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As first reported by Left Foot Forward just hours after George Osborne’s statement, the Guardian‘s front page declares that “Budget will hit poor harder than rich”. A report by the independent Institute for Fiscal Studies yesterday said the Chancellor and Nick Clegg could only assert that the Budget was “tough but fair” or “progressive” by including reforms announced by Labour, such as the changes to pension contributions and the 50p tax rate. Robert Chote, the IFS director, said: “Osborne and Clegg have been keen to describe yesterday’s measures as progressive in the sense that the rich will feel more pain than the poor. That is a debatable claim. The budget looks less progressive – indeed somewhat regressive – when you take out the effect of measures that were inherited from the previous government, when you look further into the future than 2012-13, and when you include some other measures that the Treasury has chosen not to model.”
The poorest 10 per cent were left almost untouched by Labour’s plans but would see their incomes cut by more than 2.5 per cent over the next five years. The Guardian’s editorial calls it, “a direct challenge to the new government’s claims of fairness” while the FT reports that, “Poor to be hit most by service cuts”. And mirroring analysis on Tuesday by this blog, the Telegraph reports that the, “VAT rise was far from ‘unavoidable’.”
The Guardian reports claims by City analysts that the “Cut in corporation tax to 24% from 28% [is] expected to negate the impact of the levy on bank profitability”. John-Paul Crutchley, an analyst at UBS, expected Lloyds and HSBC to benefit by 2012 because the cut in their corporation tax bill was larger than their hit sustained through the bank levy. HSBC’s banking analysts concurred. “We’d expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-budget,” the HSBC analysts said. Meanwhile, the Independent reports that, “the coalition Government’s proposed levy will fail to reach its target of generating £2bn revenues a year.” UBS analysts said that some banks would be likely to shift business to centres where levies will not be imposed, such as in Asia, if they have significant businesses in the region. Leigh Goodwin, of Citigroup, told the paper: “Based on the full levy rates announced, we estimate that the five major UK-listed banks will contribute around £1.3bn.”
The Financial Times‘ front page reveals that “Fresh welfare cuts are on the way”. The paper reports that amid warnings that Mr Osborne’s Budget implied spending cuts of up to one-third on areas such as transport, energy, universities and business support, the chancellor said that new welfare cuts would take some of the strain. The chancellor told the BBC that he could soften the impact of departmental spending cuts if “over the coming couple of months we can find further savings in the welfare budget.” Mr Osborne’s Budget set out to eliminate the hole in Britain’s public finances by 2015 with a £113 billion fiscal tightening, warning that most departments would have to cut spending by an average 25 per cent. But the Institute for Fiscal Studies said that average cuts could hit 33 per cent, because of the coalition’s promise to protect health and overseas aid spending, and on the assumption that the priority areas of education and defence lost 10 per cent.
The Telegraph‘s front page says, “Carry on working into your seventies” as the paper details how reforms will mean that “by the second half of the century, most people will work into their seventies.” The Government will make it illegal for companies to force staff to give up work at 65 while the age at which employees can claim the state pension will rise to 66 as soon as 2016 for men — 10 years earlier than the last government had decreed. Iain Duncan Smith, the Work and Pensions Secretary, told the paper that the radical pension reform he will oversee was designed to “reinvigorate retirement”. “People are living longer and healthier lives than ever, and the last thing we want is to lose their skills and experience from the workplace due to an arbitrary age limit,” he said.
The Guardian and Times‘ front pages cover President Obama’s decision to replace General Stanley McChrystal, as the top Afghan war commander, with General David Petraeus over comments he made in an interview with Rolling Stone magazine. Mr Obama said: “I don’t make this decision based on any difference of policy with General McChrystal, as we are in full agreement about our strategy … [But] the conduct represented in the recently published article does not meet the standard that should be set by a commanding general. It undermines the civilian control of the military that is at the core of our democratic system and it erodes the trust that is necessary for our team to work together to achieve our objectives in Afghanistan.” The Times reports that David Cameron spoke to Mr Obama afterwards by phone and issued a statement saying that both governments remained “absolutely committed” to the Afghan strategy crafted by General McChrystal. In a profile, the New York Times recalls that in 2008, General Petraeus said, “I’ve always said that Afghanistan would be the tougher fight.”
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20 Responses to “Politics Summary: Thursday, June 24th”
Jacquie Martin
All in this together?
Some will be sitting on the sand watching, whilst some will have their toes dipped in, then others their ankles, and progressively(!) upwards until some are in it over their heads.
MICHAEL SPARLING
RT @leftfootfwd: Politics Summary: Budget unravels – measures are "regressive"; banks will gain http://bit.ly/9iiCOd
Politics Summary: Thursday, June 24th « The best Labour blogs
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Fat Bloke on Tour
I fear Sniffy plays poor quality cricket.
If you are going to slash, then slash hard.
The surprises / shocks / cheap-shots are coming thick and fast, he must be working on the basis that if there are so many of them then it is difficult to get upset about any particular one.
He has played Coalition politics / trawled their manifestos well.
Cherry picking all the worst parts of both documents to really stick it up the poor and the unemployed.
Tax Credits are the best example of this. He passes over the Tory proposal and implements the LibDem figures are they were lower and would save more money.
I fear that we have chancellor who approached the Budget as if he was playing “Championship Manager”, wild and wacky cuts that looked good on the screen without any idea how they would play in real life. He got the idea from Cleggy with his eye catching but totally impractical £10K tax allowance. Amateurs playing at government and getting away with it, I mean how could Sniffy resist?
What should the response be to all this?
The “Dog Boiling” upper middle class are pushing this as hard as they can. Any thoughts on the BBC last night, The “Odd Couple” getting 45 minutes with Nick “The Sewage” Robinson to explain away their “Fire up the chainsaw / Lets slash and burn” ethos.
Was this unprecedented?
Will Labour / AN Other have a right of reply, be provided with a similar platform? I can never remember a budget, never mind an emergency budget getting such a fanfare.
Say it succeeds, no double dip and things pan out as planned? General grumbling but over time people accept the cuts and try to make the best of it. Will the 2015 election campaign be a bout of Bullingdon Club triumphalism – “hard but fair but we saw it through now let us ravish your daughters with the complete voucher’isation of health and education” or will it be 97 all over again, public desperate for better public services now the books are balanced and the money is flowing again?
I fear such a scenario will be used to destroy the case for proper progressive provision of public services. Once they have the bit between their teeth it will be onwards and downwards with health surcharges and education top up fees. The right has a long term goal of providing basic services for all but allowing those with the money to upgrade to better.
Given the huge changes described this week they will have no difficulty in finding the cash to make this change complete, that is provide resources to those who currently go private, so that they can move to a completely flexible system. The building blocks are being put into place in Education as we speak so the move to Stage 2 will be simple.
However I think that Sniffy has overreached himself, the changes and cuts he is proposing, and don’t you love the drip, drip aspect of them. Things were tough on Tuesday although with a few rough edges and questions un-answered and now the word is that things will have to get even worse to smooth the edges and generate the right answers.
The question here is will the cuts fail politically or economically? The public will put up with them but the basic economics will fail and another round of cuts will be needed, or will the public revolt and demand changes?
I worry that the media are pushing the coalition agenda with such conviction that any alternative will not get a look in and so with the current frightened electorate going into “everyone for themselves” routine the potential for divide and conquer and scapegoating is huge.
Therefore I go for the economics failing, I think that Sniffy has started to believe his own propaganda and act on his own narrow prejudices. He has cut more than he needed to, possibly to allow for a pre-election boom-let, possibly just to hurt the public sector into a position of ineffectiveness and acquiescence? The main thing is he has cut too much and a double dip recession is now a probability not a possibility, he should pay a price for his financial hubris.
If he had played it straight and used AD’s template then he could have ridden on the back of the Treasury’s “conservative” estimates to generate a recovery that would have surprised the establishment with its buoyancy. That was what GB / AD were playing for in the election.
Sniffy really has cut off his nose to spite his face. Add in his over-confidence and we have a budget that will unravel over time. The Grauniad better get working on it, yestreday’s choice of columnists and “pet” families was shocking. I just wonder where they get them from?
Tim Parkin
a progressive budget? The experts don't think so – http://bit.ly/aajzWG – even the telegraph agree – http://bit.ly/aRPBEJ