
Not to long ago I remember every city in the UK had the mentally ill homeless all too visible ; spectres that told a story that we had lost the basics of a civil society and a civilisied society.
“The rich have a reluctance in defending their wealth and income as a social, moral or divine right, so their only possible resort is the functional justification…….. the rich to not speak in defense of there own good fortune, they speak as the benign servitors of the common good”. (J K Galbraith, The Good Society)
Think on why any of us became interested in politics and what for.
My local Liberal Democrat MP (for whom I voted, a decision that I now bitterly regret. It was the last time I will ever vote Lib Dem) currently has this statement on his website (dated 22 June):
“This was always going to be a tough budget designed to address the mistakes of the past; and I am encouraged that the coalition government has taken tough but fair measures to try to balance the books, adopting key Lib Dem manifesto pledges.
I am delighted to see that the tax threshold will be increased by £1,000, with the intention of increasing it to £10,000 in the longer term. This will take hundreds of thousands of people out of the tax system altogether.
Restoring the link between the basic state pension and earnings is an extremely welcome move.
Raising a levy on the banks is completely the right thing to do and the cut in corporation tax for smaller companies will ease the burden for many and help to drive the economy.
All these proposals were promised by the Lib Dems in their election manifesto and we impressed upon the Conservatives that they were vital to form the basis of this budget.
They will help low and middle income earners, secure a fair deal for pensioners and rebalance the economy.
I am delighted that we have been able to deliver our promises to the people of [ ] and this country.”
Weasel words indeed. This budget was not about delivering Lib Dem promises. It was a betrayal of Lib Dem voters and of the values that I and many others foolishly thought the party stood for. There may be some small positives in the budget but the combined weight of the changes is profoundly regressive. Not only that but this ideologically-fuelled rush to stringent cuts (the direct opposite of what the Lib Dems argued before the election) is more likely to jeopardise economic recovery than to secure it. So there will be pain today, pain tomorrow and even more pain in the longer term – disproportionately borne by those least able to bear it.
If the Lib Dem cabinet members have any integrity they should resign. It’s a betrayal and a disgrace.
Clare ,
If it was a Lib Dem majority government we would have delivered most of our promises, But it isnt.
If you think this budget was bad – you would have had an even worse one with the Tories on their own.
So disappointed seeing Nick Clegg squirming on a daily basis in defence of the LIbCon budget,and what caps it all is reading Vince’s justification of the VAT increase……. they’ve sold their souls…………
@George C
I’m afraid that your justification for the VAT rise doesn’t add up. Vince Cable didn’t rule out an increase in VAT if the situation was worse than Labour’s forecasts showed. That’s a perfectly reasonable position and in fact it’s the same as Alastair Darling’s position was that Nick Clegg attacked so fiercely.
But the position is that Labour were too pessimistic in their borrowing forecasts. Allow me to quote from the OBR’s pre-budget report (and remember this is a Tory team assessing the position prior to any Coalition changes).
Full document available at http://budgetresponsibility.independent.gov.uk/d/pre_budget_forecast_140610.pdf
“The latest outturn data published by the ONS have revised PSNB in 2009-10 to £156.1 billion compared with a forecast of £166.5 billion in the March Budget.” (paragraph 4.36, page 38)
“Our central forecast is for PSNB in 2010-11 to be £8 billion lower than in the March Budget” (paragraph 4.37, page 38)
“By 2014-15 PSNB is forecast to be £3 billion lower than in the March Budget. The forecast judgement that growth will be lower than assumed in the March Budget, as set out in Chapter 3, leads to less medium-term strength in the key determinants of the tax base such as labour income and consumption.” (paragraph 4.38, page 39)
“Cyclically-adjusted net borrowing is now forecast to be higher than the March Budget throughout the forecast period, by 0.3 per cent to 0.8 per cent of GDP from 2010-11 onwards.” (paragraph 4.40, page 39)
Annoyingly I cannot fine the figures for 2011-12, 2012-13 and 2013-14 but even adding those three numbers together the OBR are saying that Britain will need to borrow £21bn less over the next five years than was previously reported. As Vince Cable’s plans were fully costed based on the March budget figures, having to find £4bn per year less should have been easy without resorting to a VAT rise.
@Foregone Conclusion
– The Tories’ promise to protect the NHS and International Development, which deepens the cuts in other departments (without those exemptions, each department would probably have to find 14% of cuts rather than 25%!)
If the Tories had not made the pledge on the NHS they would not have got the number of seats they have. The public have never had the stomach for governments to cut the NHS, and arguably the relish that the LibDems showed at the election that they would cut the NHS is the reason why they failed to get the number of seats they wished for.
Ironically, Lansley will cut the NHS and he will be doing it in a way not so different from what the LibDems want to do. Of course, neither the LibDems, nor the Tories mentioned their NHS privatisation plans at the election, but that is what we will get.
@GarryK
“if I were a Local Lib Dem Councillor in a Northern City I would fully expect a total backlash at the next council elections.”
I’m in the Midlands and local LibDems are getting very nervous. People I have talked to seem to think that the Tory vote will keep up, and the Labour vote will increase, but the LibDem vote will collapse. The talk is not about the Nasty Tories (who ever thought that they had changed?) but that the LibDems had betrayed their principles.
@simonsez
“If you think this budget was bad – you would have had an even worse one with the Tories on their own.”
We will never know. Maybe the situation we have now is worse in terms of the impact on the political landscape over the next generation or so. The ‘cover’ and ‘legitimacy’ that the Lib Dem support gives the Tories is a gift to them but one that comes at huge cost to the LD party. Far better to have let the Tories go it alone and be seen in their true colours. Instead, the Tories must be laughing all the way to the champagne bar.
Unless the LD cabinet members stop acting as Cameron and Osborne’s poodles and start showing some integrity and some differentiation from the Tory rump I fear that that no amount of ‘talking up’ by loyal supporters on this message board can rescue the party.
@Cassie,
“I worked hard for O-levels, A-levels, a first class honours degree, and a professional qualification afterward. And there are graduates working in our place on £17k. Who also lost a week’s pay last year.”
You need union representation. Seriously.
The nasty thing about Clegg’s “gold plated” argument is that the vast majority of public service pensions (and hence because of the number of people, their pensions will be the target for cuts) are very low. Attacking low paid workers for ideological reasons is a nasty character flaw of his. I am all for taxing the pensions of the high paid, but suggesting that a bin man is on a “gold plated pension” is insulting and dishonest (and for the record, my uncle was a bin man and I can tell you that he is not living in the lap of luxury).
@ george I find that I must have been in a different world than you the whole attitude was one of derrision to the idea of a VAT rise.
@ sabrina agree this wasa sell out I fear just one of many becouse the Lib dem leadership has to make the coalltion workand the Torys know it
@george again for this reason the attitude and presentation you put on it is that, that the party has to, and is demonstrative of a re;lationship that is whooly unhealthy, the lib dems getting nothing and haveing to take all the flack for the Tory actions.
@simonsez the budget is the first step there will be many more “vat” issues and things will be very much worse if this gov stays in place.
@tony
this is going to be viciouse, the cuts will lead to unemployment, leading to increased expendeture, leading to bigger deficit, leading to cuts leading to unemployment……
The problem that most of the axe wielding loonies do not admit is that when you cut public services the public have to pay more. Public services like education and health are not optional, but the plans to privatise service provision will end up with us – the service users – having to pay more out of our pockets.
Life will be far more expensive under the Tories because the only service provision will be from private companies. You will not be able to vote to have the service improved, or made cheaper. And if you think that consumers through the market will cause improvements I should point you to the free market of healthcare in the US, where it has completely failed to keep costs down and failed in areas like infection rates where MRSA infections remain stubbornly high compared to the NHS.
@richard
whilst accepting your point, was trying to make the point that the direct costs of welfare and unemployment brought about by this budget are real and substantial.
As I recall this was the case in the eighties and nineties. Looking at the Eigties not even Thatcher and Tebbit could reign the costs in, attempt after attempt failed and the resulting youth riots spread up and down the country.
The political hatred that exists looks to be heading towards the Lib dems purly becouse of the percieved betrayal here, good people in the party will feel the wrtath of the public at the next local elections garanted.
So we have a 2.5% drop in VAT under Labour that *everyone* criticizes as a pathetic reduction and a waste of time, followed by a 2.5% rise in VAT under Labour which no one bats an eyelid at, and further more no poor people die of starvation in the process (having had a year to get used to the (not-so) lower prices), and yet when we have a 2.5% further rise in VAT under the coalition its a most unforgivable sin which will surely lead to the mass genocide of the poor and the return of Thatcher to steal all the milk from our breakfast tables. Bloody hell what a double standard!
@BGB so that was the attitude to the VAT rise when the Tory Tax Bombshell idea was floated by the lib dem leadership was it?
the fact that this discussion has broadened out has no bearing either does it?
The cuts envisaged are greater than under thatcher I believe, this budget is only the first step and I really am pointing to how the relationship is devoloping here the image i get is that the Lib dem party is a lap dog of its leaders who are a Lapdog of the Tory party.
@ BGBrighton
I don’t recall Labour’s 2.5% restoration (not raising) of the standard rate of VAT being accompanied by cuts to the disability living allowance; cuts to help for the jobless; cuts to housing benefit; cuts to tax credits; cutting back free school meals; axing of the child trust fund; cuts to child benefit which the lib Dem Cons have frozen for the next three years; cuts to free swimming for children and the over sixties; cuts in income support to single parents who will now have to start finding work when their children are only five years old. Oh, and a VAT bombshell of 20%. Need I go on?
@MacK
I don’t recall Labour’s 2.5% restoration (not raising) of the standard rate of VAT being accompanied by cuts to the
No instead they plan to increase the rate of NI instead by a larger percentage.
disability living allowance; cuts to help for the jobless; cuts to housing benefit; cuts to tax credits; cutting back free school meals;
no instead Labour simply planned to carry on spending whatever the weather
axing of the child trust fund;
Not a single individual in this country has actually benefited from the CTF because you can’t access the funds till you’re 18 and the scheme started in 2002.
cuts to child benefit which the lib Dem Cons have frozen for the next three years;
a freeze is not the same as a cut, irrespective of inflation.
cuts to free swimming for children and the over sixties;
i’m crying tears of sorrow…
cuts in income support to single parents who will now have to start finding work when their children are only five years old.
How terrible a parent should go back to work after their children start preschool.
Oh, and a VAT bombshell of 20%. Need I go on?
Please! Did you honestly feel that much poorer after the rise, oh sorry, restoration in VAT to 17.5%? I think not!
@BGB
there is going to be 25%, these cuts are going to hurt, they are going to cost, there is now going to be a second recession and you sound like a Tory.
this last phrase is not an insult it is an observation and relavant becouse in order to defend what is happening the party is turning Tory or at least appearing to, the deffenders of your leaders positions could be writing in the Daily mail is the impression I get and this is a real danger for the party.
BTW you did not answer my Q
@BGBrighton
“How terrible a parent should go back to work after their children start preschool. ”
Of course it’s not terrible that parents get back to work. What is terrible is that when, because of all the cuts I’ve mentioned and the others to come, they will be unable to find work; the jobs that would enable them to work and do the best for the children just won’t be there. They will be a single, impoverished parent with a five year old child without income support. Even if the parent does find work that job may be only part time, it may be an inflexible job that doesn’t fit around the school day and the single parent may not not be able to pay the cost of child care. Single mothers and fathers currrently get income support until the child reaches ten. The Labour Party was already reducing that to seven. Now the Lib Dem Cons have reduced it to five. Single parents will also be hit by the other changes to child benefits. I’m not a single parent so how do I know this? Easy, I use my knowledge, empathy and imagination. Why don’t you try it for all the other cuts I’ve mentioned?
I have voted Liberal Democrat all my voting life. I shall never, ever, vote for this party again, from now until the day I die. The Liberal Democrats are an embarrassment and what they are prepared to do to have just a little power, but not a great deal of influence it would seem, is just about as sleazy as it gets. I hope you and your party are wiped off the political map forever come the results of the next election. There is no room for a party of such great deceit and such little support in government.
@tony
You say I sound like a Tory (and no I didn’t join the party from the SDP), but you sound like a Labour supporter, and that is the problem – carping on about how terrible the VAT rise is plays directly into the hands of Labour, and if you are a LibDem supporter you should learn the lessons of history and remember that we need to maintain unity going forward. If we fracture then that *will* be our downfall. There are plenty of worse things in the budget than the VAT rise which I really don’t think will produce a significant change in pricing (esp. since food, childrens clothes etc are except, and correct me if I’m wrong but the 2.5% only applies to the 17.5% VAT rate, not to the lower rate paid on fuel)
You say there are going to be 25% cuts to some departments and you are right, but those cuts would still have to come under Labour or under a Labour/LibDem coalition, or even under a LibDem government. The only difference is that we’d be having this same discussion with people complaining about how the poorest are going to be hit hardest (because they *always* are, because they rely *so* much more on public services) one year later.
You use the phrase “The cuts envisaged are greater than under thatcher I believe” – that my friend was Labour’s line to describe their own cuts. Lets not forget that even under Labour we were facing in their own words “cuts greater than under Thatcher”. For them to act so piously now is ridiculous, and for LibDem supporters to forget that, just because we’ve had to dirty ourselves with the business of being in government is even more ridiculous.
You’re right though, I don’t like having to defend certain aspects of the government (so thank dog for Simon Hughes), but I dislike even further people who claim to be supporters of the party (@Gavin for example) who think we are nothing more than the sandal wearing arm of the Labour party and throw a hissy fit just because we have been forced to make some tough choices as part of the government. We did come 3rd in the election – we can’t expect to have it all our own way. They have more seats and more votes – they’ll get more of their way than we will.
Direct Lies, of course, include:
UK debt is worse than everyone elses. (Not just a lie re Debt to GDP ratio, but also UK debt is longer term than comparable countries’ debts, and largely to British nationals, rather than foreigners)
Labour would have tried to increase taxes and cut public services by a similar amount. (The Cons/Nat Libs are foolishly exceeding Darling’s targets by 50%)
Vince Cable has been persuaded by economic facts. (He has no choice, sink or swim with his tory mates, until, he hopes, he replaces Osborne)
Still, at least those Labour and Lib-Dem “activists” who imagined they were a progressive consensus not look utterly stupid. Which is a plus. (Excepting those who occasionally adopt a realistic vision of the world)
@BGB my observation is that defenders of this policy (and others) sound like torys.
I want to clear this up they do when they defend this policy sound like Torys, I am not saying they are Torys(nor that they are not) merly that they sound like Torys.
I do not wish to cause offence by calling peeps Tory who may not bebut it is important that peeps know how they and the leaders come across. The route of the problem is that it is a Tory policy as is the huge cuts, peeps and espiecally of my age who recall doubleing of VAT under thatcher and cuts under same etc will see them as Tory policys, now I am not saying that the policys are wrong at this point(although for reasons I have set out elsewhere Ibelieve that they are) merly that these are Tory policys.
As Tory policys in the sense that the above para stats that is policys identifiable in peeps minds as Tory deffending them makes you sound like a Tory, you may or may not be correct in what you say but you will sound like a Tory. This is a major major problem for a party that is a broad church.
I just want to stick to that bit for the minute coz I really want to nail down that I am talking about perceptions here.
I’m a Lib Dem member, let me get that out there first. But I must say that the Lib Dem members of government are really not covering themselves in glory. It seems to me that the U-turns on immediate deficit reduction and the VAT rise suggest one or both of two things: either the Lib Dems were mind-bogglingly wrong on these major issues, or they were unnervingly dishonest
Or the LibDems lost the election.
Matthew Huntbach
Or the LibDems lost the election.
I understand where you’re coming from, Matthew, but of course Lib Dem ministers are simply not giving that explanation. They’ve bought so thoroughly into this coalition mindset that they’re constantly claiming simply to have changed their minds (or to have always believed something different from what they said before), rather than saying that they’re a minority partner who can only get some of what they want. Look at this very article — Does Vince say anywhere “we would have done it somewhat differently if we were the majority party, but we’re not, so we have to compromise”?
I understand the need for a degree of circumspection. But I don’t think it makes sense for separate parties in a coalition to adopt the same blanket collectivity that is normal for single-party governments. (Though even there, some people would welcome a little more honesty about disagreements within cabinet.)
Did you see Cameron + Clegg on “Meet the Audience” on the BBC the other night? Clegg was given a direct opportunity at the end to say what difference the Lib Dems had made to the budget, and refused. It was left to Cameron to interrupt and point to the personal allowance hike as something that wouldn’t have happened without our party’s input!
Our ministers have got to stop pretending that they are 100% behind everything the coalition does. It makes them, and us, look either foolish or dishonest. (So as someone said earlier, “Thank dog for Simon Hughes.”)
Nobody loves taxes, even though liberals all have to admit they are necessary to some degree and to a certain level.
That said, VAT (a tax invented by a French banker, lest some forget) is probably the silliest and most unfair tax ever invented. Taxing value added! How silly and anti-economic. And anyone buying the same goods is charged with the same tax amount, regardless of their income and purchasing power.
This and other measures vindicate my position expressed here even before the coalition was in place: the Lib Dems should never have embarked on that and left it to a minority Tory government with approval of some measures à la carte instead of having to swallow the insipid conservative menu.
As a progressive liberal -where are these left?- I rarely pop up on https://www.libdemvoice.org, which has become too much of His Master’s Voice for Lib Dem cabinets.
Where are the”progressive” Liberals? In retreat, whatever their former levels of Progress, but …
Perhaps 10,000 or so have joined Labour, most of the rest likely drowning their sorrows.
Have been amused at the chi chi re Simon Hughes, who at one point in the distant past threatened (petulantly) to stand for the Greens when he couldn’t get his way.
Another damp squib!
What disgusts me the most is that the Lib Dems have sold their souls for precious little reward, and they have next to no influence whatsoever in a particularly vicious Tory government that is out to do Thatcher’s unfinished business.
It seems so blindingly obvious that the fixed five-year parliament stuff and the 55% no-confidence threshold stuff is only there so that a minority Tory government can continue once they’ve got into their stride and can do without their little Lib Dem poodles. That’s all the Lib Dems are – lapdogs propping up a party that failed to win an overall majority because of the seething hatred that still exists towards it. The Tories are an evil, heartless and greedy bunch who are laughing all the way to the bank for having got everything they wanted out of this budget, having conned a gullible minor party into propping them up.
The Lib Dems are about to be electorally wiped out, especially here in Scotland. No-one will forgive them for this sickening display of hypocrisy and lust for power.
I just had the answer from the horses mouth it went Nay its none of the above we have to pay for trident somehow
@lee and stupidity they have no power just an illusion of it.
This really is the most dreadful drivel from Vince, trying to justify the unjustifiable. Of course VAT is ‘progressive as a proportion of expenditure’ – the rich don’t have to spend that much of their income to survive! And pointing to zero-rated items is just patronising. Are we, the ordinary non millionaires, supposed not to aspire to buy standard rated goods and services.
There were good points in the budget, which make it less regressive than a purely Tory budget would have been. Let’s point to those, and stop pretending that black is white, and we all think VAT is hunky dory. We don’t, and if Ministers do not accept this they are in for a very tough time indeed at Conference.
@Matthew Huntbach
“Or the Lib Dems lost the election”.
Are you saying that the only reason we now have immediate deficit reduction is because we are not able to go with a 100% Lib Dem policy? It seems to me that Clegg et al are saying that things have changed and they no longer believe in holding back on deficit reduction. What about VAT? Certainly the argument can be made, however Cable is now arguing that VAT is less regressive than income tax. Does that sound like he has a problem with VAT?
I agree with you, that there was little choice for us after the election, but to join the coalition. However, all I want to see is that someone in the party is thinking strategically about the scale of the challenge facing us. and I worry, judging from the shrill tribalist line being trotted out repeatedly on these boards, that too few are taking this threat to the Party seriously. I think we face the very real prospect of desertions on both our left and right flank, with the Greens and Labour pulling environmentalists and social democrats, and the Tories getting the market liberals. We could be reduced to a rump party like UKIP, unless someone is thinking and advising our leaders what we can do to survive the challenge of partial government with full accountability. Otherwise, liberals and social democrats, won’t have the Liberal Democrats as a vehicle for the politics beyond 2015.
How long will it take the former Liberal – Democrats to realise that their party has been replaced by Cameron’s National Liberals?
About 3 months longer than it takes the Coalition to tie some funding to Clegg’s control of the rump of that institution is my guess.
@quietzapple the coalition is going to work only for the Tories no matter what party they are in.
I think that Vince is an honourable, decent person and I’ll take him at his word.
Two things strike me re. this:
1) The UK is in trouble – and so is Europe, indeed the world is, economically speaking. So with that going on, we have to cut our debt – and fast.
2) I voted Lib Dem at the General Election, but it strikes me that there’s an element in the party and it’s supporters who like being ‘The people’s Tribune’ i.e. always being on the ‘right’ (or should I say ‘left’!) side of issues. I think that being in government, in a very difficult time means very difficult choices – choices, that I don’t think that a lot of Lid Dems are prepared to face up to yet.
Can certain Lib Dems and their supporters stomach being a party of power and able to support and make some tough choices? Or will they have a knee-jerk reaction back to always supporting what is popular, even if it’s not feasible at the moment?
Nope, Vable is not decent, but some are:
‘Colchester’s Lib Dem MP, Bob Russell, cautioned that he was considering voting against the Budget,
http://s.coop/18g
‘saying: “Less than 50 days ago, I was seeking re-election in Colchester opposed to a rise in the level of VAT. I need to discuss with colleagues how it is we have got into this situation. VAT is a tax which the low-paid disproportionately pay more.” ‘
Oh, one might add that UK’s debt is not exceptionable, especially as it is so well structured and not pressing (ie it is longer term and principally to Britons rather than foreigners) and not wildly beyond the average as liars like Cable and Osborne make out.
The public smells unexpected scunners and the poll ratings for the Nat Libs have fallen to 16%. Sayonara.
I see so the leaders are acting within a long running Liberal tradition, thats OK
presumably they can now be radical freemarket Liberals if that suits and allows them to be pals with the Thatcherites
oops sorry that was an aside after reading the justifacation in the above article for incresing VAT given by one of the leaders of the LD
Actually Britain’s fiscal stance under Mrs Thatcher was as lax as their management of UK reserves was singlemindedly delinquent:
http://www.ifs.org.uk/bns/bn26.pdf
Thatcherism: All that glisters is not gold, not every miserly fool careful.
Our debts from WW2 were finally repaid under the management of Gordon Brown. Our reserves diversified likewise.
@Si
“….The UK is in trouble – and so is Europe, indeed the world is, economically speaking. So with that going on, we have to cut our debt – and fast.”
Not disputed Si,… but Labour already had plans to cut £73 billion by 2015. The OBR said that would meet the Conservatives’ stated goal of “substantially reducing the deficit” in that timescale, and theLib Dems were with Labour on that matter during the election, so that would have also been enough to meet the Lib Dems and the Tories election promise..
The Lib Dems now support total cuts of £113 billion by 2015. And the only reason that I can see for the extra £40 billion is that the Tories want to reduce the Welfare State to zero. That’s what they have wanted since Ted Heath. Margaret Thatcher failed to do it…. but Dave and George both joined the party when Maggie was PM so they obviously have sympathy with that idea….
But it never was Lib Dem policy AKAIK.
So if , as you believe “….Vince is an honourable, decent person”…
…then he’s not very clever….
Fool or knave is always the question to ask, and it is very relevant in this instance.
Should be AFAIK….as far as I know….
Quietzapple
do the spikes in the Tory years coincide with paying for unemployment/social costs, if so was that uneployment/ social cost as a result of cuts?
moving on has anyone done any work yet to measure the cost of these cuts?
if so what are they?
The real VAT Rise for Small Business is 36%.
Headline VAT from 17.5% to 20% is a 14% rise
VAT Flat Rate Scheme for small business in Jan 2010 from 5.5% to 6.5%, then from Jan 2011 from 6.5% to 7.5%. This is a WHOPPING rise of 36% which cannot be recovered by small business.
Vince Cable blames banks for damaging small business but this is his hidden small business SLEDGE HAMMER!
Unemployment is high largely because of additional costs borne by employers such as the employers national insurance contribution and the exclusion of labour as an input for the VAT calculation.