Archive for January, 2016

h1

The sting. How George Osborne is tackling the deficit

Sunday, January 31st, 2016

We’re all in this together, so David Cameron told us before the 2010 general election.  This assertion was received with derision by many outside the Eton-attending classes.  And sure enough, when the coalition came to power after the election, the impact of the deficit-reduction measures was felt most keenly by those at the bottom of society.  The Treasury explicitly targeted spending cuts over tax rises in the proportion of 80:20.  With most government spending being deployed on the poorest in society, the direct impact of this approach was regressive.  Organisations like the IFS were quick to point this out at successive budgets, much to the government’s discomfiture.

The treatment of the richest in society was a regular source of friction within the government in the last Parliament, and not just between the coalition parties.  When the top rate of tax was reduced from 50% to 45%, rumour had it that George Osborne wanted to reduce it to 40% and introduce a mansion tax but that this was vetoed by David Cameron.

Nearly six years on from the Conservatives taking over the reins of power and the deficit still yawns wide.  The Conservatives committed at the last election to reducing spending by a further £12 billion.  Labour failed to force the Conservatives to spell out just how they were planning to achieve this.  When the Conservatives moved from the abstract to the concrete, their own backbenchers disowned the idea of scrapping tax credits, forcing George Osborne to retreat.

The hole created by abandoning the tax credit cuts is smaller than might be imagined since the system of tax credits is due to be replaced by universal credit in the next couple of years (it remains to be seen whether that actually happens). Still, the Chancellor has needed to seek new ways of balancing the books.  And he is confronted by a numerical problem.  A handful of unhappy Conservative MPs combined with a unified opposition can scupper controversial plans. Sometimes the fact that government’s majority is just 12 really matters.

How to solve this problem?  In his ideal world, no doubt, George Osborne would ensure that Conservative MPs were as effectively programmed as the SNP intake.  In the real world, there are too many populist backbenchers of all shades of opinion in the party, stretching from Heidi Allen to David Davis, to make it safe for him to rely on their unstinting support.  Each will have their own hobby horses.  All those hobby horses will need to be accommodated.  With the Lib Dems much reduced in number and having moved from government to opposition, it is paradoxically harder for a pure Conservative government with a small majority to impose spending cuts than for the previous Conservative/Lib Dem coalition with a much larger majority.  So much for the moderating influence of the Lib Dems.

If the Chancellor cannot reduce spending easily, he will need to look again at tax rises.  Those may not be particularly popular within his party but if appropriately targeted may not be opposed by the opposition parties.   So the Chancellor needs to find targets for tax rises who are acceptable to the opposition parties and where the impact on tax take will be positive, at least in the short to medium term.

The inexorable logic of the need to close the deficit, the government’s small majority, its unreliable backbenchers, the need to obtain the acquiescence of some opposition MPs and the need to raise substantial revenue is that George Osborne needs to increase the tax on richer members of society (who in any case have the most money to be relieved of).  And that is exactly where he has been focusing.

Over the last few years there has been much focus on the top 1% and their share of wealth (and support of the tax bill).  30% of all income tax receipts come from this group.  Many right-leaning commentators have expressed the view that this group are highly mobile and tax rises on them would prove counterproductive.

The Chancellor, it seems, partially disagrees.  He is less concerned about the top 1% and more concerned about keeping the top 0.1% happy.  The top 0.1% of income taxpayers – just 30,000 individuals – pay 14% of all income tax receipts.  The country’s tax base is very dependent on a very few very wealthy individuals.  I’ll call these the super-rich.

The Chancellor is largely leaving this group alone to focus on the next 0.9% or so.  This group is still well-upholstered but nowhere near as mobile as that uppermost group.  If you’re a partner in the Birmingham office of an accountancy firm or a managing director of a company in the south east of England, opportunities to emigrate will not come along on a daily basis.  Some will be able to consider their options but most will just have to lump it.  I’ll call this next 0.9% the affluent.

So how has the Chancellor gone after the affluent?  The super-rich benefit especially from the low top rate of income tax.  By tackling the reliefs which are enjoyed particularly by the affluent rather than the super-rich, he stings them most.

Look at how he has changed the taxation of non-doms.  By upping the minimum tax take from non-doms, he has forced all bar the highest paid onto the UK tax system in full.  The super-rich will have sighed at seeing the minimum increase but for so long as their non-dom status puts them at an advantage over taking British domicile, they probably won’t be better off decamping elsewhere either (or anywhere that isn’t social death to be seen living in, anyway).

The annual allowance for pension contributions has been reduced in successive budgets.  In 2010/11, the annual allowance for pensions was £255,000.  Next year for those on over £210,000 a year, it will be £10,000, with fresh horrors awaiting the affluent in the budget, no doubt.

Buy-to-let mortgages are no longer tax-deductible and stamp duty for those buying second homes and for buy-to-letters is now to be set at a much higher rate (but not for companies with more than 15 properties).  It’s the super-rich wot gets the gravy it’s the affluent wot gets the blame.

No one will weep for the affluent.  They earn more than most journalists so they don’t even benefit from the shameless special pleading that you often see in newspaper columns.  There is, however, a catch.  For a rising number of people, paying tax is something that other people do.  There must be a limit to how much can be expected of a relatively small number of cash cows before the affluent are milked to death.  With a continuing need to close the deficit, we look set to explore this further in the coming years.

We can’t go on like this, so David Cameron told us before the 2010 general election.  But for those in the sights of the Chancellor, they may not have an option.

Alastair Meeks



h1

Leave could be making the same mistake Labour made at the 2015 General Election

Sunday, January 31st, 2016

If the referendum comes down to a popular leader with economic credibility versus an unpopular leader without any economic credibility then there will only be one winner, again.

In the most recent electoral events in the United Kingdom, the Scottish Independence referendum and the 2015 general election, the side that won was the side that the voters viewed as the one that was the safest/best option for the economy. You can see something similar happening in the EU referendum, which does not bode well for Leave as I believe voters wont go for the option that makes them worse off or is perceived to be riskier, economically.

The ComRes poll showed “44% British adults say they think the state of the British economy would be better off with Britain remaining a member of the EU, compared to 23% who feel the state of the economy would be better off if Britain left the EU.” This is the type of polling advantage the Tories enjoyed over Labour in the run up to the last election.

With the opinion polling on the EU referendum showing a mixed picture, leader ratings of the de facto leaders, which Cameron and Farage will surely be, even if they aren’t the de jure leaders of the Remain and Leave campaigns, might be a better predictor of the outcome of the referendum, just like they have been at general elections.

The tweet at the top of this thread shows Cameron as the best rated GB wide party leader, whilst Farage is the joint worst rated party leader, on a par with Corbyn, which should alarm UKIP and Leave. Farage appears to be on the wane, especially after his epic whine after the Oldham West & Royton by election and the wheels coming off his assassination story, this polling isn’t surprising.

Leave should make more use of someone like Lord Lawson of Blaby, former Chancellor of the Exchequer, under Margaret Thatcher, to help boost their economic credibility. As a seasoned political campaigner once observed about winning votes and elections, it’s the economy, stupid.

TSE

 



h1

Final Des Moines Register poll has Trump as the hair apparent in the Iowa caucus

Saturday, January 30th, 2016

From the historically most accurate pollster in this race

It looks like the attacks on Ted Cruz and the doubts about his eligibilty have had an impact on the Senator from Texas.

Whilst the Democratic race is

But winning the GOP nomination is one thing, winning the White House is another

TSE



h1

William Hill say nobody’s bet on Osbo since the Google tax row broke out

Saturday, January 30th, 2016

osbo

We don’t know how many bets on Osborne that they’d normally expect in the same period so it’s quite hard to assess the William Hill statement.

In any case you don’t get many punters this far out from an outcome (it could be 2019/2020) ready to lock up their cash on a favourite with tighter odds than 2/1.

The point remains however: the Google deal hurts the Chancellor because so little money appears to be forthcoming. Cameron’s attempt to throw this back on the pre-GE2010 LAB government is getting a bit tired. There is a real sense of frustration out there about the tax activities of companies like Google.

The other thing in relation to Osborne’s leadership chances is that there’s a long record in the Tory party of the long term front runner not getting the crown.

I’ve got an all green Betfair book on the Tory leadership after laying Osborne when he was nearly evens and closing the bets when the price moved out.

Mike Smithson





h1

The key EURef issue: Whether Cameron can secure a deal that’s saleable

Saturday, January 30th, 2016

DC-EU

David Herdson questions whether minor benefit reform will be enough

When Cameron gave his Bloomberg speech three years ago, kicking off his whole renegotiation policy, he set out a vision of the European Union he believed was fit for the twenty-first century, built on five principles:

1. Competitiveness. In particular, completing the Single Market in services, energy and digital, and “addressing the sclerotic, inefficient decision-making” and “creating a leaner, less bureaucratic Union”.

2. Flexibility. He mentioned doing away with ‘ever closer union’ and ensuring that members outside the Eurozone needed changes to safeguard their interests as a quid pro quo for those within it to develop the institutional power they needed to be able to run the currency.

3. That power must be able to flow back to member states, as promised at Laeken. He specifically mentioned repatriating powers not just to Britain but to all member states in the fields of the environment, social affairs and crime.

4. Democratic accountability and a bigger role for national parliaments.

5. Fairness and in particular that the rules of the Single Market are not skewed to favour Eurozone members.

It’s a fine vision and one which no doubt the great majority of the British public would sign up to. From the noises coming out of Brussels, it’s a long way distant from what’s on offer. The right to petition for a temporary exemption from paying equal benefits doesn’t really address the points he spoke about back in 2013. Any of them.

To be fair, Angela Merkel has provided the European Union with good reason to put something else on the agenda for the February summit and getting some kind of workable solution to the migrant crisis and the consequent near-collapse of Schengen is more pressing. However that doesn’t address the EU’s complete reluctance to engage on any of Cameron’s points. Even if a new treaty isn’t in the offing – and it quite clearly isn’t – he ought to be pushing for the Council to support the principles he laid out. After all, it’s not as if they’re a threat to any of the other members; on the contrary.

The British media always viewed Cameron’s initiative parochially, through the Thatcherite lens of ‘winning back powers’, when any reading of his speech shows that his vision was far bigger than that. It’s therefore ironic that his failure to gain any sort of traction with his big ideas has reduced him to play exactly the sort of game the media believed he was playing in the first place.

But what he does look likely to come back with, whether in February or June, looks like being thin gruel indeed. The question is whether it’s saleable in a referendum? At the moment, Cameron quite clearly thinks not given his rejection of the ‘emergency brake’ offer. But even if he – and the pressure put on the other EU leaders by polling in the UK – can extract a bit more, is that the basis on which to ground membership for the next twenty years or so?

My prediction is that whatever Cameron comes back with will actually have very little impact one way or the other. There will be no metaphorical waving of pieces of paper and the campaign will be won and lost on almost exactly the same issues that it would have been had there been no negotiation at all, and by which politicians are advocating which position.

And on that score, it comes down to whether the EU can mismanage the migrant crisis so badly that it overcomes the multiple failings of the multiple Leave campaigns.

David Herdson



h1

A second EURef phone poll has REMAIN with huge lead

Friday, January 29th, 2016

pic (2)



h1

Local By-Election Review : January 2016

Friday, January 29th, 2016

Local By-Election Review : January 2016
Botchery on Carlisle: Ind GAIN from Lab on a swing of 10.5% from Lab to Ind
Launceston Central on Cornwall: Lib Dem HOLD on a swing of 9% from Lib Dem to Con
Bushney North on Hertfordshire: Con HOLD on a swing of 1.5% from Lib Dem to Con
Thatto Heath on St. Helens: Lab HOLD on a swing of 8.5% from Lab to UKIP
Hamilton North and East on South Lanarkshire: SNP HOLD on a swing of 5% from Lab to SNP
Faraday on Southwark: Lab HOLD on a swing of 4.5% from Lab to Lib Dem
Newington on Thanet: Lab GAIN from UKIP on a swing of 7.5% from UKIP to Lab
Crowborough West on Wealden: Con HOLD on a swing of 4.5% from Lib Dem to Con
Parkfield and Oxbridge on Stockton-on-Tees: Lab HOLD on a swing of 1% from Con to Lab

Votes Cast in January 2016 and change in seats
Labour 4,406 (40%) winning 4 seats (unchanged)
Conservatives 2,991 (26%) winning 2 seats (unchanged)
Liberal Democrats 1,423 (12%) winning 1 seat (unchanged)
Scottish National Party 1,089 (9%) winning 1 seat (unchanged)
United Kingdom Independence Party 793 (7%) winning 0 seats (-1)
Independents 487 (4%) winning 1 seat (+1)
Green Party 368 (3%) winning 0 seats (unchanged)
Other Parties 50 (0%) winning 0 seats (unchanged)
Labour lead of 1,415 (14%)



h1

UPDATED With Cameron’s EU talks reaching crucial stage REMAIN’s Ipsos MORI lead drops 7%

Friday, January 29th, 2016

The gap down but still larger than last October

Given the vast bulk of EURef polling has been from online surveys it’s great to see that Ipsos-MORI appears to now being doing a question for its monthly political monitor which, of course, is carried out by phone.

As can be seen in the table and has been discussed endlessly the phone pollsters have been recording very different pictures of public opinion on the issue compared with internet surveys which can be carried out at a fraction of the cost.

The pollster asked two EURef question – one its long-term tracker the other with the actual referendum question. Both showed decreases and to the latter the margin is now 19% to REMAIN.

Even so Ipsos still has a double digit REMAIN lead but it is nothing like the gap of previous months. In the summer it was at 27%.

My guess is that Cameron won’t be too upset by this development which could in fact help them. I was told by a senior diplomat from an EU country during the week that the tighter the referendum looks from a polling perspective the stronger the PM’s negotiating position.

All UK phone pollsters now call mobile numbers as well as landlines in their political surveys.

Mike Smithson