Treasury

Jim Pickard

As I had predicted, the coalition yesterday lost a minor vote on the chief coroner but won an easy victory over tuition fees. I watched the debate from the press gallery in the Lords, which was more packed than usual.

There were some robust defences of the policy from coalition peers, including Lord (Paddy) Ashdown, who argued: “We do not complain when young people have to take out a mortgage debt of £150,000 or £200,000 to buy their house. This is not like a credit card debt; it is much more like a mortgage.”

But perhaps the most striking speech was by the Bishop of Lincoln*, who described the hiking of tuition fees as “deeply flawed”.

Those reasons offered indicate an attitude to higher education which is radically different-the phrase “game-changer” has been used-from anything that we have known before and is deeply troubling to those of us who see education as a key component in human flourishing; that life in all its fullness which Jesus came to bring.

We hear it argued that it is the individual student who benefits from higher education, so it is reasonable for the student to pay, albeit not up front-thank goodness-but eventually, through a repayment of loans. But that flies in the face of everything that we believe and cherish when it comes to what higher education is all about and why it matters.

Later, Lord Pattern, vice-chancellor of Oxford, said: “On this occasion, I am afraid that I do not agree with Jesus.” Technically speaking he was referring to the views of Lord Krebs, principal of Jesus College, Oxford, who had just spoken on the Labour side.

* He also has a wider remit as chair of the Church of England’s board of education

Jim Pickard

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.

Jim Pickard

The 60-year old cabinet veteran Alan Johnson has insisted that he is sticking around for the long-term, despite signals that he is not exactly bonding with Ed Miliband. Their disagreement over the graduate tax and the 50p income tax band are the most visible signs of tension. They are also spending less time together than you might expect. As the FT reported a few weeks ago:

Mr Johnson and Mr Miliband have been allocated the same offices in Westminster’s Norman Shaw buildings once occupied by Mr Cameron and Mr Osborne before the election. But the shadow chancellor spends most of his time in his old office in a separate building.

This morning George Parker, our political editor, reports that:

“Some Labour figures speculate David Miliband could replace Mr Johnson at the midpoint of this parliament, claiming the shadow chancellor was ‘reaching the end of his political career.’”

Jim Pickard

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.

Jim Pickard

It was a relief to Ed Miliband that his defeated elder brother took a step back from frontline politics after losing the Labour leadership race in September. But David Miliband has remained, like Banquo at the feast, a visible presence on the backbenches from where he could – at some theoretical later date – still return to wreak revenge.

A survey in yesterday’s Sunday Times makes troubling reading for Ed. It suggests that 12 per cent of the public think Ed would be the better Labour leader, far below the 37 per cent for David. That is a very similar finding to surveys published during the summer.

Meanwhile pollsters found that 40 per cent of the public do not rate Ed Miliband’s leadership skills, compared to 27 per cent who do.

Back then Ed’s allies shrugged off those polls. Within a few months, they argued, people would have seen Ed in action and would have warmed to him. (David’s position as foreign secretary had given him a higher profile).

That shift in public opinion does not seem to have happened, however, although Labour as a party is now consistently ahead in the polls. The unknown unknown is where Labour would be polling if it had a more charismatic and decisive leader.

David is keeping his powder dry in terms of any remaining Labour ambitions. This morning he was quoted in his local newspaper saying:

“I’ve got to admit I wish the leadership campaign had gone differently, but who knows what will happen in the future?…I think Ed’s done well. It’s a very difficult job being the leader of the

Jim Pickard

This is one of those subjects which seems rather dry until the consequences are spelled out in your monthly pay cheque.

Yet the implication of an official document published on Thursday is jaw-dropping.  That is: that many state workers could see their pension contributions more than double in the future.

Lord Hutton’s interim report into public sector pensions has already recommended that pension contributions by state workers should rise in April 2012 by 3 per centage points from their current level (typically between 3 and 11 per cent of pay depending on the job). This is to remedy an imbalance between employee/employer contributions. But will the increase stop there?

With riots outside and conflict in the Commons yesterday was a fantastic day to bury dull but important news. And the Treasury did indeed release its consultation paperon the discount rate used to set unfunded public service pension contributions“.

Jim Pickard

I’m told by Commons’ sources that the six Tory rebels over tuition fees were Andrew Percy, David Davis, Philip Davies, Mark Reckless, Jason McCartney and Julian Lewis. Abstentions came from Tracey Crouch and Lee Scott.

For David Cameron that is a a reasonable show of unity, given that those eight amount to just 2.6 per cent of the 307 Tory MPs. He had tried unsuccessfully to get all of them to abstain.

Compare that to Nick Clegg, who was backed by only 28 of his 57 MPs – with 21 voting against and 8 abstaining, a 51 per cent rebellion ratio.

Courtesy of PA here is a full list of the Lib Dem rebels:

Annette Brooke (Dorset Mid & Poole North), Sir Menzies Campbell (Fife North East), Michael Crockart (Edinburgh West), Tim Farron (Westmorland & Lonsdale), Andrew George (St Ives), Mike Hancock
(Portsmouth South), Julian Huppert (Cambridge), Charles Kennedy (Ross, Skye & Lochaber), John Leech (Manchester Withington), Stephen Lloyd (Eastbourne), Greg Mulholland (Leeds North West), John Pugh (Southport), Alan Reid (Argyll & Bute), Dan Rogerson (Cornwall North), Bob Russell (Colchester), Adrian Sanders (Torbay), Ian Swales (Redcar), Mark Williams (Ceredigion), Roger Williams (Brecon and Radnorshire), Jenny Willott (Cardiff Central), and Simon Wright (Norwich South).

The abstentions were:

Lorely Burt (Solihull), Martin Horwood (Cheltenham), Simon Hughes (Bermondsey & Old Southwark), Chris Huhne (Eastleigh) {At the Cancun climate change talks}, Tessa Munt (Wells), Sir Robert Smith (Aberdeenshire West and Kincardine), John Thurso (Caithness, Sutherland & Easter Ross), and Stephen Williams (Bristol West).

The Liberal Democrat position on student fees has been bungled in countless ways. But there must be one error of judgement that is more important than the rest — call it the original sin. Here are my top three contenders:

1. Nick Clegg ducking the chance to reform the policy in 2009

Most senior Lib Dems knew they had a policy to scrap tuition fees that was unrealistic and unaffordable. Secret work was done to come up with an alternative that maintained a critical stance but cost a lot less. The result was a more progressive form of tuition fees — something like the proposals today. When this was put to the Lib Dem MPs and the federal policy group, it went down terribly. Some MPs thought it was futile to attempt to scrap a vote-winning policy when any change would be blocked by the Lib Dem conference. Apparently one of the most persuasive arguments  was that the Lib Dems were not going to win the election, so why do the responsible thing?  Clegg eventually ducked the confrontation with his party at the 2009 annual conference. How he must be regretting it now.

Here’s another example of the OBR shrugging its shoulders at coalition policy.

The Office of Budget Responsibility reviews the Lib Dem-backed crackdown on tax avoidance and concludes that it will have no impact on compliance rates.

This is a bit embarrassing for the Treasury, particularly given they expect the policy to raise at least £7bn by the end of the parliament. Much like the coalition immigration policy, the OBR is almost saying the government may as well have not bothered.

They of course put it in a slightly more diplomatic way:

The Spending Review 2010 settlement for HMRC included overall resource savings of 15 per cent. This assumed 25 per cent efficiency savings and a £900 million investment to addressthe tax gap and tackle tax avoidance and evasion.

This included measures to increase criminal prosecutions, tackle offshore evasion, extend HMRC’s coverage of high risk areas and the greateruse of debt collection agencies.

Inevitably there are always large uncertainties about the effects of both the efficiency savingsand additional investment. As a result, we have not included the impact from either factor in the November forecast.

Here is a fine example of the dangers of politicians writing seemingly innocuous op-eds for newspapers.

Ahead of a trip to Dublin in 2006, George Osborne used an article in The Times to pay homage to the Irish boom. The opening paragraph about Ireland’s “shining example” to economic policymakers is a classic:

A generation ago, the very idea that a British politician would go to Ireland to see how to run an economy would have been laughable. The Irish Republic was seen as Britain’s poor and troubled country cousin, a rural backwater on the edge of Europe. Today things are different. Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.

The conclusion is almost as cringeworthy:

The new global economy poses real long-term challenges to Britain, but also real opportunities for us to prosper and succeed.  In Ireland they understand this.

They have freed their markets, developed the skills of their workforce, encouraged enterprise and innovation and created a dynamic economy. They have much to teach us, if only we are willing to learn.

To be fair to Osborne, many of his arguments are still valid even after the crash.

A well educated workforce, top notch R&D investment, and competitive tax rates to encourage investment are all as important now as they were during the boom years.

But there is not a word of caution about potential imbalanaces in the economy. No mention of the racy property market, reckless lending, or his views on the dangers to Ireland from having joined the Euro.

Jim Pickard

John Pienaar has revealed that a mutiny took place during last night’s weekly meeting of the PLP: Here is his report from Five Live: I will bring you any more details I pick up later in the day.

The decision to suspend and disown expelled MP Phil Woolas, found guilty of lying by a special election court, has provoked what Labour MPs and former ministers are describing as a “mutiny” against the Labour leadership at Westminster.

Today, Mr Woolas is engaged in raising cash for a legal challenge to the court ruling whoich led to his sacking. He told me he had already received pledges of support from “dozens of colleagues” – many of whom had promised to begin fund raising efforts of their own.

Deputy Labour leader, Harriet Harman, faced a backbench revolt at last night’s private meeting of the Parliamentary Labour Party.

Jim Pickard

Geoff Lewtas of the PCS union warned this morning that the chaos around the new “LEPs” being set up to replace RDAs could mean “hundreds of millions in euros” of development money lost.

The union official said that there were real concerns about the shambolic way that these “local enterprise partnerships” are being created, covering only parts of the country. Until now the RDAs were responsible for handling huge amounts of development money from Brussels:

“It will take some time before they are recognised by the EU as acceptable bodies to handle this (development aid), there could be hundreds of millions of euros in development money being held backand possibly not made available,” he warned.

“That seems to me a pretty dire consequence and a serious risk that doesn’t seem to have been taken into account.”

Westminster blog

on the UK political scene

About this blog Blog guide
Jim Pickard and Kiran Stacey, FT Westminster correspondents, share the latest news and analysis on the UK's political scene.

Follow the latest news on the UK politics and policy.

To comment, please register for free with FT.com and read our policy on submitting comments.

All posts are published in UK time.

Contact the Westminster blog team: Jim Pickard, Kiran Stacey, Nicholas Timmins, Elizabeth Rigby and Helen Warrell.

The illustrations of Jim and Kiran are by Nick Hardcastle.

See the full list of FT blogs.

The authors

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.

Contributors

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.

Archive

« AprMay 2012
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031