Treasury

Today was a reminder of the tax change that would give Tory re-election chances a massive boost, raising the threshold at which the higher rate kicks in. Indeed, electorally dealing with this is far more important than the abolition of the 50p rate and has been made more so by the decision to link the withdrawal of child benefit to the higher rate. During Gordon Brown’s time at the Treasury, the number of people paying the higher rate almost doubled – principally because of fiscal drag, Brown didn’t link the threshold to earnings. This means there are a whole slew of people paying higher rate tax who are comfortably off

There are still conflicting reports, but Michael Crick and The Times intimate that a deal has been struck: IDS has beaten the recalcitrant Treasury over his £9bn universal benefit reform, with David Cameron’s express help. As Frank Field put it on Sky News, IDS’ plan is ‘good for the country, good for the taxpayer and good for those dependent on welfare.’ Field gave no clue as to the final outcome of this battle, but victory for IDS would be a crucial moment in public service reform. If Crick and the Times are right then this is obviously fantastic news ahead of the Tory conference, where I feel David Cameron should

The proclamations of economists and economic bodies shouldn’t be taken as the be-all-and-end-all of fiscal policy – for every one claiming that a decision is right, you can find another insisting that it is wrong. But the coalition will still be pleased by the influential International Monetary Fund’s latest report, here. It begins: “The UK economy is on the mend. Economic recovery is underway, unemployment has stabilized, and financial sector health has improved. The government’s strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability. The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal

One of the biggest problems facing the coaltion has been presentational: how to sell the cuts? In the absence of a coherent, vigourous message, the Balls school of economic thought has been allowed to grease onto the scene – to the extent that some polls have three-quarters of respondents rejecting the government’s deficit reduction plan. But now, at last, signs that the coalition is getting into gear. It’s a process which began last week, when Matthew Hancock – a new Tory MP and former adviser to George Osborne – highlighted falling interest rates in Parliament (column 606, here); a point he has been pushing around Westminster ever since. And today

This is the latest of our posts with Reform looking ahead to the Spending Review. The first six posts were on health, education, the coalition’s first hundred days, welfare, the Civil Service, and the New Zealand and Canadian experiences. Ireland As Colm McCarthy, Chair of Irish Special Group on Public Service Numbers and Expenditure, noted at a recent Reform conference the macroeconomic downturn in Ireland has been more severe than in almost any other European country: — The budget deficit, excluding the Exchequer cost of the banking collapse, went from near zero in 2007 to 11.5 per cent of GDP in the current year, despite fiscal cutbacks which began in

This is the latest of our posts with Reform looking ahead to the Spending Review. The first six posts were on health, education, the coalition’s first hundred days, welfare, the Civil Service, and the New Zealand experience. Canada In a forward to Reform’s alternative 2010 Budget, Rt Hon Paul Martin, Canadian Finance Minister from 1993 to 2002 and Prime Minister from 2003 to 2006, noted that when a new Liberal government was elected in Canada at the end of November 1993 the deficit and debt-to-GDP ratios were, with the sole exception of Italy, by far the worst of the G7. In 1998, just 4 years later, Canada’s deficit was no

This is the latest of our posts with Reform looking ahead to the Spending Review. The first five posts were on health, education, the coalition’s first hundred days, welfare and the Civil Service. International examples of public finance rescue missions Other countries can provide important lessons on what does, and what does not, work in devising a plan to bring government spending down. Several countries have undertaken major programmes of reform that have set out to restore fiscal credibility and improve the quality of their public services. Examples include New Zealand, Canada and Ireland. Reform has drawn on the experiences of senior figures from these countries, and lessons from the

Insightful work by the FT’s George Parker, who traces the choreography of the spending review in an article for the paper today. What’s striking is how much the coalition expects to achieve by what Parker calls “peer pressure”. Ministers who get through their spending settlement quickly and successfully will be held up as examples to their colleagues, and will be drafted into the the “star chamber” to cast an axeman’s eye over other departments’ plans. Ken Clarke, we are told, “can hardly wait”. According to Parker, the process is already producing its darlings. Jeremy Hunt has exceeded the Treasury’s demands by identifying 50 percent cuts in the budget for running