Wednesday, 23 June 2010

I can support this.

Yesterday’s budget was necessary, tough but fair. I didn’t join the SDP/Alliance/Lib Dems to cut the benefits of people who need them, or to increase regressive taxation. I didn’t get into politics to impose a pay freeze on public sector workers.

But sadly we have no choice: the financial mess Labour got us into has to be cleaned up. If Labour were in government, they’d have had to make similarly tough choices - though would they have had the nerve? They already had £23bn of cuts lined up for the coming year, so perhaps fewer crocodile tears from some of our local Labour politicians are in order.

The Budget takes necessarily difficult decisions in an honest and fair way, with Liberal Democrat values clearly ameliorating the worst excesses of Conservative dogma.

Key Lib Dem policies I campaigned for are well to the fore in this budget.

The £1,000 increase in the Income Tax allowance will mean that 880,000 low paid workers will be freed from Income Tax altogether. This is the first step towards delivering our manifesto commitment to ensure no-one pays tax on the first £10,000 they earn - Labour wouldn't have given you this.

The Budget introduces our promise of a new tax on banks, ensuring that they help to pay to clear up the mess they created.

Top earners will pay a full 10% more in Capital Gains Tax, with no loopholes or tapers or get-out clauses. This helps ensure those with the broadest shoulders take the greatest strain. It’s not as much as we’d have liked, but it’s more than the Tories wanted.

The budget guarantees a fair deal for pensioners, putting into effect the Liberal Democrat manifesto commitment to a “triple lock”, so that state pensions rise every year in line with earnings, inflation, or by 2.5%, whichever is the highest. Never again will pensioners be allowed to fall behind - Labour had thirteen years and didn't give you this.

The Budget establishes a regional growth fund and regional national insurance support to help create new businesses and jobs right here in the north east.

Tackling child poverty is central to the government’s approach. So while we have decided to cut child tax credits for those who can most afford it, we have increased tax credits for the poorest families and put up to £2b extra into child tax credits to help ensure children from the poorest backgrounds get a fair start in life - Labour had thirteen years and failed to eradicate child poverty.

These measures will ensure that the burden of deficit reduction is shared fairly by everyone.

This Government is being honest with people about the road ahead. Of course there are things in the budget I don't like. There are things in there that Lib Dems campaigned against, like the VAT rise. But that’s because this is a coalition based on compromise which sees the party most people voted for mix policies with the Lib Dems. It’s how coalitions work.

The alternatives are worse. Labour would not have reformed the tax system nor tackled the culture of overspending in government.

I don't like cuts and extra taxes, who does? I don't like the VAT increase, not least because it will harm my business, competing with off-shore internet-based supplement companies.

But without the VAT increase, public services would have been truly decimated, or our spiralling and unsustainable debt interest payments would have continued.

The Coalition has been open and fair. We now all know where we stand. We have a realistic and credible plan to get Britain’s economy back on track.

A couple of tough years, with more tough choices to come, is something we will just have to grit our teeth and get on with. Rather this than the economic and financial meltdown Labour's policies were pushing us towards.


james said...

Labour had no plans for retrenchment this financial year, Mike, as you well know - and by his own admission Osborne has cut further than the Tories had said before the election.

What worries me is what has worried me for weeks - there is no plan to "get the economy back on track".

There are a series of contradictory and ultimately deflationary measures which will make the export-led growth more difficult, and which will result in increased unemployment and falling living standards for ordinary people. (I think I've already pointed out that rather than making immediate retrenchment necessary, austerity measures will reduce demand across Europe, the UK's main export market, make the prospect of export-led growth much harder.)

Capital allowances for manufacturing firms will be reduced to pay for a tax cut for all corporations, irrespective of whether they are trading in domestic or export markets - this will make it harder for firms like Sheffield Forgemasters to expand.

Job losses in the public sector are unlikely to be mopped up by an expansion of the private sector - resulting in a rise in an over-all unemployment rise. The VAT rise will make life more expensive for many, which eats into purchasing power and will put pressure on retailers.

I fear we will see a return to recession both domestically and globally. Deficit spending is the only way to boost employment and enterprise when there's a stand-off by private investors - especially in a global recession.

The people who caused the crisis - men like Cameron, Osborne, Clegg, Laws, Huhne, etc. will not be hit hard by cuts. They will not lose their jobs, homes or businesses. This was a budget of class warfare by the rich against the rest, dressed up in the language of "fairness".

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