PMQs: Miliband exposes Cameron vulnerabilities
It was no surprise that Ed Miliband led on the economy today, on the day that GDP figures showed a drop in output in the last quarter of last year.
The Labour leader’s questioning was more effective than usual. He has a new line that looks like it could pay off:
He and his chancellor are the byword for smug, self-satisfied complacency.
It certainly gives us all some relief from the previous ubiquitous epithet Labour applied to the prime minister and his party of “out of touch”.
Vince tells big business: stop overpaying your execs
Vince Cable will not be outflanked by George Osborne. Osborne said on Tuesday that banks needed to show restraint when paying bonuses – an unusually anti-City message for a Tory chancellor.
But Cable today has gone one further, urging investors not to focus only on banks, but to make sure that no big company allows its executives to be paid too much. We will have more on this in tomorrow’s FT, but here is the letter he has sent to top investors and FTSE100 chairmen:
Ministers may consider interest rate cap
The FT reports this morning that payday lenders (or legal loan sharks as they are also known) have been flooding into the country looking to take advantage of hard-up recession-hit borrowers and the UK’s lax lending laws. Borrowing at rates of up to 5,000 per cent, customers can find their debts escalating at a startling pace.
Even though many other countries have interest rate caps, the UK has never gone down that route. The government has always said it is wary of implementing such a cap in case it pushes poor people into the hands of illegal loan sharks instead.
Labour MP Stella Creasy has also waged a long campaign to get the government to crack down on these companies, and now her campaign is gaining momentum.
Who will suffer from a cut in tax credits? The squeezed middle
Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.
This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.
So who suffers if these are frozen or cut?
PMQs: Cameron forced to the left
It was an intriguing PMQs today. As I have previously noted, Ed Miliband has begun to find his feet on the economy, and once again used this as his main attack line.
As he has done at previous sessions he chose an obscure policy that has achieved little so far (this time the “business growth fund”, which was set up using money from the Merlin agreement), and used it to embarrass the PM.
As has happened before, Cameron didn’t know what the policy was (in fact at the end, he started talking about the Regional Growth Fund – a different fund altogether). So when asked how many businesses the fund had invested in, he was unable to answer.
Threats to Osborne’s plan to scrap the 50p income tax rate
Is George Osborne planning to scrap the 50p income tax rate? Yes.
But not today, nor tomorrow. Not this month, or next. Not even before Christmas. The move may not even take place next year.
The rate – which applies to those earning £150,000 – has always been classified as “temporary” by the coalition.
In recent weeks the Tories and Lib Dems have played up their differences over the issue. In fact neither think the 50p rate should be removed just now; the internal debate is whether to go for 2012 or 2013.
Danny Alexander insisted last Sunday that scrapping the rate was not a priority – and that lifting the income tax threshold to £10,000 should come first. Tory outriders such as Boris Johnson and Lord Lamont called for it to be axed; but even Lamont said this should happen in 2013. Johnson, meanwhile, is unfettered by the responsibilities of national coalition government.
Osborne kills consumer confidence (but Wills and Kate help restore it)
Top stuff here from Bloomberg’s Rob Hutton (@robdothutton).
Since the coalition government took over, and particularly since George Osborne laid out exactly which cuts he would make, confidence of UK consumers in the economy has nosedived.
Philip Hammond versus the snowflakes – some tips from Boris
Alan Johnson was guilty of modest political opportunism this morning when seemingly questioning Philip Hammond’s position in the light of the extreme weather conditions. The shadow chancellor hinted that the transport secretary should resign.
It reminded me of the occasion that Boris Johnson appeared in front of the transport select committee (in May 2009) to defend charges that he had failed to protect London from the wintry elements.
It seems to testify to the theory that Boris is at his most witty when under pressure:
Q197 Graham Stringer: You are telling me what gritting went on, but that was not the question I asked. The question I asked was what action you took, with your overall responsibility for transport in Greater London, over the five days when we knew, the whole country knew, there was going to be a heavy downfall of snow which was likely to cause disruption. I would like to know what actions you took.
Mr Johnson: As Chair of Transport for London, I am happy to say that I had general oversight and I presided over, with my Commissioner for Transport, a massive programme of gritting. If you ask me whether I personally went around trying to repel each snowflake as it tried to settle over London, then obviously I would have to give you a negative answer. You do ascribe phenomenal powers to me – quite rightly, I think, as I think it is high time that we thought about a revision of the powers-to have authority over basic meteorology, but it is not within my competence to get up into a helicopter and encourage the snow to stay away. What I think you need to focus on, if I may be so bold, Chairman -
Vince Cable admits new bank tax is only a possibility
We reported yesterday that David Cameron had joined Nick Clegg in warning of new action against banks which did not show bonus restraint.
David Cameron warned banks on Friday that they faced higher taxes if they continued to pay “unjustified” bonuses, adding to a growing political and regulatory pressure on the City before the industry’s bonus season early next year.The prime minister, speaking after a European Union summit in Brussels, said that the public found such payments “galling”, adding: “Every decision the banks make like that makes it more difficult to keep a tax regime that they might favour.”
Vince Cable’s comments on today’s Andrew Marr show this morning continued in the same vein. But if you listened carefully the words indicated a threat rather than an imminent crackdown.
“If they don’t behave, if they don’t take account of their wider responsibilities the government has as a possibility some form of taxation,” said Cable.
Understanding the government’s stance would be a lot easier – as I pointed out on Friday – if they could indicate what they want from the banks, which are already heading for a lower bonus payout than last year. A bit less than last year? Half that figure? Ten per cent? For now it is not clear.
As for the opposition, what should we make of Alan Johnson’s suggestion that last year’s one-off bank levy could be made permanent? Is it credible? Is it official Labour policy?
Johnson told Sky:
Last year we introduced a tax on bankers’ bonuses; it pulled in about £3.5bn. Nobody fell over, nobody went abroad, all the kinds of things that we heard that would happen. So you know there is more money to be taken from banks. Particularly when you look as a fair share not as retribution; as a fair share to getting the fiscal deficit down.”
The counter-argument is that the banks only stayed onshore was because they knew it was a one-off; to regularise the levy could change their calculations.
Meanwhile Cable is still keen for banks to enforce new disclosure rules put on the statute book by Labour – requiring them them to list how many staff (albeit unnamed) received £1m-plus bonuses.
In this respect he is at odds with George Osborne, the chancellor, who last month watered down the rules – as revealed in the FT by George Parker. Which makes this a genuine spat at the top of government.
How coalition sought to water down EU bonus proposals
This may come as a surprise to those who read Nick Clegg’s comments today about the need to crack down on bankers’ bonuses. (And David Cameron’s veiled threats today of a higher tax on banks that don’t comply).
Yet last week coalition MEPs were sent a document on how Britain has been seeking to water down a EU rule intended to restrict bonuses in the future.
The EU last Friday laid out its new rules meaning that no senior banker should get more than 20 per cent of their bonus in cash upfront.
The EU wants bankers to defer half of their bonus, of which at least 60 per cent will have to be paid in shares or other financial instruments.
The British (via FSA policy set out in the summer) had argued that banks should be allowed to give all of the cash element upfront while mostly deferring the shares element. That would have meant bankers getting 40 per cent of their bonus in cash upfront – double what the EU wanted.
The document argued that Britain “led the way” in implementing G20 principles and that the EU should not go any further.
It was an entirely valid point of view to take; but there is a distinct irony in the idea of the British government proposing weaker restrictions than the rest of the EU while posing as banker-bashers.
The document is a bit long but here you go:
CRD3 Briefing
CEBS Guidance on Remuneration Provisions in the Capital Requirements Directive
Summary
Upfront Cash and Retention Conditions
Standards. Treasury forces Huhne to scale back green investment bank
My colleague Fiona Harvey revealed in October that plans for a green investment bank could be watered down under pressure from the Treasury.
A commission set up by George Osborne to look at the issue – led by Bob Wigley, the former European head of Merrill Lynch – had called for the bank to have powers to raise finance from the private sector, for instance by issuing bonds, green Isas, raising loans and other measures. But this was opposed by Treasury officials, according to Fiona:
They would prefer the bank to operate as a simpler fund, dispensing grants and loans in conjunction with the private sector but without the powers to generate its own self-sustaining financing mechanisms.
And in today’s Guardian Chris Huhne confirms that the bank will start life in the more limited form.
Local government cuts are steeper than they seem
It turns out today that cuts to local government “spending power” will only be 4.4 per cent on average next year across Britain’s councils. So says Eric Pickles and his DCLG department. This sounds great compared to the figure floating around recently about a 10 per cent cut for the same period.
Except this is looking at apples and pears.
The DCLG has come up with the “spending power” figure to include all council income streams, including council tax – which will stay the same in the coming years. (This measure will also include “specific grants*”). Under this calculation, no council will endure more than 8.9 per cent cuts this year or next.
Pickles argues that this is the right way to view council finance given that some authorities get most of their money from council tax and others do not.
Yet the more important number here is the formula grant, which is the £29bn a year given by Whitehall to local government. It is this number which is falling substantially – by 27 per cent – over the next four years as a result of the spending review. The deepest cuts are in some of Britain’s most deprived regions, reflecting their heavier dependence on this central grant.
I’ve checked with DCLG and the cut to the formula grant this year will still be, on average, about 10 per cent, despite council pleas to Mr Pickles not to “front-load” the cuts to the first year of the four-year period. Some local authorities will be cut by 17 per cent in the same period.
To illustrate my point, visit this official breakdown and take one council at random: Wakefield. Supposedly its budget is falling by just 4.7 per cent between this year and next. Except the formula grant is dropping from £159m to £139.8m – which is a drop of 12 per cent in spending from central government. Many other councils are in a similar situation.
It will probably take a day or two for councils, or the LGA, to work out the full details of grant cuts across the whole of local government; it should make an interesting read.
(There is also another £85m for the coming year as a transition grant for those councils which depend heavily on the central grant. It’s still miniscule compared to the £29bn total, however).
* There is no obvious pattern to cuts in “specific grants” over the period, although I notice that Manchester’s will fall from £88.5m to £55.4m – a drop of 38 per cent.
| About this blog | Blog guide |
Jim Pickard joined the lobby team in January 2008. He has been at the Financial Times since 1999 as a regional correspondent, assistant UK news editor and property correspondent.
Kiran Stacey is an FT political correspondent, having joined the lobby in 2011. He started at the FT as a graduate trainee in 2008, working on desks including UK companies and US equity markets before taking over the FT's Energy Source blog.
Elizabeth Rigby, the FT's chief political correspondent, joined the lobby team in September 2010. Elizabeth has worked at the FT for more than a decade and was most recently its consumer industries editor.
Helen Warrell is the FT's UK reporter, covering home affairs, crime and policing. She joined the FT in 2008 and has spent time as a reporter in the Brussels bureau and more recently, editing the paper's Asia coverage on the world news desk.
Older entries
