Political

Liberal Democrat Newswire #50: questions over Lib Dem fiscal policies deepen with more tax cuts floated

£20 pound note in the firing line

Edition #50 of Liberal Democrat Newswire came out last week, looking in particular at how the party’s tax and spend policies are shaping up for 2015. As you can read in the newsletter below, there’s real concern over what the knock-on effect will be on areas such as local government spending from the tax and spending decisions announced already.

Promising extra spending, or no cuts, in some areas, added to talk of tax cuts and removing the deficit means something is going to have to take a hit. As a result, areas such as local government are very much in the firing line.

Since Liberal Democrat Newswire #50 went out the problems have got bigger with the party now adding in talk of wanting to cut National Insurance too:

David Cameron has been put under pressure to offer a major tax cut after it emerged that the Lib Dems will raise the idea of cutting national insurance paid by workers.

Nick Clegg’s party will promise to look at raising the threshold at which workers begin to pay national insurance contributions.

In its manifesto, the party will say it will consider the measure as the “next step” in its attempt to reduce the tax burden on low and middle earners.

“Next step” here means ‘after first prioritising increasing the income tax allowance to £12,500’, but it still all adds to the fiscal pressure in the next Parliament on areas of spending that haven’t been protected by announcements such as the ring-fencing of schools spending.

You can read more about the National Insurance policy itself over on the party website [now removed].

If you would like to receive the next edition of Liberal Democrat Newswire direct to your own inbox as soon as it is published, just sign up here. It’s free!

Mark Pack

Liberal Democrat Newswire #50: will the Lib Dems have credible and costed spending plans in 2015?
Me

Welcome to the 50th edition of Liberal Democrat Newswire, which majors on the party’s tax and spend plans for the 2015 general election – and also takes a look at the Liberal Democrats’ own equivalent of the Boris Johnson question.

There’s another very popular elected Mayor who may, or may not, run for Parliament and she’s a Lib Dem. Read on to find out more…

Thanks for reading and, as ever, do please let me know your views or if you’ve spotted a story you think should be covered.

Best wishes,

Mark

P.S. Remember, you don’t have to wait for the next edition of Liberal Democrat Newswire to keep up with the news. My blog is regularly updated with stories such as The unelected man behind one of the most important Lib Dem achievements in government.

Local government set for more cuts under a Lib Dem government

Inside a Town HallRather than waiting for a big bang publication of the party’s pre-manifesto document ahead of the autumn party conference, the Liberal Democrats have rolling out the main proposals contained in the paper over the summer, seeking to maximise the amount of media coverage generated for it (with some success).

Taken together with the party’s recent other policy decisions, those made public so far make major financial commitments for the party’s 2015 manifesto:

  • Increase the income tax allowance to £12,500 – expanding the party’s very popular £10,000 policy from this Parliament
  • Continued ring-fencing of NHS spending – with the pressure from ministers and former ministers being to go further than this and increase it in real terms
  • Expanded ring-fencing of education spending – continuing the current ring-fencing of the Department for Education’s schools spending and expanding it to cover more of the education budget
  • Spending 0.7% of GDP on international aid – a commitment which gets more generous the better economic growth does
  • Writing the triple-lock for pensioners into law – pensioners vote, pensioners like pensions, so…
  • Building 300,000 new homes a year – this does not have to mean 100% public funding, but implies a significant financial commitment from the state

But on top of all that, the party has also announced plans to cut the deficit and reduce the debt burden. The structural deficit will go by the middle of the next Parliament and the debt:GDP ratio will be falling by then too.

Oh, infrastructure spending will be protected.

That’s an awful lot of financial goodies, which have been offset by only a limited volume of announced tax rises, notably the Mansion Tax.

It is hard to see how the numbers can add up without other significant cuts in expenditure outside the protected areas, including local government.

Despite the party’s particular love of local government – and its very strong showing in the latest round of Lib Dem appointments to the House of Lords – the financial future of local government has been notable by its absence so far.

What local government is missing as yet is the one sentence headline commitment that would protect it, in the way that ‘ring fencing health spending’ serves the NHS or ‘300,000 new homes a year’ serves housing.

That’s an omission the party’s local government base would be wise to ensure is remedied at the Glasgow conference.

Are the party’s tax and spend plans credible?

Giles WilkesRegardless of what happens to local government, there is a more general question about how credible the overall financial package will be.

Giles Wilkes, Chief Economist at CentreForum for two years and then one of Vince Cable’s special advisers for four, writes exclusively for Liberal Democrat Newswire setting out the basic problem that all parties face with their tax and spend plans for the next Parliament.

The challenge is certainly still daunting. According to the latest forecasts, the incoming government will still be borrowing face a structural deficit of around £60bn in 2015/16. That figure needs to fall to £30bn or so before the critical Debt/GDP ratio is stabilised.

One option is to holding spending constant in real terms, allowing taxes to recover with the economy. This would mean stabilising the ratio towards the end of the next Parliament.

A government worried about the need to do it quicker could raise taxes or cut spending more than this in order to hit the point earlier. This is what the current party leadership looks minded to do. By my calculation the party’s current plans go several billion pounds further than is needed to stabilise debt, freeing up some money for the party’s spending and income tax cutting priorities. But it involves cutting departmental spending (DEL – departmental expenditure limits) in cash terms to incredibly low levels – £20bn lower than the amounts the Coalition needed during 2011-15.

My simple view is that spending on departmental needs has hit such a low point that further cuts are non-credible. We need to start from the assumption that departmental spending will need to be rising in real terms from 2016, particularly if we want to protect the NHS, which means either securing higher growth, making extra cuts to welfare (which doesn’t fall within DEL) or finding more tax revenue that the party’s current plans envisage.

How should a British party leader fix an image problem?

That’s the question the BBC’s Daily Politics recently asked, and I was one of the experts wheeled out to answer in a piece featuring the leadership problems of Cameron, Clegg and Miliband:

What have the Lib Dems achieved in government?

Infographic previewMy ever-popular infographic/poster highlighting the main achievements of the Liberal Democrats in government since 2010 has had a fresh update (including, of course, same sex marriage now being a reality). You can view the latest version here.

Its companion poster – on what the Liberal Democrats believe – is a little more timeless as Gladstone tends not to do things that require updates these days. You can view that too online.

And if posters aren’t your thing, there’s also a newly updated version of What The Hell Have The Lib Dems Done? website for your idle moments, er…, serious research: www.whatthehellhavethelibdemsdone.com

Links to all of these and other online resources for Liberal Democrat campaigners are collated on my website.

The semi-costed manifesto

Bank notesGiles Wilkes’s final point above highlights a political dilemma for the party in 2015: how far should the party produced fully-costed financial plans beyond an immediate post-general election set of tax and spend decisions?

In the past, the party has prided itself on having fully-costed manifestos, but “fully-costed” is a little bit of a mirage. However expertly the calculations are done, once you get beyond any immediate decisions, uncertainties over future economic growth – let alone over what the exact knock-on effects of policies will be – means you can’t be sure your sums will really balance a year, let alone a Parliament, down the road.

Setting out broad priorities such as ‘we’d rather use tax then spending cuts to close the deficit’ or ‘we want to prioritise infrastructure investment’ makes a lot of sense, but detailed figures beyond the immediate future never turn out to be right. Economic forecasting just isn’t up to it.

What’s more, the party has learnt first hand from being in government that finding sums which are relatively small compared to total government expenditure is always possible – and the sums involved often dwarf the sort of figures which have previously had the party’s Federal Policy Committee (FPC) and manifesto writing teams anxiously trying to make things add up.

The FPC, for example, often gets down into ‘mere’ tens of millions of pounds. That sounds a lot a money and so sensible. But consider this. The last Budget set out total spending of £732 billion. Just one half of one percent of that is £3.7 billion, or nearly double what the party’s much touted Mansion Tax would raise. To put that on the household scale, taking the current average salary of £26,500, one half of one percent of that is just £132.50 and the Mansion Tax would raise the equivalent of £72.40.

What the party is used to anxiously costing is in fact such a small part of the overall government finances that other factors, such as growth and the ability to move sums around within such a mammoth total budget, matter rather more.

As a result, it’s notable that neither Danny Alexander (current Chief Secretary to the Treasury) nor David Laws (formerly of that post and now leading the party’s manifesto writing team) have been laying down the law to stop colleagues speculating over public spending commitments.

Rather than trying to tightly control what anyone says that comes with a hint of possible future expenditure, they have been taking a rather more relaxed view – knowing that in practice what matters far more is how growth figures and hence tax revenues turn out.

Expect, therefore, the party’s general election manifesto to have some headline financial commitments alongside detailed costings, as the political and media environment require that (not to mention the problems of the public not believing that good things can come for free after years of being told the deficit is a big problem).

But expect too a much less detailed, more principles based overall approach to tax and spend for the years beyond 2015.

What’s being debated at party conference in Glasgow?

Nick Clegg at Lib Dem conferenceThe outline agenda for the Lib Dem Autumn Conference has now been published.

It includes the titles of all the policy motion and policy papers up for debate in Glasgow.

You can read the agenda over on my website.

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The Liberal Democrat’s own popular Mayor for Parliament dilemma

Dorothy Thornhill, elected Mayor of WatfordBoris Johnson may have ended the will he/won’t he speculation over his plans for the next general election, but the Liberal Democrats too have a highly popular Mayor who has been regularly caught up in speculation over her Parliamentary ambitions.

Dorothy Thornhill, the directly elected Mayor of Watford, has one of the most impressive election records in the party. Four times in a row she has been a winner in Watford, including in 2014 with the same share of first preferences as she won in 2010 and only three points down on her first winning share in 2002.

Watford itself has also over the last two general elections been a closely fought Parliamentary constituency where the Liberal Democrats have had high hopes but not won.

In 2010 Sal Brinton (now candidate for Party President and a member of the Lords) finished second just 1,425 votes behind the Conservatives.

Yet the local party has left it until now to select its Parliamentary candidate, an unusually long delay in such a marginal seat, but one which has allowed Dorothy Thornhill the space to get re-elected as Mayor and consider her options.

With the selection now kicked off, the strong speculation is that she will go for the selection, win the selection and – given her popularity in Watford – be the hot favourite to win the seat at the general election next year.

Like Boris Johnson, she too will face some questions over how being Mayor and running for Parliament go together, especially as in her case a Mayoral by-election is likely to have to follow, as the next scheduled Mayor contest is three years after the general election.

But her almost unmatched record of electoral success means that is far more likely to be a hiccup to be managed rather than an obstacle to stop her.

Pssst! Fancy some free chapters from 101 Ways To Win An Election?

101 Ways To Win An Election: book coverSign up at www.CampaignMasterclass.com and you can receive a selection of extracts from 101 Ways To Win An Election by Ed Maxfied and myself for free via email.

Or if you’re too impatient and just want the whole thing now, you can buy it online now (in either print or ebook formats).

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The race to be Lib Dem President: the first round of literature

Outgoing Party President Tim FarronThe previous edition of Liberal Democrat Newswire included a Q+A with the candidates to succeed Tim Farron as Lib Dem President. One of them, Pauline Pearce, did not provide answers in time for the newsletter but has now so I’ve added them to my website.

The other three candidates – Sal Brinton, Linda Jack and Liz Lynne – have also now released their first leaflets of the election campaign.

Sal Brinton was the first out of the blocks in the race this spring, and is the front-runner so far. In as much as there is an establishment candidate, it is she – member of the Lords, serves in several important party posts and heads up the party’s Leadership Programme for future Parliamentary candidates.

Although she effectively signed up early supporters at the party’s spring conference with her campaign badges, this has been followed up by only an A5 leaflet with an “artworked at home” feel to it.

The messaging shows the balancing act she is trying to carry off, neither blindly loyal to the way things are currently done nor explicitly critical. Hence the final two words in her determination to, “support [the] Liberal Democrats as we find ourselves, our passion for our liberal principles, and our love of helping our communities once more”.

Her vision is of a democratic party, with a listening President and a rebuilt local government base. As in the Q+A I carried out, there is not (yet) much detail about what this means in practice, but as an overall message it is very similar to that of previous party President Ross Scott, who successfully defeated Lembit Opik.

It also points to a much more inward looking role for post than Tim Farron set out when he ran for President, making great play of his ability to speak up for the party in public.

Liz Lynne’s leaflet, a full colour glossy A4, is the most professional looking of the lot so far. Add to this her skilful upping of her profile on social media in recent weeks and her campaign may have started later, but it is now the one with the most momentum.

Liz Lynne’s time both as an MP and MEP gives her plenty of party and political experience to talk about – and she uses the resulting media experience to burnish her case to members who think external communication is an important part of the job.

The references in Liz Lynne’s literature to the need for an “independent” President to represent members, especially in the event of another hung Parliament, nudges the reader to draw the conclusion that Sal Brinton is too establishment for the post.

Arguing that point during the full campaign in a way that doesn’t sound like a mean personal attack but which does give people a clear reason to vote for her instead will be an interesting challenge for Liz Lynne. Her literature, too, is rather short of details on what she would do in the post beyond listening.

The third leaflet is that from Linda Jack, whose strapline “the activist’s activist” means her leaflet being the one with the roughest production qualities is not wholly a disadvantage. That quality to it reinforces the grassroots message – but at the risk of some members therefore also concluding that this leaflet isn’t in the right league for a President candidate.

The leaflet repeatedly emphasises her grassroots credentials, and in fact plays down her experience at the national level in the party.

Although her overall priorities are very similar to those of Sal Brinton and Liz Lynne, there is a touch of more specific plans with talk of “reform of party structures, strategy and HQ operations”.

This is more than a low-key reminder of her differences of view from Nick Clegg over Coalition, but quite what it means isn’t expanded on, despite the space available in a double-sided A4 leaflet. It is, however, the closest any of the candidates have come so far to a distinctive set of detailed ideas for the post.

You can see all the leaflets in full for yourself up on my website, and so find out which one of them has played a Doctor Who connection…

(Thank you to them all for answering my questions and supplying copies of leaflets. Lib Dem Newswire will continue to cover the contest, so let me know if there are any aspects of the race you’d like to see covered in future editions.)

Happy 50th birthday!

Birthday cake candles. Photo courtesy of http://www.freeimages.com/photo/1060565 - some rights reservedThis is the 50th edition of Liberal Democrat Newswire, the monthly, independent newsletter about the party that is read by thousands of party members, supporters, journalists and other interested parties.

Many thanks to all my readers, especially the hardy souls who have been loyal listeners since the first edition, which appropriately enough led with a story about tuition fees.

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Thank you – and please forward

I hope you’re found this edition of Liberal Democrat Newswire interesting, informative, useful – or all three!

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Best wishes and thank you for reading,

Mark

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