Weekly Round-up - Festive Edition

The Christmas break has been punctuated by a couple of big stories. At the end of last year we had the Telegraph’s sting of a number of Lib Dem MPs, including Vince Cable. We also saw a big political battle over the hike in VAT to 20% on 1 January.

Other stories have rumbled on over the holidays, with Conservative MPs increasingly uneasy with their leader’s approach to the Lib Dems and the Oldham East and Saddleworth by-election. Angus Reid conducted an interesting poll showing that the Coalition would struggle if if fought as one in 2015 because Lib Dem voters would desert it. Ed Miliband has changed up his press team and looks to be making more of an impact, although there is a long way for him to go.

The NotW hacking scandal came back again to ruin Andy Coulson’s New Year, and the Coalition has got itself in a bit of a mess trying to decide what to do with Control Orders. Half of Westminster decamped this week to Oldham for the by-election, which is expected to return the Labour candidate, Debbie Abrahams, and David Chaytor became the first MP to be sentenced for his expenses claims. He was given 18 months in prison.

YouGov Polling 06-01-11:
Conservative 39%
Labour 43%
Lib Dem 7%
Government Approval: -20%

'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.

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.