Coalition

Kiran Stacey

HMS Ark Royal on a farewell tourLast month, we mapped out what each department could expect to face in the June spending review given the Treasury’s promise to keep cutting at the same pace as it has done before.

That study showed some of the most sensitive departments were in line for the steepest cuts. Local government was in line for £1.3bn of cuts, the business department, just over £1bn, and most sensitively of all, defence, nearly £700m.

Those calculations, however, only got us up to just over £7bn of cuts. We decided to take a cautious view, sticking to the idea of spending falling at the same trajectory as it has been so far, rather than striving to hit the £10bn figure. Read more

Elizabeth Rigby

David Cameron and Nick Clegg were this morning falling over themselves to claim the credit for helping “hard working families” with news of a new voucher scheme that could be worth up to £1,200 per child.

After weeks of wrangling, the coalition was finally ready to press the button on a tax-free childcare scheme to replace the current “employer supported childcare” system. The new scheme will eventually reach up to 2.5m families – compared with the 450,000 who access the current voucher system – and include the self-employed. Read more

Kiran Stacey

Labour continues to pile the pressure onto Iain Duncan Smith over reductions in housing benefit to those who have one or more spare bedrooms in their social housing. At DWP questions today, Labour MP after Labour MP stood up to ask a question about what they call the “bedroom tax” (Tories hate the label but their “spare room subsidy” label misses the point).

Amid the barrage of questions, it became clear that DWP is about to offer a concession. IDS told the Lib Dem MP Greg Mulholland that guidance would be going out to councils tomorrow about what they can do for severely disabled children. Read more

Kiran Stacey

 

Jeremy Forrest, the teacher extradited from France last year

Jeremy Forrest, the teacher extradited from France last year

We revealed this morning that the first battle that Nick Clegg intends to pick in the coalition after his party’s victory in Eastleigh is over the European arrest warrant.

The EAW is one of a number of measures involved in the European crime and justice framework, which the Tories want to leave altogether. The prime minister has won plaudits among his own party for saying he would pull out of the 130 measures agreed among EU countries, but he needs the support of his coalition partners to do so, as it must go to a vote in the Commons.

Negotiations between the two parties are being led by Danny Alexander and Oliver Letwin, and according to sources close to the talks, have pretty much broken down altogether. Read more

Kiran Stacey

George Osborne and Danny Alexander will front two important pieces of analysis next month into why being in the UK benefits Scotland both in terms of its currency and its financial services sector.

The first of these papers could prove particularly interesting. It will argue that the best kind of relationship between Scotland and the rest of the UK would be full fiscal and currency union – ie remaining part of the UK.

But it will also give an intriguing answer on the terms on which Scotland could leave the UK and yet still retain sterling as its currency. Read more

Kiran Stacey

Boris Johnson and Maria Hutchings doorknocking in Eastleigh

Boris Johnson and Maria Hutchings campaigning in Eastleigh

We are now just a week from the Eastleigh byelection and the likely result is starting to take shape.

The Lib Dems have emerged as the decisive favourites. They have run an impeccable campaign, from choosing a man who was the antithesis of Chris Huhne, to limiting the campaign to three weeks, preventing their rivals from getting their machinery properly off the ground.

For a full explanation of why the Lib Dem ground operation has been better than the Tory one, James Forsyth’s piece for the Spectator gives an excellent summary. Read more

Kiran Stacey

David Cameron with Maria HutchingsIt was always going to be fascinating to watch how the two coalition parties would campaign when pitted against each other in the closely-fought Eastleigh byelection.

Commentators expected both sides to start criticising policies they have backed within the coalition, and to a certain extent that has happened.

But a press note just delivered by the Lib Dems has turned that on its head, becoming what must surely be the first election material to praise a minister of a different party for implementing government policy. Read more

Kiran Stacey

Ed Miliband’s announcement that Labour backs a mansion tax on properties over £2m, with the money used to fund a new 10p rate of income tax, has left the two coalition parties scrambling to trump the opposition with their own progressive tax plans.

For the Lib Dems, this meant leaking a tax document* being prepared in advance of the party’s spring conference. The paper proposed extending the mansion tax from people’s first properties to apply also to additional properties and any other land they may own. It also suggested the more radical idea of taxing assets such as paintings, jewellery and even record and book collections – although this was quickly dismissed by Vince Cable.

The Tories offered their own response on Sunday evening, when Tory chairman Grant Shapps appeared on BBC 5 Live’s Pienaar’s Politics. Shapps told the programme the Tories were considering pushing the income tax allowance beyond the £10,000 level currently planned – something that could go into the party’s 2015 manifesto.  Read more

Kiran Stacey

Today’s exchanges at PMQs sounded fairly hackneyed and well-worn. Ed Miliband chose to ask about the economy, and the usual argument took place – the Labour leader accused the coalition of stifling growth, the prime minister said it was all Labour’s fault for borrowing too much.

But Miliband did give one revealing answer during the debate. The Labour leader pointed out:

[Cameron] is borrowing £212bn more than he promised.

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The UK government has revealed the planned route of the second stage of the proposed high speed rail link from London to the north of England. Lex’s Stuart Kirk and Oliver Ralph discuss who’ll invest in a project where any returns would be a long way off.

Kiran Stacey

Two big questions remained after David Cameron’s landmark speech on Britain’s role in Europe this morning: would it do enough to please his eurosceptic backbenchers, and how would Ed Miliband respond?

We got the answer to both at PMQs. We know now that for the moment, Cameron has got his party off his back, and that Labour are not about to promise a referendum of their own.

The atmosphere in the Commons was electric as the leaders took their places. The Tory benches were packed with grinning faces – this looked like being a good day for Cameron, and so it proved. He even got a cheer for starting his first answer by saying: Read more

Kiran Stacey

Is this a first? An email has just popped into a colleague’s inbox stating:

The Joint Committee on the draft Care and Support Bill, chaired by Paul Burstow MP, is conducting pre-legislative scrutiny into the draft Bill and the policies it seeks to implement. Read more

Kiran Stacey

This year is likely to be one of the hardest for the coalition, as spending cuts begin to hit harder than ever before. Tory MPs are warning that the measure that is most worrying their constituents is the removal of child benefit from higher earners, and analysis today from the Institute of Fiscal Studies gives us some inclination as to why.

The IFS has examined how much this will cost parents earning over £50,000 – the point at which the payments begin to be taken away. It has found that the measure will mean that for someone with one child who earns over £50,000, they will have a marginal tax rate of 52.6 per cent. In other words, for every extra pound earned over that level, 52.6p will be taken away. As they continue to go up the income scale, they will lose more and more cash until they hit £60,000 and all the child benefit payments are gone. This results in a marginal tax graph that looks like this:

IFS Child benefit chart

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Tom Burgis

George Osborne

Welcome to our rolling coverage of the Autumn Statement.

George Osborne has missed his fiscal targets and cut corporation tax.

We’ll bring you all the day’s developments live. By Tom Burgis and Ben Fenton.

15.45: We’re winding up the blog now, but you can follow events as they unfold through constantly updating stories on the front page of FT.com

15.31: A representation of the “flamethrower of uncertainty” can be found in the documentation of the OBR. It is also known as a “fan chart”. I doubt George Osborne is a fan of it, though.

15.24: Chote speaks of the “flamethrower of uncertainty”- a favourite phrase, unsettlingly enough, of the OBR, which is a chart showing forecasts in a wide range that makes the chart lines look like a firebreathing dragon.

15.18: Chote says that the variation in the possible range in the forecast of net debt figures for the UK is a large number, but is “dwarfed by the scale of uncertainties” on the issuance of debt. I think that’s the second time he has said that in his address.

15.12: The Spectator is running a rather scary chart showing the lost output of the current “seven-year slump” in the UK.

15.07: Robert Chote, director of the Office for Budget Responsibility, is live now, going through his department’s figures that underpinned the bad news Mr Osborne has just had to deliver.

15.05: Gavyn Davies has blogged for the FT with his view on the autumn statement while the FT’s Lucy Warwick-Ching has collated some very interesting instant reaction from personal finance experts.

14.49: Hannah Kuchler on the FT’s UK desk has been keeping an eye on business reaction to the autumn statement.

She says:

The CBI, the employer’s organisation, urged the government to stick to its guns on deficit reduction to retain international credibility, saying it was no surprise that austerity would last longer than expected.

John Cridland, director-general, welcomed investment in infrastructure and support for exports, but said the proof was in the delivery. He said:

“Businesses need to see the Chancellor’s words translated into building sites on the ground.”

But the British Chambers of Commerce was less positive, declaring the statement not good enough for a country meant to be in a state of “economic war”.
The government is just “tinkering around the edges”, John Longworth, the BCC’s director general said, adding: “The Budget next March must make truly radical and large-scale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state. Only a wholesale re-prioritisation of resources, to unlock private sector finance, investment and jobs, will be enough to win the ‘economic war’ we are facing. The danger is that our political class is sleepwalking with its eyes open.”

14.40: Lionel Barber, the FT’s editor, just passed by the live news desk so we asked him what he thought of the autumn statement.

The Chancellor is in a hole, but the good news is that he’s stopped digging. The FT supports the government’s fiscal stance, but is there more to be done on monetary policy to boost growth? That’s the question.

14.26 Who says the British don’t like doing things the French way? Might we surmise from this tweet from the BBC’s Robert Peston’s interview with Danny Alexander, Osborne’s Lib Dem No2, that the UK’s crediworthiness might be going to way of its Gallic cousins’?

[blackbirdpie url="https://twitter.com/Peston/statuses/276330461142327296"]

Others are more chipper:

[blackbirdpie url="https://twitter.com/MJJHunter/statuses/276330252601524225"]

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Jim Pickard

When Whitehall wants to put out new information without mass coverage the technique is quite simple: ministries publish the data without any press release or calls to journalists.

And so it was a few weeks ago when Decc, the energy department, published figures predicting where Britain’s future energy supplies would come from.

At a stroke of a pen, officials quadrupled their predictions for unabated gas from 8GW to 28GW; in layman’s terms, about 8 new power stations to around 28.

As such, tomorrow’s announcement by George Osborne about a new dash for gas will not come as a surprise to the industry. Ministers have been open about the need for a vast increase in gas, in part to replace the ageing nuclear reactors and coal-fired power stations coming to the end of their life.

Here are the Decc statistics: Firstly, Annex I of this spreadsheet shows you the 2012 forecasts for new energy capacity in its different forms. You can see the much lower estimate for new gas in the same spreadsheet for 2011, also in Annex I.

The stats show how Decc still does not believe that new nuclear will be truly transformative – in size terms – by 2030. The department expects nuclear to provide only a relatively modest amount of new capacity (at 9.9 GW). (Interesting to note cost problems at EDF’s site in northern France, announced yesterday.)

Tomorrow’s gas strategy statement is politically important and was insisted on by the Treasury as a way to reassure potentially nervous investors in the industry. But it does not Read more

Kiran Stacey

George Osborne and Nick CleggBack in September, Nick Clegg said he would block any attempt by George Osborne to freeze benefits in this week’s autumn statement. This put the chancellor in something of a quandary. He had been hoping to save several billions with the move, as well as winning the support of a public that is increasingly hostile to people who are claimants.

Another option remains on the table, however, is to allow benefits to rise, but not by as much as they would normally do if the link with inflation is kept. New analysis from the Institute of Public Policy Research suggests there could still be a fair amount of savings to be gained, for example, by increasing them by just 1 per cent.

The IPPR has produced a table of savings from possible options open to the chancellor: Read more

Hannah Kuchler

Lord Justice LevesonWelcome to the FT’s Leveson live blog with Hannah Kuchler and Kiran Stacey. Posts will update automatically every few minutes, although it may take longer on mobile browsers.

17:37: See FT.com for further updates this evening and over the coming days. Before we sign-off, here’s a summary of what’s happened today:

- Lord Justice Leveson published his report into the culture, practice and ethics of the press, recommending independent regulation with statutory underpinning. “Guaranteed independence, long term stability and genuine benefits for the industry cannot be realised without legislation,” he said.

He said the press and politicians had at times been “too close” but there was little evidence to suggest there was a widespread problem in the relationship between the press and the police.

- He proposed: Read more

Jim Pickard

The Tory MP running this week’s by-election campaign in Corby was facing awkward questions tonight after appearing to admit he had given support to the campaign of a potential rival candidate.

Chris Heaton-Harris, who has campaigned vociferously against onshore wind farms, was secretly recorded saying he had encouraged an anti-wind farm candidate, journalist James Delingpole, to enter the race against his own party.

In the film, he tells an undercover Greenpeace campaigner – posing as someone from a fictional anti-wind group – that he“actually essentially suggested to him (Delingpole) he did it”. Read more

Kiran Stacey

Vince Cable’s speech to Lib Dem conference was just about on-message as regard to the coalition’s economic strategy. We need the state, he said; we need a demand stimulus, he said; we are taking advantage of low interest rates and borrowing more, he said. But he didn’t quite call for more borrowing for an immediate fiscal boost.

In fact, any Lib Dem wanting to call for a departure from George Osborne’s Plan A will now find it very difficult to do so after the party conference voted overwhelmingly in favour of the current fiscal plan.

This morning, delegates were asked to vote for a motion backing the “difficult decisions taken by the coalition government” and calling for the government to “do everything possible to stimulate growth within its fiscal mandate” (emphasis mine). Read more

Kiran Stacey

The Lib Dem conference, which starts on Saturday, could be an awkward affair for the party leadership. It is the first conference when Nick Clegg has been faced with members of his own parliamentary party calling for his resignation, and the second successive one where the party has been languishing in the polls.

The agenda for the conference shows the party leadership willing to give the faithful some red meat in the form of Tory-bashing motions. There is a motion insisting on national pay bargaining, one recommitting the party to Lords reform and one resisting any attempts to expand Heathrow.

But the biggest problem could come during the debate on the economy, when an amendment will be discussed calling for the government to rip up its fiscal mandate and take immediate measures to stimulate the economy. Read more