Here’s what Lib Dem shadow chancellor Vince Cable had to say in response to Alistair Darling’s Pre-Budget Report statement:
What we needed was a national economic plan but what we got was a weak party manifesto. There has never been a deficit like this and we need a sensible and coherent plan for dealing with it.
“The Chancellor has ducked the hard choices on spending and cuts. Instead of facing up to reality he has chosen to move the goal posts by relying on fanciful growth forecasts. He could have used this Budget to make the tax system fairer. But instead people on middle incomes will be paying more tax while those at the top end continue to enjoy their loopholes.
“The bankers’ payroll tax is the worst type of gesture politics and a gift wrapped invitation to tax avoidance. The hidden costs of this budget will be borne by low paid workers who face a cut in real wages because of the 1% pay rise – which is lower than inflation.
“This is a good budget for bingo and boilers but not much else.”
There’s some interesting detail in the accompanying press release’s notes to editors, notably …
2% increase in tax on workers
The Chancellor has announced a further 0.5% increase in National Insurance in addition to the 0.5% increase announced last April for both employees and employers, amounting to a 2% increase in tax on workers. Furthermore, a 1% increase in NICs means that by 2011/12, people earning over £7,000 will pay 32% tax on their income (20% income tax plus 12% NIC)
Highly optimistic growth assumptions
The Government has assumed that the structural deficit has shrunk by 1% based on highly optimistic assumptions about growth and the output gap. In the 2009 budget the Chancellor assumed the cyclically adjusted surplus on the current budget in 2010/11 would be 6.4% – he has now decided it is actually 5.4%. Even with this assumption the Government is predicting the national debt will be higher in every year than was expected in the last budget.
Government has made it easy for bankers to avoid bonus tax
The bank pay roll tax will only be levied until the 5 April 2010, making this tax wide open to avoidance, for example:
a. Multiple bonus payments
b. Deferral of bonus payments until after April
c. Relating bonus payments for years other than 2009
d. Temporary increases in basic salaries
e. Payments in benefits in kind
Real pay cut of 1.5% for workers
A 1% pay increase for workers will mean a real pay cut of 1.5% as the Treasury predicts RPI inflation to be 2.5% in 2010/2011.
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21 Comments
The boiler scrappage scheme is about the only productive economic measure in here, the rest seems so familiar – gesture politics looking for headlines rather than outcomes.
The bingo tax reduction just stinks of someone targeting voters, instead of acting with principles.
What a nightmare!
I’ve had the TV in the background most of the afternoon, but have yet to see a Liberal Democrat comment either on BBC News or Sky. Have I just been watching the wrong channel at the wrong time?
The boiler scrappage scheme is available at present to over 65s., on the warm front scheme.
I had a man around who offered us a grant, but we had just had one fitted, but we had cavity wall insulation and loft insulation fitted. We did not come under the rules laid down, but it ment work for his company so he just signed us up.
Most manufacturers will offer you discounts.
Save up to £1,102 With Energy Efficient Boilers
Offer Saving
New Boiler Discount £350
£248 Worth of Radiator & Heating Controls £248
Free HomeCare 200 for 1 year £204
Warmfront Discount for Over 60’s £300
Total Saving £1,102
David Blake.
I did see Vince interviewed this afternoon on the BBC 24 hour News channel. It lasted a few minutes and might easily have been missed with all the other interviews, but he was not left out.
Thanks, Stanley – good to know.
“The hidden costs of this budget will be borne by low paid workers who face a cut in real wages because of the 1% pay rise – which is lower than inflation.”
And yet Vince Cable was calling for a freeze in total public sector pay, never mind a 1% cap!
Actually the net effect of the NI changes appears to be favourable to the low-paid.
Herbert Brown: Vince Cable called for a flat-rate public sector pay rise – so everyone gets the same amount of extra cash per week. The freeze in the total bill would be achieved by reviewing salaries and pensions at the very top end of the scale.
Stephen
“Vince Cable called for a flat-rate public sector pay rise “
The document I am thinking of called for no such thing. It proposed an overall freeze in public sector pay (it didn’t concern pensions). Certainly he said it might be possible for the pay of some groups to rise if the pay of other groups fell. But he didn’t say anything about safeguarding the low-paid at the expense of others, and he certainly did not propose a “a flat-rate public sector pay rise”.
Are you thinking of this?
http://www.guardian.co.uk/politics/2009/sep/20/vincentcable-libdemconference
Which goes on to say:
“But Cable will say that his proposal would not lead to an across the board pay cut for all public sector workers. The Lib Dems would hope to protect, and even increase, salaries for lower-paid public sector workers by cutting the salaries of highly paid managers and by scrapping managerial jobs. The plan would only apply to the next round of pay deals; the party would honour existing deals.”
I’d check your sources a bit more deeply. That seems like a call for an overall pay freeze in total budget terms but not applying to every worker.
No, Hywel, it wasn’t a press report – it was Vince Cable’s pamphlet “Tackling the fiscal crisis”, which you can find here:
http://libdems.org.uk/siteFiles/resources/PDF/Tackling%20the%20fiscal%20crisis.pdf
Cable proposed a freeze in total public sector pay, precisely as I said. To be fair there are a couple of passing references to the low-paid in the relevant section – “There may well be many individuals who can make a pressing case for more, particularly those on low pay, but in aggregate terms pay discipline is unavoidable” and further on a reference to the need to accommodate “pressures from low-paid staff some of whom are on or around minimum wage levels”. But those vague references are as far as it goes.
And to claim that Cable was calling for “a flat-rate public sector pay rise – so everyone gets the same amount of extra cash per week” is sheer fantasy. But curiously you don’t advise Stephen Robinson to check his sources!
And, incidentally, in that document Cable was definite about freezing civil service pay:
“In the case of the civil service specifically there should be a salary freeze for several years as well as an end to bonuses …”
When you consider that – for example – in 2006 a quarter of civil servants earned less than £15,430, this concept of an indiscriminate pay freeze makes it very hard to believe that Vince Cable has any genuine concern for the low-paid.
“No, Hywel, it wasn’t a press report – it was Vince Cable’s pamphlet “Tackling the fiscal crisis”, which you can find here:”
Thank you for extracting the relevant quotes which confirm the analysis in the Guardian report I quoted. And which in any case was explicitly presented as not party policy
Hywel
It isn’t a question of “analysis”, is it? Clearly the Guardian was reporting was Vince Cable had told them he was going to say in a speech.
But please be honest. Do you really think it’s possible to reconcile a proposal for a salary freeze for the entire civil service, lasting “several years”, with an aspiration to “protect, and even increase, salaries for lower-paid public sector workers”?
Herbert – yes it is possible to do that. You axe one £60K job for every 120 low paid workers you give a £500 rise to, etc.
I repeat what I quoted above:
“In the case of the civil service specifically there should be a salary freeze for several years as well as an end to bonuses …”
A “salary freeze” means that salaries are fixed, doesn’t it?
When asked questions at conference (and since) on the subject of freezing the public sector pay bill, Vince Cable and Nick Clegg were quite clear about freezing the TOTAL. This is not the same as freezing individual salaries. Vince and Nick have frequently talked about reviewing the ‘fat cat’ salaries at the top of the scale, and also reviewing NEW staff contracts, as regards both pay and pensions.
The fixed rate pay rise suggestion was made by Vince in interviews this last week in connection with the pre-budget report. He said it on BBC News and wrote it in The Times. He suggested £8 a week. (Times article, para 8: http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article6949303.ece)
Stephen
Thank you for the link to Vince Cable’s article, which I hadn’t seen.
Obviously this is a quite different policy from the one he was advocating in September. I note that there is no mention of pay being frozen in that article – either individually or in total.
As I said, in September Vince Cable was calling for total public sector pay to be fixed, and also calling for a salary freeze in the civil service, to last for several years. It’s all there in black and white in the document I linked to.
I’m pleased to hear that those proposals have now been dropped, but I remain disconcerted by the timescale of weeks on which policy positions are still being adopted and then abandoned.
HS – it’s not a quite different policy; it’s a detail emerging after statement of broad principle back in September. And he DOES use the word “freeze” in the article, as a broad principle:
“Most private sector workers, outside City banks, have accepted pay cuts or freezes. The public sector must expect comparable discipline”
He then makes the detailed proposal of an £8 a week rise, explaining
“this is a real increase for low-paid workers and a real cut for higher earners.”
Pretty clear I thought!
Stephen
I’m sorry, but he is clearly not advocating any kind of pay freeze for the public sector in that article. He is advocating a flat-rate increase in pay. Apparently he has dropped both the freeze in total public sector pay and the indefinite salary freeze for the civil service.
It’s ridiculous to pretend that this is “a detail emerging after statement of broad principle back in September”. In September he was proposing the total wage bill should be frozen. Now he is advocating a rise of £400 per employee, which would imply a rise in the total wage bill of 1-2%.
To know the size of the total pay bill you have to be certain how many public sector employees there will be during the next financial year. If the total number of jobs were to fall (simply through not filling some vacancies, for example), you could give a pay rise and still save money. Leave one £100k job vacant and you can pay over 300 staff an extra £400 per year.
Stephen
I’m sorry, but it’s simply fantasy to pretend that what Vince Cable proposed in September – in the document I linked to previously – is consistent with imposing a flat-rate £400 pay increase on the whole public sector.
Just read it, and you’ll see that what he was suggesting was quite different. If that’s too much trouble, simply reflect that you can’t have a civil service pay freeze while increasing civil service salaries by £400 a year!
Evidently those ideas were simply being floated then. Now they have been sunk. That in itself is to the good. But if only these processes of policy trial and error weren’t carried out quite so publicly … !