Britannia Radio

When I decided that I had to call it a day I tried to find a rational point at which to stop. I decided that the long-heralded PBR was the right time, for it was supposed to map out the future and create debate. More precisely I thought that the immediate date was not a good point as all budgets take time to analyse and sink in. So I settled on the point when Thursday’s, Friday’s and Saturday’s commentators had had their say and the more measured and considered voices of the Sunday columnists could pull it all together. This seems on reflection to have been a good choice! CS

I’ll tie up any loose ends tomorrow.

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The Observer, normally a supporter of Labour and Andrew Rawnsley never normally friendly to the Tories, both feel that for a host of reasons it has to be a change to the Tories at the election. Exactly the same can be said about John Rentoul in the Sunday Independent.

Then to Janet Daly in the Sunday Telegraph. Predictably she’s backing the Tories but she does so with consideable intellectual depth.

This is a long posting but worth every inch of it!

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So there you have it from all corners of the political spectrum - all saying the same thing on the same day! A good point to stop.

Christina

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OBSERVER 13.12.09

Having invoked the taxman, the axeman waits for Labour

Andrew Rawnsley

Alistair Darling's pre-budget report has won the government no friends and quite a few new enemies, particularly in the media

The silliest thing said about it was that it was political. Well, of course, the pre-budget report was really a pre-election report. This was Labour's last serious opportunity before Britain votes to set the terms of the debate about tax and spending with the Tories. It was also Labour's best chance to convince the country that it had the more credible approach to sustaining economic recovery and then mopping up the red ink weeping from the public finances. To complain that it was political is as futile as deploring bears for defecating in the woods.

Was it good or bad politics? That is the question the cabinet have been asking themselves since the chancellor sat down on Wednesday. Ministers are getting their answer in an almost universally hostile reaction from markets, the press and the voters. Senior members of the government privately lament that it has been a disastrously missed opportunity, not so much a springboard for the election as a death trap. The person they primarily blame is not the chancellor, but his next-door neighbour.

The PBR was invented in the first place by Gordon Brown for mainly political reasons. He decided to create the event when he was chancellor in order to give himself two opportunities to deliver a budget every year, two occasions to subject his cabinet colleagues to his power, two occasions to infuriate Tony Blair by hiding what he was up to, two occasions to make the same announcements of spending promises, and two occasions to boast that he had ended boom and bust. That was during the sunny days before he presided over the most spectacular bust since the 1930s.

I guess whoever was the equivalent of chancellor of the exchequer to King John had a pretty rough time of it, but few holders of the purse strings since have had to operate in such a bleakly unforgiving context as Alistair Darling. He is a chancellor presiding over a recession which has turned out to be much longer and deeper than the Treasury initially anticipated. He is working for a boss who tried to fire him a few months ago. That boss, moreover, made the mistakes that landed us here. The chancellor had to confirm that the deficit is now at a peacetime record and this has been the most severe contraction certainly since 1945 and probably since 1921.

Whoever finds themselves in power after the election, the country contemplates a dismal vista of spending cuts and tax rises. Even the most masterful political magician could not conjure a brilliant electoral strategy out of that miserable material.

In those circumstances, the approach that most commended itself was cool truthfulness about the depth of the hole we are in and a credible account of what Labour would do in the next parliament to climb out of it. Alistair Darling is never going to win first prize in a charisma contest, but he does have a reputation for being relatively straight, quite a prized commodity in an age of such mistrust towards his profession. The principal reason why the politics have gone so horribly wrong for the government is because this PBR so badly failed the credibility test with its three most important audiences.

One audience was the bond markets which fund Britain's borrowing. They were looking for reassurance that there is a serious plan to tackle the mammoth deficit over the medium term. It is one of Labour's better arguments against the Tories that deep spending cuts should be postponed to avoid the risk of choking off the tentative signs of economic recovery. The important thing for those lending to Britain is not so much the speed of cuts as a plausible account of how the deficit will be paid down once a return to growth has been firmly established. That was missing. The Treasury would have been more specific, but it succumbed to the prime minister's insistence that they should keep it vague. So there is very little detail about how Labour would meet its own target – which it plans to enshrine in law – to halve the deficit in four years.

The result has been a slide in the price of gilts and muttering among credit agencies that Britain may lose its AAA rating which would have the calamitous effect of making the deficit even more expensive to finance. A good measure of how the world regards the financial soundness of the UK is the price lenders have to pay to insure against the British government doing a Dubai and defaulting on its debts. The insurance premium for lending to Britain is now higher than that charged for lending to Slovakia.

This failure to be more candid let the Tories off the hook. Their approach is also characterised by a lot of dodgy numbers, vague assurances and hidden intentions. The fuzziness of Labour's plans means there is reduced pressure on the Conservatives to specify how and where they would cut faster and deeper.

The next audience was the media. Given that the chancellor was playing such an appalling hand, he was never going to get glowing press notices, but senior members of the cabinet have been taken aback by the almost universal ferocity of the reaction from the press across the spectrum.

"Darling just screwed more people than Tiger Woods," cackled the Sun, an echo of the "Now we've all been screwed by the cabinet" headline that the tabloid ran about Black Wednesday when it destroyed Tory economic credibility in 1992. Well, they already knew that the Sun had gone down on them. The Guardian and the Daily Maildo not agree on much, but they were alike in depicting this as squeezing not just the rich, but soaking the majority of the population.

The most politically negative component was the increase in National Insurance contributions which will hit anyone earning £20,000 a year or more. That tax rise on middle Britain could have been avoided, at least for the moment, had the chancellor not promised some spending increases in 2011 and 2012. This was because Gordon Brown still thinks he can fight the next election on the basis of "Labour investment" versus "Tory cuts". He is addicted to this strategy because it worked so well against the Conservatives in 2001 and 2005. But many of his senior colleagues are highly sceptical that the election of 2010 can be successfully fought on that dividing line. Gordon Brown still wants to wage the last war, perhaps because he is not capable of fighting any other.

Over the summer, the chancellor, with Peter Mandelson and Jack Straw as important allies, thought he had dragged the prime minister into a more defensible position. But then, like an old recidivist, Gordon Brown started sliding back into his old habits, spraying around more unfunded spending promises in his party conference speech.

He has been egged on by Ed Balls, partly because the schools secretary is also obsessed with that old dividing line, partly because he wanted to be able to boast that he had won more money for his department. I am reliably told that the wrangling between the schools secretary and the chancellor went on into the early hours of the morning on the day of the PBR itself. The result was that some of the extra spending beaten out of Mr Darling by Mr Balls did not get into the document because it was already printed. Yvette Cooper, wife of Mr Balls and work and pensions secretary, was also refusing to settle right up to the wire – and beyond it. They may celebrate by treating themselves to His and Hers boxing gloves, but some colleagues think their brinkmanship was outrageous.

The disbelieved suggestion that they can carry on spending on health, education and the police as if the boom had never bust has won the government no credit while the tax hike has attracted almost total damnation. It has also done another favour to the Tories. They can present themselves as the party most interested in helping "the many", which is supposed to be Labour's tune. George Osborne has been given the opportunity to play down his inheritance tax cuts for "the few" by making a priority of pledging to reverse Labour's tax increase on "the many".

Which brings us to the final and most important audience: the voters. Even the fuzziness of the figures and the chancellor's genius for inducing drowsiness in an audience could not mask the brutal truth: the incomes of most voters face a severe squeeze in the years ahead. The deficit is far too huge to be dealt with simply by dipping deeper into the pockets of the very wealthy. One-off taxes on bankers' bonuses aren't going to do the trick. There are just not enough of the rich to provide the money that is needed. As Denis Healey remarked when he was Labour chancellor grappling with the fiscal crisis of the 1970s, governments that want to raise serious sums can only do so by putting up taxes on the moderately affluent and the average earner.

The other option is to make deeply painful spending cuts. For Britain, both are now in prospect. The axeman and the taxman are waiting at the door. The real budget will be the emergency one that someone introduces shortly after Britain has been to the polls next spring. The incredibility of this PBR makes it even more likely that that person will be George Osborne.

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SUNDAY INDEPENDENT 13.12.09

John Rentoul: Labour is unelectable again

Gordon Brown's party is being propelled into the wilderness by economic plans that repel voters

The small print of a little-noticed annexe to the pre-Budget report reveals that the Chancellor has revised the official forecasts: he has postponed the Labour Party's return to electability until 2028.

Gordon Brown might have thought last week's was an election-winning moment; Alistair Darling might have thought he was setting out a path to halving his party's credibility deficit within four years. But this secret annex suggests that it will take much, much longer. It is entitled "The End of New Labour, No It Really is All Over, It Is Much Worse Than You Think". It reveals the Prime Minister's cunning masterplan to put everything that he and his predecessor built to fire and the sword, making sure that the party is not simply dented but flattened for a generation, the big tent cut into pieces and burned, the centre ground abandoned to the enemy, and anything of value utterly destroyed.

Of course, the destruction of New Labour has been a gradual process. One important moment came in last year's pre-Budget report, when Darling announced a plan to bring in a new 45 per cent rate of income tax on earnings above £150,000 a year in 2011. But that was not the end. It would not have raised much revenue, but it was necessary as a token of fairness – to show that the burden of clearing up the fiscal disaster would be borne by those best able to afford it. A more important moment came in the Budget itself in April this year. That was when Darling announced not only that the top rate would be 50 rather than 45 per cent, but that it would be imposed from April next year. Tracey Emin threatened to leave the country. Stephen Byers, holder of the honorary post of Blairite Outrider, condemned it for breaking a manifesto pledge not to raise income tax rates – because it would come in just before the expected date of the next election. It became known that Tony Blair himself had described it as a "terrible mistake".

All that was bad enough, but there was worse to come last week. Not that Darling's forecasts for the economy and the public finances were significantly worse than they had been in the spring. But the tax on bankers' bonuses was the final act of self-destruction. I realise that clobbering bankers is, in some circles, regarded as a sane and desirable activity, and that the howls of anguish from the City and Canary Wharf are seen as evidence that it is the right policy. And I accept that excessive pay in banks owned by the taxpayer, and in other banks bailed out by the taxpayer, is a problem about which any government that cares for social justice ought to be concerned. But it is not a simple problem, and last week's one-off tax is not a solution to it. Not only is it arbitrary and indiscriminate, it is likely to be ineffective. Ways round it are certain to be found. No one seriously thinks that it will raise the £550m estimated by the Treasury.

The cost of the measure will be measured in years of lost goodwill. The efforts of the Labour Party to build its reputation for economic competence have, of course, been most damaged by its disastrous mismanagement of the public finances since 2002. But Brown's reversion to class-war politics has compounded his error. The City's fury matters. London has, at a stroke, become a less attractive place in which to do business. It is easy to say that "these are the people that got us into this mess", but in almost every individual case this is not true. There are blameless specialists in arbitrage, foreign exchange and pork-belly futures who know about as much about American sub-prime mortgages as you or I do. Bashing bankers is gesture politics.

And for what? It won't make Labour any more popular among the voters it needs to save its marginal seats at the election. Of course, with the public finances in the state they are, taxes will have to rise, and it is right that the burden should be shared according to ability to pay. Our ComRes poll today confirms that voters accept that it is "fair" for those on higher incomes to bear the heavier burden. The 45 per cent rate achieved that; even 50 per cent might have been defensible. But to break a manifesto promise for the sake of trying to embarrass the Conservatives (an attempt that failed: David Cameron and George Osborne refused to promise to reverse the tax rise); and to hit the banks overnight with a tax for the sake of being seen to be doing something about high City pay – that is to betray a hostility to aspiration and success. That inflicts lasting damage to Labour's image as the party that is on the side of those that want to get on in life.

The danger is illustrated perfectly by ComRes's question about Labour's attempt to use Cameron's Eton education against him: 70 per cent have no time for it. Almost the whole point of New Labour was that it meant Labour politicians had to make a conscious effort to suppress their inverse snobbery about the rich. That involved teeth being put on edge for a long time, as the press sneered about Blair's hobnobbing with millionaires and Peter Mandelson once saying that "we are intensely relaxed about people getting filthy rich" (although his next words, in 1998, are not so often reported: "as long as they pay their taxes"). But it also conveyed the message that Labour was a party that celebrated success.

That has now gone. Part of it, inevitably, is the tenor of tough times. But laid over that is a thick, suffocating, politically disastrous and completely unnecessary layer of Labour's oldest and least attractive instincts. It took the party 18 years to shed its association with the 98 per cent income tax rate (83 per cent plus 15 per cent "unearned income surcharge") of the Callaghan-Healey era.

Last week's pre-Budget report was not just the end of New Labour. It made it much, much more difficult for any kind of Labour to recover, possibly for a decade or more.

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SUNDAY TELEGRAPH 13.12.09

Labour tax increases are a priceless gift to the Tories

Alistair Darling's pre-Budget report showed that New Labour has abandoned the aspiring classes on which its power was built, says Janet Daley.

Christmas has come early for the Conservatives. Labour has presented them with a gift whose value is simply breathtaking in its implications: it has handed back to the Tories the key constituency which delivered them four successive election victories. George Osborne summed it up in what has to have been the most succinct political statement of the past tumultuous week: "The message to aspiring families from these tax changes is pretty clear. If you want to get on in life, then the Labour Party is not for you any more."

What was supposed to have been the most politically calculating pre-Budget report in history turned out to be a revelation of a quite different order. New Labour has dumped Middle Britain, written off Mondeo Man and Worcester Woman – abandoned Mr and Mrs Struggling-To-Make-It-On-Their-Own. It has turned its back not just on the traditional middle classes, who flocked to Tony Blair's re-invented party of the Left because it seemed to offer a comfortable compromise between social conscience and free-market economics, but on the more electorally volatile C1 and C2 voters, whose lives were transformed by Thatcherism.

These are the people who have been specifically and strenuously courted – the ones, indeed, for whom New Labour was created – because it is they who hold the power in so many marginal seats and whose sensitivity to economic shifts makes them peculiarly politically receptive. They do not have a cushion of family position, higher educational qualifications or inherited financial security: having only just emerged from poverty (or, at least, from working-class assumptions) their lives are most immediately and substantially affected by tax changes, fluctuating property values and the threat of unemployment.

So they are the ones, paradoxically, who will most resent the increase in National Insurance contributions, even though those on higher earnings will actually pay more: it is the man trying to support a family on £20,000 or £30,000 a year who will feel the difference in his take-home pay, more than the one on £80,000. Not to mention the possibility that the increase in National Insurance – which is, of course, a payroll tax – may very well cost Mr Struggling-Family-Man (or his wife) a job.

Mr Brown and his evil twin Ed Balls, who apparently over-ruled the Chancellor, have now placed Labour definitively on the side of tax rises rather than public spending cuts as the solution to the economic crisis. That is pretty much the precise opposite of what public opinion has been saying for some time that it would prefer, but it runs particularly against the inclinations of the C1s and C2s, who are still trying to see their way through this thing without giving up their proud self-reliance.

The Tories' private polling has shown that their proposed cut in inheritance tax, which proved to be an electoral game-changer when it was announced, is still hugely popular. People who have managed to buy their own homes and accumulate a bit of hard-earned savings are deeply resentful of the idea that government should help itself to a fistful of their proud bequest to their children: it does not accord with their concept of "fairness" at all. Interestingly, in a poll taken immediately after the PBR, the highest level of approval for the National Insurance increase came from those who were most well-off: once again, the bourgeois guilt of the wealthy comes to the aid of socialist inclinations.

But what is wrong with these inclinations, you may ask? Isn't it true that public spending stimulates the economy? Yes, it does – briefly. But other kinds of spending do too, in a rather more lasting way. The kind that is done by government is necessarily temporary and does not create either real jobs or real wealth; but the kind that is done by you and me when we have the disposable income to do it, and by businesses that are able to expand when they have the money to do so, makes a genuine, permanent contribution to economic growth.

So if you depress personal spending by lowering people's incomes through tax rises in order to increase state spending, you make a very bad short-term bargain. What is more, you give more economic power to the state and take it away from the individual, thus diminishing personal freedom and the possibility of self-determination – which are things that those prized C1 and C2 voters have come to cherish.

So how can the Tories make the most of this gift which has been bestowed upon them? Unlike many of my brother commentators on the Right, I do not think it is strictly necessary for David Cameron and his Shadow Chancellor to make a promise in blood to reverse the National Insurance increase, or to deliver the inheritance tax cut, immediately. Nobody believes politicians' promises anyway. They just have to reiterate, with absolute conviction, that they understand the anger of people whose chance of making their own way to economic recovery is being taxed out of existence: they must not waver, or seem ambivalent, in their commitment to them or to the beliefs on which they have pinned their lives.

The Tories' leaders must not, in other words, be seduced by those on the Left who are urging them to abandon the principles of lower taxes and self-improvement. In the battle for the soul of the Cameron Conservatives, those Left-wing (or Left-ish) commentators who dangle the possibility of an endorsement for Mr Cameron are like mermaids luring the Tory ship on to the rocks: Oooh, they say, you are looking much nicer now, but not quite nice enough. Just a little bit softer, a little more "compassionate"… that's it, now a bit more tax and a lot less competition, there you are – CRASH!

Not that these fair-weather friendly advisers actually believe that the Conservative ship will go down: they fully expect it to sail home triumphantly. What they want is to be able to say that it was only possible for the Tories to win an election by moving on to Left-liberal territory (which is what they mean by the "centre ground"). At least that way, they will salvage something from the humiliation of defeat. New Labour, they will claim, brought about precisely the sort of fundamental shift in political reality that Thatcherism did: the Tories may have won, but they did it on our terms and by borrowing our language, just as we were once forced to borrow theirs.

Much will depend on whether Mr Cameron listens to his instincts, or to people who want to pretend that they are still the future.