Archive for March, 2011

Bullingdonia: Osborne’s banana republic

25/03/2011, 01:32:24 PM

By Dan Cooke

In other news this week, concerns were raised about standards of governance in the Republic of Bullingdonia.

The ruling party, with a strong traditional base in the south east of the country,  imposed a shock 12% tax hike on the country’s oil and gas industry. This is overwhelmingly based in the state’s northern province where the governing party recently won only one of all 59 constituencies in the recent general election.

Critics charged that, while the government of Bullingdonia claimed to be promoting growth, the levy would undermine the competitiveness of one of the country’s leading industries and that the lack of consultation on its introduction would undermine the certainty needed for international investment. While the ruling party argued they were fulfilling a manifesto commitment to a “fair fuel stabiliser”, it was pointed out that such plans never previously envisaged a levy on the oil industry. (more…)

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Revealed: Fuel stabiliser set to hike household energy bills

25/03/2011, 07:00:01 AM

by Atul Hatwal

Ofgem research contradicts government claims that costs will not be passed onto consumers

As George Osborne and Danny Alexander struggled to deny that increased taxes on North Sea oil would simply be passed on to consumers on petrol forecourts, it emerged that these taxes would also hit hard-pressed households’ energy bills.

Wholesale costs faced by the big household energy suppliers, who are involved in energy exploration and production in the North Sea, are set to rise when these new taxes are levied.

New research released by Ofgem this week revealed how these increased costs will feed through into household energy bills.

The report, entitled Do Energy Bills Respond Faster To Rising Costs Than Falling Costs, was sneaked out on Monday. It details how energy suppliers don’t just pass on an increase in the wholesale costs of energy, they hike customer bills by almost 10% more than the original cost increase.

Applying Ofgem’s analysis to the changes announced in the budget, all households that use energy from the major suppliers facing higher oil and gas taxes will be hit, regardless of whether they benefit from the cut in fuel duty.

The result will be millions of non-drivers subsidising motorists’ petrol costs through their energy bills, raising new questions about David Cameron’s claim that this would be the “greenest government ever”.

Even worse, Ofgem’s analysis shows that when energy suppliers’ wholesale costs decrease, they don’t pass on the full benefit to consumers. Instead, they pocket over 60% of the difference, leaving prices much higher than before the initial increase.

This means that the fuel stabiliser is likely to permanently ratchet up energy prices for consumers. (more…)

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Friday News Review

25/03/2011, 06:40:38 AM

Calamity Clegg

It was supposed to be all about promoting the Budget plans for economic growth. Twenty-one Enterprise Zones are being set up in unemployment hotspots and David Cameron and Nick Clegg were at the Boots HQ in Nottingham to celebrate one of the first of them being set up right next door. Then at the end of a question and answer session with Boots employees, the PM and the DPM were asked about where we’d all be in 2015. David Cameron said in a jokey closing remark that they’d probably be having election TV leaders’ debates and that this time it might be ”a bit better natured between the two of us.” The two men then take the applause and walk off the stage … BUT Nick Clegg forgets he has his microphone on and says to David Cameron as they leave the room: ”If we keep doing this we won’t find anything to bloody disagree on in the bloody TV debates.” David Cameron laughs then Nick Clegg looks down at lapel realising, a la Gordon Brown and “bigot-gate,” that he’s forgotten to take the mike off. His press chief, Lena Pietsch, gives an anxious sideways look to Ed Lewellyn, the Prime Minister’s Chief of Staff. – Gary Gibbon, Channel4 News

A gaffe by Nick Clegg looks likely to fuel fears among backbench Coalition MPs about his enduring friendship with David Cameron. After a question and answer session with members of the public, the Lib Dem leader was recorded yesterday telling the Prime Minister: ‘If we keep doing this, we won’t find anything to bloody disagree on in the bloody TV debates.’ Mr Cameron laughed, before Mr Clegg realised he had left his lapel microphone on. Gordon Brown suffered a similar fate during the General Election campaign when he was recorded describing angry Labour voter Gillian Duffy as a ‘bigot’. It will intensify fears among both Lib Dem and Tory MPs that the pair’s close relationship shows they are happier with each other than with their own MPs. Some fear their partnership could even lead a so-called ‘purple plot’, with the Coalition continuing beyond this Parliament. – Daily Mail

The Labour Party last night threatened to pull the plug on three-way televised debates at the next General Election after Nick Clegg was inadvertently recorded telling David Cameron that the pair “won’t find anything to bloody disagree on”. His remarks were immediately seized on by Labour who suggested that it would be inappropriate to have a three-way televised debate as Mr Clegg was effectively now just Mr Cameron’s deputy. “What we think should happen is that David Cameron debates with Ed Miliband while Nick Clegg debates with our deputy leader Harriet Harman. Clegg’s comments have reinforced our view that the next election will offer the choice between two directions for the country: a Tory led coalition and a progressive majority represented by Labour.” He added Labour’s concerns would be raised in negotiations with the broadcasters over the next set of TV debates. – the Independent

Cameron’s broken promises

David Cameron stood accused yesterday of breaking two key election promises in the Budget. The Government is set to axe NHS funding by nearly £1billion – despite a vow to increase health spending. And millions of pensioners will lose up to £100 in winter fuel payments in a cut sneaked out in the Budget small print. An analysis by the highly-respected Institute for Fiscal Studies showed yesterday rising inflation means NHS funding will fall 0.9% over the next four years, equivalent to a cut of £900million. Chancellor George Osborne has helped to cook the books by reducing the baseline from which the Government measures health spending. But the IFS said that even with the new baseline Mr Osborne will struggle to maintain NHS spending above “zero” and was “sailing very close to the wind”. The organisation also warned public services face an extra £4billion cut due to inflation, and household incomes will fall by £1,500 over the course of the Parliament. Gemma Tetlow of the IFS said: “There is a 30% chance that further tax increases or deeper spending cuts will be needed.” Shadow Health Secretary John Healey said yesterday: “The small print of the Budget confirms David Cameron is letting the NHS down, and has broken his promise to protect the NHS. With the Office for Budget Responsibility’s new inflation forecasts, NHS England is in fact facing a real-terms cut of £1billion.” – Daily Mirror

The coalition is embroiled in a row over its health pledges after it emerged that the budget contained a cut in the NHS‘s spending power of almost £1bn.Labour accused ministers of reneging on their repeated promise to increase the NHS’s budget in real terms every year throughout this parliament. Revised upward predictions of inflation in the budget by the Office for Budget Responsibility show that the NHS in England will undergo a cut of £1bn in its spending power by 2015. It also reveals that its budget will be cut in each of the next two financial years, alleged shadow health secretary John Healey. He was supported by Professor John Appleby, chief economist at the King’s Fund, who calculated that the NHS would have £910m less to spend over that period. “It looks like the government won’t meet its pledge to give a year-on-year real rise to the NHS each year during this parliament,” he said. – the Guardian

How are you getting to the march tomorrow?

But tomorrow tens of thousands of people will come to a march and rally in London to show there is an alternative. It should be a march of the mainstream. Nurses, cleaners, care workers and council staff should be there to urge the ­Conservative-led administration to have a change of course. There are expected to be 600 coachloads, nine special trains and thousands will attend by public transport. One man is walking from Cardiff. And I will be joining them in Hyde Park to add my voice to the many. For me there is one thing that links all our concerns. It is the threat that these cuts pose to the next generation. This is what I have called the betrayal of the British Promise. If anybody wants a reason to join this Saturday’s demonstration, there are many – the need to show there is an alternative, to save our services, to show the cuts are going too deep and too fast. But I would also urge people to join us to protect the promise we in the past have made to our children. This is what Saturday should be about. Let us make Saturday a one-nation demonstration against the politics of division. – Ed Miliband, Daily Mirror

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The wrong demo: five reasons why

24/03/2011, 07:00:50 AM

by Rob Marchant

On Saturday, Ed Miliband will be speaking, but not marching, at one of the biggest anti-government demonstrations for many years.  Activist Luke Akehurst writes passionately and eloquently about the need for all of us involved in the Labour movement to march, and, on the face of it, it is an obvious way to capitalise on the unpopularity of the Tories. But there is a big difference between it being right for individual members to be involved, and it being right for the leader of the Labour party to speak there.

Ed is in an uncomfortable position – “walking a tightrope”, as the New Statesman’s Mehdi Hasan puts it. He’s not wrong: look, and you can find at least five compelling reasons for his not being involved in the demo.

One: Labour didn’t organise the demo, the TUC did. Who knows what other people will say? Who can say what they will do? Things do not bode well regarding the other speakers. “Keep your sleazy hands off our kids”, Unite’s Len McCluskey told the progressive London conference, in a message directed at the metropolitan police (not very good political judgement, it would seem, considering the met themselves now stand to lose heavily from the cuts and could have been a useful ally against them). And if, like the earlier student demo, there are police clashes, heaven help us. (more…)

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Thursday News Review

24/03/2011, 06:45:12 AM

Budget 2011 – reaction

George Osborne has bowed to growing concern over the biggest squeeze in living standards since the second world war with an instant cut in fuel duty, but had his claim to be delivering a budget for growth undermined by the ominous prospect of lower growth, rising unemployment and higher borrowing. While insisting the government was sticking to its austerity plan despite a gloomier outlook for the economy, the chancellor levied a surprise £2bn windfall tax on North Sea oil companies to finance a populist 1p a litre reduction in the price at the pumps as the unexpected finale of a reform package focused on reversing Britain’s economic decline. The chancellor said he was “putting fuel in the tank of the British economy” by liberalising Britain’s planning laws, scrapping red tape, simplifying the tax system and creating a Green Investment Bank to fund the expansion of environmental companies. But he was forced to admit that growth this year would be just 1.7% – lower than the 2.1% expected – while 200,000 fewer jobs would be created during this parliament. Figures from the independent Office for Budget Responsibility showed slower growth would result in £45bn extra borrowing between now and 2015. – the Guardian

The Chancellor announced a £2 billion-a-year windfall levy on North Sea oil to fund an immediate cut in fuel duty of 1p per litre. He also postponed a 5p rise in fuel duty due next month and introduced a fuel price stabiliser to keep costs at the pumps down… Elsewhere, Mr Osborne announced a staged 3p cut in corporation tax, a £326 tax cut for 23 million low to middle earners and a fund to help first-time house buyers. But these were among few giveaways in a Budget dictated by the stagnant state of the economy. The Chancellor was forced to admit that growth would be slower than expected over the next two years and that he would have to borrow more than originally forecast to plug the gap in the public finances. He refused to change his strategy for cutting the deficit, saying: “We have a plan and we’re sticking to it.”… The announcements were welcomed by motorists and business groups. However, economists pointed out that the small savings to households were likely to be dwarfed by sharp tax rises that had already been announced and come into force next month. – the Telegraph

It is getting hairy. This only works if we get decent growth – solid thumping growth of close to 3 per cent a year by the back end of this parliament. If we get that, the national debt levels out and starts to come down as a percentage of GDP. If we don’t – and the challenge will be to grow faster than the rest of the EU and well above our long-term trend – then it is not just the Coalition that is in trouble. We all are. So is this really a Budget for growth? Well it is not a Budget against growth, and since the main business bodies have given it a general welcome, that’s a start. But the debt mountain is as high as ever and if this Budget tells us anything, it is that we need things to come right in the next four years – or, in grander language, for a lot of the economic variables to turn out to be towards the more favourable end of the possible scale. So far, looking at our latest growth and inflation numbers, rather the reverse seems to be happening. – the Independent

Ed Miliband lambasted George Osborne as “the wrong Chancellor” yesterday, accusing him of putting the recovery at risk and squeezing living standards by cutting public spending “too far and too fast”. The Labour leader denounced Mr Osborne for pursuing the wrong economic course, pointing to faltering growth, rising inflation and growing unemployment as evidence that the tough medicine was not working. He argued that the centrepiece measures of the Budget – the rise in income tax thresholds and the 1p cut in fuel duty – were dwarfed by other tax increases in the pipeline. Producing an instant response to a Budget statement – even a leaked one – is one of the toughest jobs in Parliament and Mr Miliband frequently struggled to make himself heard in rowdy Commons scenes. Lindsay Hoyle, the Deputy Speaker, was forced to appeal for calm as MPs hurled insults across the chamber. Mr Miliband deployed a series of jokes crafted by his new press team to deride the Coalition’s strategy and accuse it of ideological inflexibility.- the Independent (more…)

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Where’s the social care in the health and social care bill?

23/03/2011, 03:00:23 PM

by Peter Watt

There has been, rightly, an awful lot of attention given to the government’s health and social care bill. It proposes opening up the delivery of NHS services to any willing provider and the introduction, in some instances, of competition on the basis of price rather than outcome. Controversial stuff. Especially as the Conservatives promised no “top down reorganisation” during the election.

But there is one aspect of the bill that hasn’t been much commented on. It is misleadingly named. It is a “health” bill, certainly, but it is not a “social care” bill at all. This is not a pedantic point. The bill does not cover the social care system, which provides care and support to hundreds of thousands of people across the country in their homes and in residential settings. Last year, social care cost the state in the region of £27 billion. And individual families billions more on top. Many people do not realise that social care, unlike health, is not universally free.

Basically, if you have assets of more than £23,500 then you have to pay. If you become old and infirm, and need help staying at home, you will probably pay. If you need to move into a residential home, you will probably pay. With the average cost of a room in a nursing home at £36,000 pa, it won’t come cheap. (more…)

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Half a minute Harris

23/03/2011, 11:00:36 AM

Episode 4: Student visas… I’m with Theresa May on this one

You can catch up with previous episodes here:

Episode 1: Welcome, Uncut readers, to the mind of Tom Harris

Episode 2: Should we abstain on the welfare reform bill?

Episode 3: How’s that working out for you Polly?

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Budget 2011: David Cameron is Ricky Hatton’s Mum

23/03/2011, 07:00:02 AM

by Jonathan Todd

The current Spectator cover story claims that Conservatives are as struck by panic as they were in the autumn of 2007 when Gordon Brown seemed set to crush them by calling an election. George Osborne saved their bacon then and they look to him to revive them now. Everyone else is looking at Libya. Hence, the impact of the budget will be dimmed. But Osborne will try to pull a big enough rabbit out of his hat to wrest attention away from the middle east.

Osborne doesn’t begrudge Libya coverage, obviously; particularly not if it leads to his boss being seen as a competent and brave war leader. If – and clearly this is a massive if – a stable post-Gaddafi Libya emerges, then the earlier shambles will be largely forgotten and David Cameron will gain kudos, which will make him harder to dislodge from Downing Street. The resignation of Lord Carrington did little to dent the boost that the Falklands war gave Margaret Thatcher at the 1983 general election.

Osborne’s rabbit isn’t intended to divert eyes from Libya or the spotlight from Cameron. It will seek to disorientate Labour and have our leaders confuse tactics with strategy. Fiscal constraints limit the cards in play, but the cards available are all held by Osborne. He knows that he can use them to establish dividing lines that will set the terms of debate. He was as keen a student of Gordon Brown as either Ed Balls or Ed Miliband. (more…)

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Wednesday News Review

23/03/2011, 06:46:18 AM

Osborne prepares to deliver budget

Only a short but eventful year ago, George Osborne was no one’s idea of a chancellor. He routinely trailed Vince Cable and Alistair Darling in polls of the City, the public and business for competence. Mervyn King told the US ambassador he was worried by his lack of experience. Peter Mandelson identified poor George as the Tories’ “weakest link”; dark rumours circulated that he would be replaced by the apparently full-of-mojo William Hague. Yet now Mr Osborne has confounded his critics and emerged as the most formidable operator in the Government, and it is fair to acknowledge that (though some of us rated him in opposition a bit higher). He does not exactly bestride the British political scene today, but then again nobody does. In any case the eyes of the world will be elsewhere today – on Portugal, whose government may topple if its austerity budget is not passed today, in which case the eurozone could be plunged yet again into existential crisis. The UK’s sovereign debt trauma never arrived. Mr Osborne calls this “the absence of war”, and much of it is down to him. Quite an achievement for “the weakest link”. – the Independent

Time for George to stop blaming the snow and go for growth

IN today’s Budget George Osborne will boast he’s a man with a plan. He’s right – a political plan to cut services now in the hope he can bribe voters with tax cuts later, before the next election. He blames his ­decisions on Labour and hides behind the Lib Dems. But this isn’t an economic plan. And it’s not working. A year ago, under Labour, unemployment was falling, ­inflation was lower and the economy was growing strongly. But yesterday we saw inflation rise again, the number of people out of work is now at a 17-year high, and the economy has ground to a halt. But all the Tories can do is blame the wrong kind of snow. The Tories said they were the most family-friendly government in the world. But they’re giving the banks a tax cut while clobbering families with children hardest. They told us the NHS would be safe in their hands. But they’re cutting funding in real terms. Today, I think Osborne will cancel April’s fuel duty rise, as Labour did when world oil prices were going up. But will he reverse the Tory VAT rise on petrol? He’ll claim to help more young people get work placements. But, with nearly a million out of work, is it enough? – Ed Balls, the Mirrror (more…)

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Today’s growth figures vindicate Labour’s economic stimulus

22/03/2011, 07:00:53 PM

Borrowing figures published today: £123.5bn borrowed April to February 2010-11 versus £136.6bn April to February 2009-10.

As we head into tomorrow’s budget, there is clear evidence of the effect of growth on reducing borrowing. Last year, predictions were ratcheted higher on growth, and that on borrowing ratcheted lower as we went through the year. The supply side of the economy in particular surprised, with the result that the highest quarterly growth this century in Q2 2010 and the highest half year growth of the past 10 years allowed the supply side to respond and generate tax receipts that will grow over the financial year by 7.7%.

This has meant that the primary budget deficit has been slashed by a massive 33%.  From last year’s 9.1% of GDP to 6.2% GDP, the growth in the economy has closed the gap in the deficit, supported by the government’s focus on growth-supportive spending. Getting the primary deficit down is the first step to paying off the deficit. The reason the budget deficit itself has not fallen by the same amount is that the interest on the government’s inflation-linked debt has risen considerably, because the Bank of England has failed to keep inflation under control.

As we head into a period of retrenchment and possibly another recession as a result of the cuts, it is instructive to look at the effects of the stimulus from research published by the OBR’s counterpart in the US, the Congressional budget office.  It has published estimates of how the stimulus package has created growth in the USA:

Full time equivalent is a better measure of maintenance of living standards – estimating both the maintenance of jobs together with the maintenance of full time employment that would have become part time. Clearly, the stimulus kept things going both over in the US and here in the UK. The rise in tax receipts is probably the best evidence we have for how much UK productive capacity the stimulus kept alive.

Alas, as we look at where the current government is cutting taxes in their neo-Ricardian view on growth over the rest of the parliament, it’s useful to see what the CBO estimates are of the growth multipliers on different policy effects:

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