Balls and Osborne: Entertaining? Yes. Informative? Sort of.

Today we saw the first clash at Treasury Questions between George Osborne and Ed Balls. The format of these questions always meant that this exchange was likely to be a little underwhelming, and less exciting and revealing than the battle that they'll fight in the media, and that proved to be the case. But what we did see were two MPs desperate to kick each other about at every opportunity.

Ed Balls was in his element. It's not that his questions were great - they weren't. It's that he was clearly having the time of his life. He looked totally assured, like a man who completely understands what is required of him. His questions on America and the difference in snow were always going to be weak because Cameron and Osborne have both acknowledged that the figures for the last quarter of 2010 were bad even without the adverse weather. Plus any actual comparison with America's economy is riddled with problems. His joke about a hurried mini-budget was better though, as was his pointed question about Osborne having to revise down his first growth forecast, which will be a focus of attack for Labour and is something the Tories are desperately hoping to avoid.

Osborne's approach, as ever, was marked by his usual insouciant demeanour and brutal verbal assaults. Like Balls, he doesn't get fazed. On this occasion he delivered two very good lines, the first claiming that now both Balls and the Ed Miliband know what it's like to be people's second choice. More cruelly (to Ed Miliband, at least) he asked Balls what it felt like to be working under the man who used to do his photocopying. Importantly, Osborne called Balls a 'deficit denier', a line we can expect to hear again and again from the Government.

As usual, the event was a waste of time for anyone wanting to learn anything about the economy, but then that isn't the point. These sessions are political, and that's what we saw today. Every question and every answer is designed to hammer home a message about the other sides' economic incompetence: 'The Tories are leading the country into a second recession' versus 'The Labour Party caused this mess and after a bit of pain it'l be fixed and life will be great'. This was just another small part of a debate that will run throughout this Parliament. 

PMQs Preview - 26th January 2011

This is not going to be a long post. In fact I wrote that sentence just to beef it up a bit. Because PMQs tomorrow is only going to be about one thing: today's shock 0.5% GDP contraction. Balls has already launched a pretty effective broadside on Osborne tonight, claiming that the 0.7% GDP growth in the previous quarter was a legacy of Labour's spending plans and that these are the first set of figures that reflect the Conservatives' economic policies.

Surely even Ed Miliband can make this stick tomorrow. For all their bluster Cameron and Osborne know that the weather did not cause all this damage alone - and that blaming the snow is a line that won't play well in the House. Expect their VAT hike to take a beating. Despite this, Balls' record under Brown and the resignation of Alan Johnson late last week should give Cameron something to hold on to, even if Miliband can just point to Coulson and previous Tory calls for more financial deregulation. It should be fun... 

'Progressive' argument obscures real threat from inflation

We are four days into 2011 and already I've heard the words 'progressive' and 'regressive' so many times my head is spinning and I'm starting to feel nauseous. Sadly, I can see this being a trend that continues throughout 2011 as Labour seeks to label everything the Coalition does as 'regressive'. 

What's even more upsetting is that the real issue here is being missed. Retailers are going to put up prices by as much as 5% or even 8%. This isn't to make profit, it's to readjust their costs to factor in inflation. These price rises were coming VAT rise or no VAT rise. 

So the real story here is not the tired old tale about the profligate Labour Government and the austere Coalition reducing its deficit, but about the huge risk the UK faces in 2011 from inflation which some economists at the Bank of England fear could see the CPI top 4%. 

4%! And that's just the CPI. The RPI was already at 4.7% in November. So despite recent support for their economic measures from a group of leading economists - who believe that the UK is in for a slow period of growth in 2011 rather than a double-dip recession - the threat of inflation still looms large. It is the most pressing economic problem facing the country, and the Government must start concentrating on finding some way to reduce inflation. 

p.s. If you want to look at whether the VAT rise is progressive or regressive then look no further than this well-researched article by the BBC's Business Reporter Laurence Knight.

The Telegraph's Cable Cables

The Telegraph's sting this week has upset Vince Cable. Speaking to his favourite local paper, the Richmond and Twickenham Times, Cable claimed that the sting had caused 'great damage' to the relationship between MPs and constituents. 

This response is really pathetic. First, he's trying to deflect attention away from what he has said and onto the means which the journalists used to obtain it. Secondly, there will be no damage to the relationship between MPs and their constituents. To realise this you only have to look at what has been published: it's all headline stuff about national politics. The Telegraph went looking for concrete evidence that senior Lib Dem MPs were proclaiming their loyalty in public and were then openly critical behind closed doors. They found it, not because they were duplicitous, but because some Lib Dems ARE saying one thing in public and another in private. 

The only 'great damage' done is to an MP's ability to fob off constituents by saying that really he opposes everything nasty that his Government has done but that he had to do it or he'd get sacked. 

And really there is very little in these tapes that should surprise anyone. 

Jeremy Browne called the Conservative's EU allies 'quite nutty' and 'an embarrassment'. Well, they sort of are aren't they? Cameron's decision to ditch the mainstream right-of-centre EU block in favour of the smaller ECR group, which includes some pretty controversial individuals, has surely been one of the strangest decisions he's made as Tory leader. It's hardly surprising that the Lib Dem's leading foreign policy man should be critical. 

He also said that the Lib Dems were a softening influence on the Tories' Europe policy, and that the EU was relieved that they were tempering the anti-EU side of the Conservatives. Again, this is hardly news. It's very obvious to anyone who looks at the UK's foreign policy for more than five seconds. The same applies to the comments he made which claimed that the Tories' immigration policy was driven by 'uncharitable' instincts. This is pretty much what the Lib Dems and Labour said about the Tories before the election. 

Other things we already knew include:

Paul Burstow saying that he didn't want voters to start trusting David Cameron, and that Cameron hasn't suddenly become a 'cuddly Liberal'.

David Heath claiming that George Osborne 'gets up your nose' and that he didn't understand what it was like to be poor. (I'd never heard this argument before.)

Vince Cable bragging that he thought he was important enough to bring down the coalition with his 'nuclear option' of resigning.

Michael Moore saying that he didn't like the plans to scrap Child Benefits to some families and that he doesn't like Liam Fox. 

Norman Baker saying that there were some Tories he liked and some he didn't, the former including Ken Clarke and the latter category including George Osborne. 

Ed Davey claiming that changes to Housing Benefit could be problematic.

Steve Webb stating that the Lib Dems needed to assert their identity more within the coalition. (Shocking.)

and Andrew Sturnell claiming that he didn't know if Cameron was 'sincere', and saying he was a 'very skilled' political operator. 

The only seriously interesting revelation was of just how idiotic Cable could be. Not just in his naive claim that he could bring down the Government but also by saying that he was trying to 'wage war' against Murdoch, and that in doing so he might actually seek to bring his office into disrepute by not being objective. Now it's pretty common for left-wingers to dislike Murdoch, but to risk your professional career in order to prevent a takeover takes things to another level. 

It's also such a cliché that these middle-aged politicians were stung by two younger female journalists (Holly Watt and Laura Roberts - above L and R). I'd love for it to have been a coincidence, but given that the two journalists' investigative strategy basically consisted of giggling, I'm pretty confident that it was not. 

As a final point, it was very revealing to see the Telegraph shamefully fail to report Cable's comments about Murdoch. The Telegraph stands to gain from any curbs on Murdoch's empire and so didn't report what Cable said. Instead, some brave journalist leaked it to Robert Peston at the BBC and it was left to that organisation - one which, like the Telegraph, competes against Murdoch - to tell the truth. The BBC is to be highly commended for its reporting and the Telegraph should be ashamed. 

CSR - 'Reform, fairness and growth'

So, 'Today is the day when the country steps back from the brink.' I do wish that Osborne wouldn't wear three-buttoned suits though, they make him look like a teenage boy forced to wear a suit to a wedding or something. Cameron and Clegg both look very statesman-like in their two-button suits, Osborne should copy them. Did like his line that the department suffering the biggest and steepest cuts is the department for debt interest. 

Osborne's letter to MPs explaining Child Benefit cuts

Date: Tue, 5 Oct 2010

Subject: IMPORTANT - Dear Colleague from the Chancellor of the Exchequer

Dear Colleague,

I wanted to take this opportunity to give you some more information about the two announcements on welfare spending that I made in my conference speech.

We all know that the unprecedented scale of the mess that Labour left behind means this Government will have to take some very tough decisions about public spending. The Conservative Party has been here before and we have always risen to the challenge of rebuilding our public finances.

But in order to sustain public support for the difficult choices ahead I believe that we must show people that our approach is not only tough but is also fair. That means showing that those at the higher end of the income scale are also affected by the measures we take.

The first announcement I made yesterday was that from 2013 we will withdraw child benefit from around 1.2 million households containing a higher rate taxpayer, saving around £1 billion a year. The other 85 per cent of families, 6.6 million in total, will continue to receive child benefit as they do today.

As I said in my speech, I understand that most higher-rate taxpayers are not the super-rich, but at a time like this it is very difficult to justify taxing people on lower incomes to pay £1 billion in benefits to households that contain higher rate taxpayers.

To put this saving in context, in the Budget I made £11 billion of savings from other parts of the welfare system, many of which affected people on lower incomes.

I know some have pointed out that this approach will leave households that do not contain a higher rate taxpayer, but whose joint income is above the higher rate threshold, still in receipt of child benefit. The only way to assess these joint income families would be to create a new complex, costly and intrusive means test that would spread right up the income distribution.

Effectively that would mean abolishing child benefit, which is one of the simplest and cheapest benefits to administer, and bringing every family in the country into a new tax credits system, with families having to provide details of their household income every year. Colleagues will be all too familiar with the drawbacks of Gordon Brown’s tax credits system and I do not believe that would be the right approach.

It is also important to note that we are not introducing a new principle to the tax and benefit system; at the moment a single earner on £50,000 pays higher rate tax while a two-earner couple earning £40,000 each do not.

And as David Cameron pointed out this morning, we should not see this policy in isolation. Other policies contained in the Coalition Agreement will help families, including our commitment to introduce transferable allowances for married couples.

Crucially, I do not believe that fairness is only defined across the income distribution. As I said in my speech, if the welfare state is going to regain the trust of the British people, it needs to reflect the British sense of fair play.

That is why I have also announced that for the first time we will introduce from 2013 a limit on the total amount of benefits any one family can receive, saving hundreds of millions of pounds.

The limit will be set according to this very simple principle: unless they have disabilities to cope with and therefore receive Disability Living Allowance, no family should get more from living on benefits than the average family gets from going out to work. By 2013 this is expected to be around £500 a week.

I believe that this measure will have strong support from the British people, and together with our transformative proposals for a new Universal Credit, it will help to ensure that work always pays.

I know that both these measures are tough, but they are also fair, and I believe that the public will perceive them as such. Our opponents pretend that difficult decisions can be avoided, but they are consigning themselves to the margins of British politics. This is a battle between the vested interests and the national interest. The Conservative Party has always been on the right side of that divide.

Please feel free to contact me or my PPS Greg Hands if you would like to discuss any of these issues further.

Yours ever,

George

Budget! Here's my two cents...

The 20% VAT rate is obviously going to get lots of coverage, and rightly so. Every media outlet is using the words 'regressive' and 'unfair' to describe it. It isn't fair because it does hit the poorest* disproportionately. People in the middle will lose out as well, missing out on benefits and also facing higher taxes.

But on the whole, I thought that the budget was pretty reasonable.

There were genuine attempts by the coalition to avoid putting all of the pain on those with the lowest incomes. Efforts to freeze public sector pay will only affect those earning higher salaries, those with wages that mean they will really struggle to pay all their bills and get enough food will have some protection. The raising of the allowance limit by £1000 as part of the drive to get it to £10,000 is very promising.

The call for government departments to cut their spending by 25% by the end of the parliament is surprisingly high. I suspect that there is a lot of waste in the public sector and that these cuts could be made. What worries me, and probably everyone else, is that useful and important things will be easy targets.

Harman's best line was that the Lib Dem's have sacrificed thousands of people's jobs in return for a few ministerial positions. Will read brilliantly in the Mirror. The rest of it was naturally - given that she didn't know exactly what was coming - vague and probably wouldn't have changed whatever Osbourne had said. Her cries that the cuts were ideologically driven were amusing, given how driven the Labour party is by its ideology. The Tories feel more comfortable with a smaller state, and they are looking to redefine the role of the state in our lives. They are right it is too large. They are right that the current benefits system is flawed, and they are right in trying to encourage private sector development. Labour are wrong to believe that simply creating government jobs in poorer areas solves the problem. Government is there to help people, not simply employ them all if they can't find jobs.


*It goes without saying that the convenient social definitions - the poor, the middle class, the rich - are useless. They are simple generalisations loaded with political implications. While there is just one budget, it will affect each individual in a different way. And the current media obsession with asking locals in Nottingham or Gateshead or wherever what they think of the budget and it's effects on them is irrelevant to everyone except themselves. Well, maybe that's a bit strong. But you get the point: the definitions are flawed.