Kiran Stacey

Mark Hoban, the employment minister, has just suffered a bit of a torrid press conference with the assorted ranks of the British press after the Department for Work and Pensions admitted its £5bn back-to-work scheme has fallen well short of its own targets.

The government’s figures show the scheme had found sustained employment (six months for most, three months for those most difficult to help) for just 2.3 per cent of people. The department had set a minimum performance level for itself of 5.5 per cent.

Why is it failing? There are many reasons, but here are the main ones:

1) The economy is worse than expected. The original assumptions built into the scheme were that the UK economy would be growing at 2 per cent. Of course, it is not, which means there are fewer jobs around to be had.

2) The targets were too high. As a way of getting the Treasury to cough up the cash needed for the scheme, the department for work and pensions set very aggressive targets for providers. This has been a concern right from the start of the scheme, as the FT’s former public policy editor, wrote last yearRead more

Kiran Stacey

This blog revealed back in March just before the Budget that George Osborne was considering capping child benefit at a certain number of children per family. At the moment, parents receive £20.30 a week for their first child and £13.40 for each additional child after that, but Treasury officials were looking at stopping those payments once a family had reached a certain number of children.

At the time, the measure was supposed to be an alternative to capping child benefit at a certain income level: the family-size measure would have been easier to implement and involve less of a cliff-edge for

people increasing their earnings. In the end, it was ruled out as too controversial, but judging by George Osborne’s speech at the Tory party conference today, the idea is back on the table. The chancellor said:

How can we justify a system where people in work have to consider the full financial costs of having another child, whilst those who are out of work don’t?

 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

This morning’s research from the IPPR lays out in thorough detail just how difficult George Osborne will find it to meet his fiscal rules when announcing his spending review for the period 2015-2017 next year.

The think tank has analysed the forecasts from the OBR and the Treasury and calculated the cuts needed to make sure the current structural deficit is cleared by the end of the five-year period and debt is falling as a ratio of GDP by 2015.

Firstly, let’s assume no cuts are made to welfare. If that is the case, the chancellor needs to make average savings of 3.8 per cent from departmental budgets. If spread equally among the departments, that would mean hugely controversial measures such as cutting the NHS budget by nearly £8bn a year and education by nearly £4bn.

 Read more

Kiran Stacey

Nick CleggNick Clegg took many by surprise this morning by appearing in the Guardian calling for an emergency, temporary tax on wealth to help pay down the deficit. Why make the call publicly, when he’s a senior member of the government that decides whether this happens or not? And why now, so far away from Budget time?

The obvious answer is that this is not a thought-through policy proposal, but merely a bit of positioning to cheer the troops ahead of next month’s party conference. It will not happen, say many (including the BBC’s Nick Robinson), so there is no need to worry about what Clegg actually means.

But, that analysis ignores a couple of things. Read more

Helen Warrell

As I reported today, the Treasury is looking seriously into the idea of adopting German-style “mini jobs”, a scheme long championed by free market Conservative MPs. The model is that workers can earn up to €400, or £314, tax free each month, while their employers benefit from flexible labour with minimal bureaucracy: they pay a flat rate of wage taxes, insurance and pension contributions.

It is easy to see why companies and jobseekers might be clamouring for the government to pick this up, but there is actually a serious political case as well. Tories who were frustrated by the Liberal Democrats’ opposition to radical labour market reforms put forward by Adrian Beecroft have been calling for ministers to come forward with some new deregulation measures for some time.

The Lib Dems themselves are keen not to be seen as too obstructionist on this issue given the drive for growth, and party officials have assured me that they are not pushing back against the mini jobs idea. Could this be the middle way? Read more

Kiran Stacey

As Jim wrote earlier on this blog, the Tories and Labour are trading accusations of hypocrisy over their response to the news that Barclays has been hit with a record fine for trying to manipulate key interest rates.

The Tories are accusing Labour of under-regulating the banks; Labour reply they were under pressure from the Tories to regulate even less. Both are right, and here are a couple of quotes both will use to score points off each other.

The first is from Lord Tunnicliffe, Labour’s deputy chief whip in the Lords, who admitted today that his party did not legislate to make such manipulation a criminal offence: Read more

Jim Pickard

It probably seemed like a great idea to David Cameron when he criticised Jimmy Carr’s tax affairs during a round of TV interview in Mexico. His comments – attacking the immorality of avoidance – chime with the public mood. People don’t like to find out that others aren’t paying as much tax at a time of austerity, unemployment, spending cuts and so on.

But the Cameron stance quickly unravelled within minutes of him uttering the words on Wednesday afternoon. First question was why the prime minister criticised a single comedian and not those closer to home (Sir Philip Green, Lord Ashcroft, etc) whose tax affairs have been questioned in the past.

Second question was why the PM attacked Carr but not Gary Barlow, the cuddly Take That singer who supported the Tories before the last election. Asked about Barlow on Wednesday, he said something vague about having not reached his computer yet. By today, it was a matter of no comment.

During a press conference today Cameron sought to shift into reverse gear, saying it was everybody’s right to arrange their tax affairs efficiently and that he wouldn’t provide a “running commentary” on individuals’ tax. Yet the genie is already out of the bottle. The spotlight will now be on members of Cameron’s family, his friends, his donors and his MPs; who else has been a little too efficient in Read more

Kiran Stacey

Journalists were told two days ago in the wake of the u-turns on the pasty tax and caravan tax that there would be no imminent decision on the charity tax. The position is the same, said Treasury officials – there will be some form of compromise with the charitable sector, but not a full u-turn, and it will come after a consultation during the summer.

Today we were told there would be no consultation, and that a full u-turn would take place immediately. What on earth is going on at the Treasury? Read more

Kiran Stacey

David Cameron is fond of saying that u-turns are not a problem, they are actually a sign of strength and a government that listens to voters and is willing to change its mind.

He may be right: voters stuck with him through a spate of u-turns early in the government’s life – on selling off national forests, on GP commissioning, on sentencing. But today we have three in one day – will this now start to look like a government that doesn’t know what it’s doing?

Ken ClarkeThe key may lie in the way in which the u-turn is handled. When he announced he was abandoning plans to offer 50 per cent discounts on sentences for offenders who offer guilty pleas, Ken Clarke united the House in laughter by telling MPs:

I have done a few u-turns in my time, and they should be done with purpose and panache when you have to do them.

This is exactly the way Clarke has gone about his u-turn today on secret courtsRead more

Kiran Stacey

Is the government in danger of handing over its reputation for being pro-business to Labour?

William Hague’s message in yesterday’s Sunday Telegraph that businesses should “work harder” to promote growth was certainly bold.

At a time when the economy is stagnating and the government’s strategy is increasingly being questioned, turning round and blaming the sector of the economy you’re relying on to turn that round seems like a reckless strategy.

Before we get on to why it’s not a good idea to blame business for not supporting growth, let’s mention why Hague has a point:

  1. The govt is implementing the cuts programme many business groups have supported, and is sticking to it.
  2. Corporation tax is low and getting lower – on its way down to 20 per cent.
  3. Embassies around the world are pushing UK trade as their top priority, and the prime minister has taken huge business delegations on state visits with him on several occasions.

 Read more

Kiran Stacey

The data released last night on how much the super-rich paid in tax in 2010-11 was fascinating. As Robert Peston comments on his blog, getting this information out of the last government was nigh-on impossible, as Labour didn’t want to put wealthy people’s tax affairs in the spotlight. So it is an amazing irony that it is a Conservative-Lib Dem coalition that is choosing to do so instead, as it looks to bolster support for its unpopular decision to cap tax reliefs, which will impact on charitable giving.

The Treasury released the data in an attempt to show us how much rich people avoid tax. George Osborne told the Telegraph that when he saw these figures he was “shocked”. And certainly there are some shocking figures within them, such as that thousands of people in the 50p tax band actually pay less than 20 per cent tax. Twelve people who are mega-rich, earning over £10m, even pay less than 10 per centRead more

Kiran Stacey

David Cameron in JakartaDavid Cameron today repeated the claim his spokesman made yesterday that one of the reasons for the cap on tax reliefs was that some wealthy people were putting money into bogus offshore charities as a way of reducing tax.

The prime minister said:

I’m quite convinced we can get the balance right increasing philanthropy and charitable giving, which is an important part of our culture which I want to see expanded, and making sure the tax system isn’t abused.

The government’s comments on this have been met with confusion: if bogus charities were in operation, why didn’t the Charity Commission stamp them out?

The answer, strangely, lies in a legal case launched by a German man, Hein Persche, against his local tax office in the province of Lüdenscheid, in 2009. Read more

Kiran Stacey

This morning the prime minister’s spokesman was grilled by the Westminster press pack on why exactly the government was putting in place a cap on tax reliefs when it could reduce charitable giving.

This is the explanation the spokesman gave:

The reason was that certain individuals in this country on very high incomes are exploiting some of these reliefs to reduce their tax burden.

But surely the whole point of offering tax reliefs on charitable donations is to encourage wealthy individuals to give donations by allowing them to reduce their tax burden? The PM’s spokesman explained that it was not just use, but abuse of these reliefs that was concerning the government: Read more

Kiran Stacey

One of the biggest announcements from the Budget was one that may not happen, and if it does, is unlikely to be implemented for several years. George Osborne told parliament:

If in the next spending review we maintain the same rate of reductions in departmental spending as we have done in this review, we would need to make savings in welfare of £10bn by 2016.

 Read more


Welcome to the FT’s rolling coverage of the UK Budget.

By Kiran Stacey at Westminster and Gordon Smith, Michael Hunter, Darren Dodd, Tom Burgis and Ben Fenton on the FT news desk.

All times are GMT.

16.45 So, that is about it for the live blog. The main FT coverage can be found in the usual place.

We thought we would leave you with a small image of what life in the Financial Times London newsroom is like on Budget Day. Below, you can see Chris Giles, economics editor, briefing the rest of us on what it all means. This picture was taken less than two minutes after the Chancellor sat down at 13.29.

So, from the FT live news desk, enjoy digesting the ramifications of the 2012 Budget, whether you are an outraged pensioner, a relieved 1-percenter or the Chancellor of the Exchequer. FT Live Blogs will be back just as soon as something big enough breaks. Goodnight.

Chris Giles briefs the Budget team on what it all means. He is the figure in a light grey shirt immediately below the left-hand TV image of George Osborne.
Chris Giles briefs the Budget team on what it all means. Chris is the figure in a light grey shirt immediately below the left-hand TV image of George Osborne.


16.25 John Authers and Martin Wolf parse the 2012 Budget

16.06 The top trending phrase on Twitter in the UK at present is #grannytax.

And one of the main users of Twitter, Lord Prescott, has his say on the Budget.

[blackbirdpie url="!/johnprescott/status/182489902074703875"]

16.01 The FT’s Christopher Cook tweets:

[blackbirdpie url="!/xtophercook/status/182490962516393984"]

15.57 This was a budget, opines the FT’s Philip Stephens
that was in part “about George Osborne’s ambitions to establish
himself as David Cameron’s heir apparent”.


The chancellor talked about a Budget to put Britain back to work, but

the measure most likely to stick in the public mind was the cut from

50 per cent to 45 per cent in the top rate of income tax. It marked a

tilt to the tax-cutting right that he hopes will build his support on

the Thatcherite wing of the Tory party.



15.52 Podcast time.


15.48 Our colleagues over at FT Alphaville have been going through the
Budget documents and have found the official issuance plans for the
Osborne super-long bond.
The question, it seems, is not how long the bond should be, but how


 Read more

Kiran Stacey

The quad - David Cameron, Danny Alexander, George Osborne, Nick Clegg

Tim Farron, the Lib Dem president, told me yesterday:

I suspect that we are going to see a Budget which has got more Liberal Democrat stuff in it than Tory. The amount of money being returned to individuals will go overwhelmingly to middle and lower income earners.

He’s right, to the extent that by far the biggest spending measure announced by George Osborne tomorrow will be the increase in the personal tax allowance to around £9,000 – a move likely to cost around £3.3bn. Read more

Kiran Stacey

The Lib Dems have made raising the personal tax allowance (what you can get paid without paying income tax) one of their flagship policies. So when George Osborne says at the Budget in two days’ time that he will raise that allowance beyond inflation, it should be a major victory for the junior coalition party.

It is interesting therefore, to take note of a piece of research published today by CentreForum, a think tank with close ties to the Lib Dems, showing that raising the tax threshold* to £10,000 (the eventual aim), would not be especially progressive. It fares especially badly when compared to an alternative proposal, to lift tax credits instead, which would cost the same amount of money.

The think tank produced the following table detailing who benefits from either move, which paints the difference in stark terms: Read more

Elizabeth Rigby

Labour MP Sharon Hodgson was given short shrift from the prime minister today when she asked David Cameron whether the following statement was true:

The problem is policy is being run by two public school boys who don’t know what it’s like to go to the supermarket and have to put things back on the shelves because they can’t afford it for their children’s lunchboxes. What’s worse, they don’t care either

The prime minister told the MP for Washington and Sunderland West to celebrate the fact Nissan is building a new car in Britain rather that focusing on “whatever nonsense” she had read out.

That “nonsense” actually came from his own benches in the form of the rebellious and outspoken Nadine Dorries – she made the comments to my colleague Kiran Stacey this week when asked to discuss child benefit. Hers is not a lone voice: Mark Pritchard, MP for the Wrekin, also made similar remarks to the FT about the prime minister a few days ago. Read more

Kiran Stacey

I wrote earlier this week about the options open to ministers for solving the child benefit conundrum.

To recap, the government’s current proposals to axe child benefit for higher earners lead to two problems:

  1. Families with one person earning above the threshold (around £42,000) will lose their benefit, but those with two earning just below it will keep it.
  2. The lack of any tapering means it will become a disincentive to earn a promotion that takes you just above the £42,000 mark.

The most likely answer appears to be that George Osborne will find some extra money to move the threshold to £50,000 instead. But that solves neither issue, only moves the problem higher up the income scale.

But another proposal is floating round the Treasury: to reverse the plan altogether and instead cap child benefit at a certain number of children (most likely to be three). Read more