Treasury

Tuesday

Fraser Nelson

Putting the cuts into context

Having been accused of being a “pain denier” by Tim Montgomerie yesterday, I’d like to quickly defend myself. In my News of the World column, I sought to put this in some perspective. I put in the fact that has been reported nowhere: that we know what the cuts will be. Total cuts to government spending will be 3.7 percent, spread over four years. It is debt interest which forces departmental cuts down to an average of 13 percent, again spread over four years. There will of course be real pain, for thousands of workers facing redundancy. For commuters facing a huge 30 percent rail fare increase. But when trying

Friday

George Trefgarne

The true scale of the cuts

George Osborne likes to spend his weekends at Dorneywood, the chancellor’s official residence near Slough, but I doubt this one will be  particularly enjoyable. He will be burning the midnight oil as he prepares next Wednesday’s spending review. No doubt he will also be taking calls from ministerial colleagues, muttering dark threats about aircraft carriers, the arts, sport, the roads budget, overseas consulates – you name it. And just when the numbers all add up he will probably have to start all over again after discovering that No10 has  promised to save some wind turbines because Steve Hilton bumped into somebody at a drinks party.   Meanwhile, we can expect

Tom Clougherty

Privatization revisited

The similarities between now and the early years of the Thatcher government can easily be overplayed. Yes, there are parallels: a public sector grown fat on government profligacy, unions leaders stirring up resentment, and a government unsure about quite how radical it wants to be. But there are clear differences too: the political dynamics, the industrial landscape, and, indeed, the magnitude of the fiscal crisis. Nevertheless, there is at least one successful Thatcher-era policy that is desperately due a comeback: privatisation. It won’t have escaped many CoffeeHousers’ notice that, despite the tough talk on the deficit, the government is still borrowing almost £20m per hour. The cost of servicing our

Wednesday

Peter Hoskin

Counting down to the spending review

Only one week to go, folks, until the main event itself: the Comprehensive Spending Review. And judging by this morning’s papers, the Treasury have almost settled on their final acts. Only the welfare, eduction and defence budgets have any significant question marks hanging over them. Those question marks, though, are fading fast. A story in this morning’s Times (£) reports that David Cameron has endorsed the building of two aircraft carriers, but has decided to delay the Trident upgrade until after 2015. No, strictly speaking, he’s not going back on this. Rather, the idea is that the coalition will keep on working towards a replacement for Trident between now and

Thursday

Alex Massie

Jim Murphy for Shadow Chancellor?

Good stuff from Iain Martin: [Ed Miliband will] have to deal with Ed Balls and Yvette Cooper. Balls is an impressively robust “big beast” who wants to be shadow Chancellor, but Ed Miliband may not fancy sub-contracting his economic policy to someone so tricky to control. Subverting Lyndon Johnson’s famous rule, keeping Ed Balls inside the tent makes no difference – he’ll probably still urinate on his colleagues. Indeed. The Balls Problem is a tricky one. Ed Balls is a fine attack dog perhaps the best, certainly the most ferocious, Labour have. But if Miliband gives Balls the Treasury brief there’s every chance that the Shadow Chancellor will eclipse the

Peter Hoskin

Delaying the cuts

Put aside all the post-match analysis of David Cameron’s speech: the most intriguing story in the papers this morning is this one in the FT. It claims that the Treasury is working on plans to “reprofile” the spending cuts, which basically means “delay” them. The idea would be to push the bulk of the cuts back to the end of this Parliament. And the underlying concern is, apparently, that early cuts could trigger various financial penalties, such as those for breaking contracts. The paper even suggests that ministers are worried that, “deep deficit reduction in 2011-12 could undermine the fragile recovery.” The Treasury have firmly denied the story, and I’d

Monday

James Forsyth

Taxing issues

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

Fraser Nelson Fraser Nelson

Osborne can go even further on middle-class benefits

George Osborne had been expected to subject child benefits to tax. Instead he is to abolish them entirely for higher-rate taxpayers. I’ve spent this morning talking to friends, whose judgment I respect, who are furious about Cameron hitting the squeezed middle. I cannot agree, and here’s why. We are not talking about the “squeezed middle” here – of the 30.5 million income tax payers in Britain, just 3 million pay the top rate of tax (figures here). They’re the best-paid 10 percent – and I have never worked out why the tax of the average worker (who’s on £22k) should be higher to afford the payment to those on twice

Sunday

Peter Hoskin

OBR Watch

When Sir Alan Budd was head of the Office for Budget Responsibility, there was an insistent argument in opposition circles that the independent body was biased in favour of the coalition. Much of this cented around the OBR’s growth predictions. How on Earth, came the question, can growth hit 2.3 percent next year and 2.8 percent the year after? Isn’t that a bit optimistic in view of all the warnings about a double dip? Won’t the cuts stifle growth? And so on and so on. A few months ago, I produced a graph which showed that, when compared to a range of independent forecasts, the OBR’s growth predictions weren’t really

Fraser Nelson Fraser Nelson

How Osborne and IDS reached agreement

I have found out a little more about the Universal Credit – and how the arguments over the summer were resolved. First, the backdrop. Money was always going to be a problem. This policy is about saving lives, not money. Right now, we pave the road to welfare dependency, creating a vacuum in the labour market that sucks in workers from overseas. Under Brown, the Treasury accepted this: cheap workers pay tax too, and as do companies who profit from them. Result: tax receipts up, but never fewer than 5 million on out-of-work benefits throught the boom years. The IDS plan was not sprung on Osborne. As I blogged a

Friday

David Blackburn

IDS the victor?

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

Wednesday

David Blackburn

Ed Balls saves the pitch till last

Predictable lines from Ed Balls this afternoon. ‘DIY free schools’ are iniquitous; Michael Gove is like the child snatcher in Chitty-Chitty Bang-Bang. Naturally, he made a pitch for the shadow chancellorship. Nick Clegg was his target and his pitch was avowedly left-wing: ‘It was Nick Clegg: the man whose own election leaflets said ’Vote Liberal Democrat or you’ll get a Tory government, who said ‘stop the Tory VAT bombshell, who said spending cuts now would be ‘reckless’ and put jobs and the recovery at risk. It was Nick Clegg who has given us: a Tory Prime Minister, a Tory Chancellor, a massive and unfair hike in VAT and a Budget

Alex Massie Alex Massie

Liam Fox Declares War on George Osborne

Liam Fox may well be correct to argue that the Ministry of Defence ought not to be subject to the same level of cuts as other government departments. It is odd to ring-fence NHS and International Development budgets but not the MoD even though there’s supposed to be a war on and all the rest of it. But let’s not pretend that a 10% cut in the MoD budget will necessarily, as the good doctor warns, “destroy” the “reputation and capital” the Tories have accumulated on defence issues for the very good reason that I’m not sure how much that capital has really been earned. Eighteen months ago Fox’s defence

Monday

Peter Hoskin

The IMF delivers a boost for George Osborne

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

Thursday

Peter Hoskin

A salesman for the cuts

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

Thursday

David Blackburn

Deferring deterrent

We’ve been here before: Hacker’s ‘Grand Design’, a scheme to save money by cancelling Trident. The BBC reports that the coalition plots a similar ruse – the renewal of Trident is understood to have been deferred until after the next election. This is the best of bad a situation. Britain has an independent nuclear deterrent, albeit nearing obsolescence. Trident’s renewal Is a point of contention for the coalition – with the Tories for and the Lib Dems against. Better to delay than squabble. It makes financial and strategic sense too: the upfront renewal cost is £20bn, deferring is understood to cost somewhere in the region of £750m; the suicide bombing

Tuesday

Peter Hoskin

A worrying – but not disastrous – poll for the government

This morning’s Times/Populus poll (£) will have supporters of the coalition grimacing into their cornflakes. The headline finding is bad enough, if rather familiar, with Labour closing the gap between themselves and the Tories to only two points. But what follows is worse. According to the poll, around three-quarters of voters reject the government’s deficit reduction strategy – preferring, instead, what are loosely the approaches advocated by Labour and the unions. And, what’s more, economic pessmism is arrowing upwards. The number of respondents who think “the country as a whole will fare badly,” has risen by 13 percentage points since June. The number who think “me and my family will

Thursday

Andrew Haldenby

A lesson from New Zealand

This is the next of our posts with REFORM looking ahead to the Spending Review. Earlier posts were on health, education, the first hundred days, welfare, the Civil Service and international experiences (New Zealand, Canada, Ireland). Ruth Richardson, the former reforming Finance Minister of New Zealand, set the benchmark for the Spending Review in a lecture for Reform on Wednesday evening. The coalition Government has framed the Review in the right way – as a chance to reshape and redefine the role of government rather than just shave a few percentage points off the existing structure with all its structural flaws. Ruth Richardson explained what that should mean, addressing each

Peter Hoskin

Robert Chote is the new head of the OBR

Now this should dispel any worries that the Office for Budget Responsibility is partisan in the government’s favour. Robert Chote, director of the Institute for Fiscal Studies and scourge of Osborne’s “regressive” Budget, has been appointed as the body’s new chief. It is, in many repsects, the most sensible and obvious choice. Not only is Chote respected across the political divide, but the OBR is an attempt to institutionalise the kind of fiscal oversight that his IFS has provided for years. I can’t imagine that the Treasury Select Committee will try to block this appointment. In case you missed it first time around, Fraser interviewed Chote for the magazine back

Peter Hoskin

A banking split

Blame Bob Diamond. Until the “unacceptable face of banking” (© the utterly acceptable face of politics, Peter Mandelson) was appointed chief executive of Barclays, the issue of banking reform was trundling along noiselessly in the background. But now it has spilled, violently, back out into the open. Critics of Diamond say that his very presence makes the case for splitting the retail and investmet divisions of banks – you can’t, they say, have someone who made their money via “casino banking” presiding over a high street banking chain. But the banks are warning that any such split would force them, and their tax dollars, abroad.   The government’s official position is