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Tuesday, June 29, 2010

The impact of the budget

At least one Labour Assembly Member has already raised the Observer story on the briefing from Tim Horton of the Fabian Society and Howard Reed from Landman Economics in the chamber. But as Ed Long on Liberal Democrat Voice points out, you should be very careful about believing everything you read in newspapers.

This report from the Fabian Society and a supposed economic expert is neither. It performs a numerical magic trick in order to draw a graph that can be superficially labelled ‘regressive’. Real questions can and should be asked about welfare reforms when the exact breakdown of the cuts is revealed. If there are cuts to social housing, for example, then the poorest families will face a very real financial loss, but trying to argue that all spending can be valued at the point of delivery and then subtracting this value from income is merely a smoke and mirrors game to justify spending at the status quo.

His criticism is echoed on Liberal Vision who compare the graph from the Appendix A of the Budget, which shows the actual material impact of all measures on each income decile by 2012/13 to that produced by the Institute of Fiscal Studies.

They say that the IFS graph shows that the impact of the budget from decile 2 to 9 income groups is broadly progressive or proportional, from 9 to 10 highly progressive, and only from 1 to 2 slightly regressive. They add that the actual cash impact of the changes is about £25-50 a year between those on £14,000 and those on less. At the other end those on £50,000 or more will be paying an average of £1,000 a year more than those around £38,000, or £1,650 a year in total.

They add: The other point of attack is that to be progressive the Budget depends on previously introduced measures not yet implemented, for example the 50% tax rate. There is something in that, however it is the case that the Coalition could have reversed those measures. It is the Coalition, not Labour implementing the changes.

Broadly then the ‘regressive Budget’ narrative is not supported by the evidence bar in one small part of the distribution where there has been gross partisan exaggeration of a tiny difference. One more than made up at the other end of the income scale if that is your notion of fairness.

From bottom to top the facts show the impact of changes this Government will introduce are progressive, just not uniformly for every group.


This budget has been difficult and I am not happy about all of it. Clearly many people will lose out but in accepting that we should not get carried away and exaggerate its impact as Labour and their fellow travellers are doing.

We should not forget from where we are starting and that immediate action is necessary to put the economy on an even keel. I am aware that even that statement is controversial but it is the reality and I am just pleased that the Liberal Democrats are there to moderate the worst excesses and ensure that fairness remains at the heart of this government's economic policy.
Comments:
yes, but some things are now worrying - for example, Nick Clegg's new mantra that public sector pensions are unaffordable and unfair. Unaffordable, well maybe, though many could have been admisnistered better and too many have been pillaged to support early retirements in the employers' interest - but unfair? To whom? To the taxpayer! Ah, but don't public sector workers pay taxes too? And haven't they been contributing to in good faith and all along.

Let's not forget that private pensions are struggling because too many firms were allowed to take pensions holidays (ie not pay their contributions) when the finds were doing well, and because Gordon Brown taxed them when he was Chancellor.

I'm not arguing for cosseting the public sector, but the choice of language is far from helpful.
 
Peter, Go to the LSE website and read the short article by Professor John Van Reenen entitled 'Extreme Austerity is not the wrong medecine.' The leaked Treasury paper in the Guardian today on the employment effects of the budget should also worry any politician in Wales who is a real progressive. I admire your loyalty to your party but you are frankly being used by the Tories to go down a road when there are alternatives for anyone who is on the left of centre in British politics. Sadly for your party you can't put a fag paper between Clegg and Cameron on most issues. No can foresee the future but at this stage I can't see any reason why anyone should vote Liberal Democrat next year when you support policies which are clearly not in the interests of the majority of people in Wales.
 
Jeff, I would argue that long-term economic stability is in the interests of Wales. I have read the Guardian article and I am astonished it is considered serious journalism. It took a Treasury report and picked out the bits it agreed with and ignored those parts that were inconvenient. In fact the report says that there will be a net-gain of 1.2 million jobs. Now you may disagree with the job creation figure, and I think it is on the high side, or even say that the job loss figure is too high but that is no excuse for the sort of sensationalist bias evident in this newspaper article.
 
Peter the budget is based on a gamble that economic growth centred on the private sector will ensure that employment will be created to replace the jobs lost in the public sector. It also assumes that there will be an increase in exports which is a big 'if' given the issues in our main trading area the Eurozone. Forgetting party politics everyone should hope that the budget strategy works for the sake of the many people who could lose their jobs . There last thing that Wales needs is the repeat of the 1980s and another lost generation.
 
I see that the latest You Gov poll confirms my earlier opinion that very few voters at this stage can see much point in voting Liberal Democrat next year.As a party you need to start addressing very quickly the issues raised by David Marquand in a very thoughtful piece on the IWA website. Marquand quite rightly argues in my view that there really isn't a need for two Conservative parties in UK politics. The logic of the Liberal Democrat support for a budget totally out of sink with everything that UK Liberalism has stood for since the publication by Lloyd George of 'We can Conquer Unemployment' is that eventually like the Liberal Unionists and National Liberals the majority of those now serving in the Coalition government will end up as members of the Tory party after 2015.
 
A poll is just a snapshot Jeff. Things will not remain static. It is easy to criticise from opposition. We are the ones who have to take responsibility to deliver the changes that get the county back on its feet. The programme for government is a very liberal one due to our influence.
 
I wouldn't disagree that many of the policies outside the economic sphere can be supported by anyone who supports a left of centre approach to politics. I fully support fixed term Parliaments(although 5 years is too long), the equalisation of constituencies and the change to the voting system. Ken Clarke's speech on prisons yesterday could and should have been made by any Labour or Liberal Home Secretary pre 1979. Jack Straw's reply in the Daily Mail of all papers was complete nonsense.No one on the left of politics should believe that 'prison works'. The size of the prison population is an indictment of the way in which society has failed too many individuals. Having said that you cannot just dismiss criticism of the budget as only coming from the Labour Party or its 'fellow travellers'. By no stretch of the imagination can Sam Brittan and Martin Wolf who write in the FT be described as Labour supporters. There are real worries amongst too mnay eminent economists such as Paul Krugman that we could be heading for a double dip recession and a repeat of the mistakes made by Roosevelt in 1937 and Japanese policy makers in the 1990s. Past evidence suggests that Osborne's idea that private sector employment will grow at such a rate to compensate for the loss of public sector jobs is just fantasy economics. Given the number of public sector jobs in the Swansea area it will interesting to see how Osbornomics works in your area. If it doesn't then we really will have another lost generation with the biggest hits taking place in area such as St Thomas, Bonymaen, Port Mead and Townhill.
 
After Thatcher and then 15 wasted years in the wilderness under new labour, I really can't see how there would be much left in Bonymaen, Townhill or Portmead to suffer Jeff. This shows, yet again, Labour doesn't 'get' the economy or understand what's going on - the job losses this time will be in sketty, the gower, killay and dunvant.

And you can blame Peter and the LDs, and Clegg is looking way too close to Cameron these days to help, but we know who caused the mess!
 
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