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A taxing deal?

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Stephanie Flanders | 23:12 UK time, Tuesday, 11 May 2010

I have learned that the Conservatives will not implement a key part of their National Insurance tax cut next year, in order to make a start on raising the main income tax threshold to £10,000 a year.

Confirming what Robert Peston reported earlier, the Conservatives have indeed taken on this Liberal Democrat pledge as a priority on tax for a Conservative-Lib Dem coalition. This is how they plan to show they are in good faith.

Remember that Labour has put in train a rise in both employer and employee National Insurance from next year. This tax rise was always going to go ahead under the Conservatives. But to prevent it from affecting most taxpayers, they had pledged to raise the threshold at which both employers and employees pay national insurance.

Now, as part of the agreement with the Liberal Democrats, they are going to only raise the employers' threshold - and use the money saved to raise the basic income tax threshold instead.

I'm told that this increase in the allowance will be significant, costing more than the rise in the employee threshold which it replaces - though nothing like the nearly £17bn it would cost to go all the way to £10,000. They will need to raise money from somewhere else as well, but the bulk of the money will come from not implementing that piece of their national insurance cut.

For many taxpayers, the difference will be fairly academic. True, pensioners who earn more than the current income tax threshold but don't pay national insurance will benefit more from the income tax change. But their income tax allowance is high already, so it won't be big money.

But clearly, this was an important symbolic concession for the Liberal Democrats.

Contrary to some reports, I am told that the Conservatives have stuck to their guns on the modest tax cut for married couples in the Tory manifesto, but the inheritance tax cut is indeed firmly on the back burner .

As previously indicated, the Tories have stuck to their guns on the commitment to cut public spending by at least £6bn more than Labour was planning in 2010-11 - my sense is that it could end up being more than that.

They never seriously contemplated rowing back on this crucial part of their USP for the financial markets. But there has been some form of assurance that the cut will not go ahead in full, if the economy drastically weakens in the next few months.

Vince Cable can draw comfort from this, and perhaps even more from today's encouraging news about manufacturing output.

As a result of the new output figures for March, the first estimate for growth in the first three months of 2010 is likely to be revised up. Indeed, for all the talk, this recovery is starting to look rather like past rebounds.

We might have hoped for something better, after an unusually steep downturn, but the news is reassuring all the same. In terms of rhetoric, it will help the Liberal Democrats make the case that a £6bn additional spending cut may not be, er, quite as cataclysmic as previously claimed.

Come to think of it, I guess Vince Cable will also have to rethink his scathing assessment of the Conservatives' promise to find an extra £12bn in efficiency savings this year. But something tells me that won't be the greatest piece of fancy footwork demanded of him and his Liberal Democrat colleagues in the weeks to come.

Now we wait to hear what the Governor of the Bank of England decides to say - and not say - about all this at his press conference tomorrow morning.

Comments

  • Comment number 1.

    And doubtless "the markets" will be glad their brother Tories are in Downing Street.

  • Comment number 2.

    I can't believe they've agreed to lower the CGT threshold - what a slap in the face for private investors who want to do something useful with their money rather than waste it away or worse, let it erode away in the bank...the worst "compromise" out of the lot in my opinion!

  • Comment number 3.

    So, correct me if I'm wrong, but as it stands we expect:

    Reduction in the government deficit by 20-30% this year alone.

    Income tax threshold rise.

    Ring-fenced front line services (NHS, Education?)

    This really does leave the forthcoming emergency budget rather wanting for details. It would seem that very deep cuts will be made from social security departments and services; presumably government administration, final salary pension bonuses, public sector pay, benefits (probably all of them) amongst all else. The CGT compromise does seem very bizarre, as a conservative policy and during early recovery period. In the immediate short term the markets will probably appreciate the new government, but it remains to be seen what their assessment of compromised conservative policy will be...

  • Comment number 4.

    How do they think small firms raise finances nowadays? We know it doesn't come from the banks...placing shares on the market is how...so how does taxing the investors that fund these companies make any sense!! Very short sighted!!

  • Comment number 5.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 6.

    Let common sense prevail. Less spending, more money to those who buy UK goods, more investment for those who make UK goods, better relations with EU than would have been the case if Tory majority..... Good luck to our almost national government.

  • Comment number 7.

    1. At 11:38pm on 11 May 2010, Caledonian Comment wrote:
    And doubtless "the markets" will be glad their brother Tories are in Downing Street.

    ===============

    if it wasn't for the fact that Socialists moan ALL the time, I could get the impression this was sour grapes. Mind you if it was, tough, you had your chance, and you blew it (personally I think you had at least 3 chances, and blew every one, now that takes a certain kind of ability, unfortunately it isn't the one required to run a Government), now lets see if the Lib-Dems and the Tories blow theirs.

  • Comment number 8.

    These cuts will reduce services, take away jobs and deny opportunity. Before you cheer on the jobs axe consider this- In many parts of the country the public sector is the only employer offering decent jobs and meaningful careers. What will happen when these careers are gone. Are we all to stack shelves in supermarkets?
    Analyse new jobs created by the "engine" of the private sector. Outside the South East these have, for the most part, been minimum wage with no prospects. Don't talk to me about creating opportunity. The only opportunities will be for the already smugly comfortable to become even more so.

  • Comment number 9.

    This is a strange conundrum.
    The Lib-Dems know the importance of halving the deficit, and yet the raising of the basic tax threshold makes the task so much more difficult.
    However, if you're trying to get by on 10k or less it makes perfect sense.
    Perhaps the answer is to get there SLOWLY.
    Whatever happens, those taxes will be gathered from somewhere else, so hold on to your hats.

  • Comment number 10.

    I am a bit worried about the impact of the proposed increases to CGT and in particular the uncretainty it brings for people who are currently in the middle of business sale deals.

    I have long thought that we should bring back taper relief in both its business and non business forms but make the qualifying period for maximum relief 10 years. Gains should also be taxed aa the top slice of income as before. As far as see it this covers all bases by encouraging longer term investment and taxing short term gains which in many cases are just disguised income.

    The Liberal Democrats proposals to tax all gains as income without any relief would massively stifle smaller business in the UK where the owners rely on the sale of their businesses to fund their retirement. There are no third party funded final salary schemes here and since fiscal incentives to invest in pensions are to be significantly reduced this might be the only method to obtain a meaningful pension.

  • Comment number 11.

    #4 >>We know it doesn't come from the banks...placing shares on the market is how...so how does taxing the investors that fund these companies make any sense!!

    Cart and horse, dear chap !! In order for there to be a liability for CGT, there must first be *profits* from the company sufficient to raise those shares to the level that make them eligible for CGT !! Considering, as you say, these are *small* companies with *small* share capitals, the shares will have to appreciate significantly to be liable for CGT !!

    If I had shares in any small company that grew so fast as to be liable for CGT within a year, I'd be a very happy man !! It means that my money has not gone down the tubes as most investments in SME usually do !! Sadly, this is not the most likely scenario !!

  • Comment number 12.

    I'm a little bit worried about all this to be honest. As a public sector worker it seems like I'm going to be taking a big hit, even though I had nothing whatsoever to do with the recession. I don't earn loads (below national average, and no pay rise for the last 2 years) but that was never the reason for taking this job, as I suspect it wasn't for many like me. But a word of warning to the private sector - myself and a lot of my colleagues are very highly qualified, well experienced and not too fussed about earning a fortune. We may just be coming after YOUR job.

    As a side note - who has any idea what will happen with interest rates? A few percentage points up, and I might be in a tent.

  • Comment number 13.

    Caledonian Comment seems to be under the impression that the 'markets' are some sort of private conservative-funded club. Not so. Britain raises its funding through the 'markets' and the cost of doing so is fundamental to the deficit and how much of our national income is spent on debt interest payments. If the 'markets' believe that the UK is risky, the cost of borrowing will go up, as will our interest payments, wiping out any benefit of public sector cost cutting. The opinion of the 'markets' is vital, and is a major contributor to how quickly we can cut the deficit and strengthen economic recovery.

  • Comment number 14.

    #8 >>What will happen when these careers are gone

    You seem to assume that there will be an endless supply of money coming from somewhere to pay for these people !! What will happen when there is no more money to pay them or anyone else, for that matter ?? This is what happened in Greece !! Is this what you want for UK as well ?? A bankrupt nation begging for scraps from the International Community ??

  • Comment number 15.

    #12 >>But a word of warning to the private sector - myself and a lot of my colleagues are very highly qualified, well experienced and not too fussed about earning a fortune. We may just be coming after YOUR job.

    This is (still ??) a free country and you are free to go for any job you like !! Whether you will get it or not is another different kettle of fish !! In fact, if, as you say, you are "not too fussed about earning a fortune", then I'm sure there will be many private sector employers willing to hire you for less than the normal going rate and expect you to work and produce at the same private sector rate.

    Good luck in your job hunting !!

  • Comment number 16.

    #13 >>Caledonian Comment seems to be under the impression that the 'markets' are some sort of private conservative-funded club. Not so.

    It is not polite to challenge the rights and wrongs of other people's religious beliefs !! Facts are quite another matter altogether !!

  • Comment number 17.

    I believe the CGT proposals are targeting non-business assets, in order to reduce speculation on share prices and house prices, etc.

    Those SME business owners who retire/sell their businesses should not be affected by the proposals.

    Retail equity investors are protected by stocks and shares ISAs, to the tune of £10,200 per person per year.

    Therefore, the new CGT move is aimed at wealthy speculators, who currently avoid 50% income tax by opting for the 18% CGT.

  • Comment number 18.

    I don't know much about statistics; all I know is, bad things will be implemented ASAP but things good for average people will be postpond for a year or two. That was just an election manifesto to get votes from majority average salaried people but now they assured their position for 5 years, now they will what is in their benefits or in the benefits of the people of their class.

    THIS IS CONSERVATIVES ALL ABOUT!!!!!!!

  • Comment number 19.

    I am a public sector worker too, but also live in the real world where I realise that it is the private sector that generates income for the country. Any public sector worker who does not believe there is gross wastage in the public sector is wandering around their workplace with blinkers on. I believe the Tories are looking for cost savings in the region of 1% across the public sector this year - that will be easy to achieve from what I see, and in my view is not ambitious enough.

  • Comment number 20.

    #12 wrote

    myself and a lot of my colleagues are very highly qualified, well experienced and not too fussed about earning a fortune. We may just be coming after YOUR job.

    I was in that postion some years ago after redundancy at the age of 52. Unfortunately its not as easy as that to get a lower paid job if you are over qualified.

  • Comment number 21.

    Post 12 by JA0005:

    Well, you'll have to wait in line with all the other highly qualified workforce. And if you are successful at taking someone else's job in the private sector, you'll have to use your fortune in earnings to replace that rather expensive, and heavily subsidised, pension arrangement you presently enjoy. And what do you think interest rates will do? They are hardly going to go down.

  • Comment number 22.

    Stephanie - I dread reading that King is to speak since in the past it has seemed that every time he has opened his mouth the pound has fallen. Isn't it time that he was told by the government of the day that his remit concerns interest rates and inflation and that whether the government wants, as a matter of policy, a weak currency is for the PM and Chancellor rather than the B of E to determine.

  • Comment number 23.

    Just heard the unemployment figures. How long before New Labour rediscover unemployment and start blaming the new Government? Anyone running a book on it?

  • Comment number 24.



    “The best way to destroy an enemy is to make him a friend.”

    - Abraham Lincoln

  • Comment number 25.

    The simple reason the UK is spending £163,000,000,000 more than it recieves in tax is __ waste__
    heres a good place to start.... the cuts dont have to be front line staff.

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 26.

    #12 and follow on notes.

    So the protector of the oversized public sector payroll has gone. Welcome to the real world #12. The private sector has been here for some time but the past government appear to still hold the view that if you can't afford it pay for it on debt even in a downturn!

    I wish you well #12 but many should have smelt the coffee earlier. The depth and ferousity of public sector cuts will now have to be harder and deeper due to lack of action of the last government.

    Its like bad tasting medicine - time to take it and get on with the healing process.

  • Comment number 27.

    @21 - "What do you think interest rates will do" how old are you? 5?

    I was hoping for someone with some sense, and manners, to explain what is likely to happen and by how much. Obviously I think they will go up, or I wouldn't have asked. Can you just ignore this now, and I'll wait for a reasonable answer.

    And it seems my point about "may be coming after your job" has been misunderstood. I was trying to point out that there could be a hell of a lot of qualified, experienced people entering the job market.

  • Comment number 28.

    #8 "In many parts of the country the public sector is the only employer offering decent jobs and meaningful careers"

    I grew up in one of those parts. The public sector + those on benefits amount to about 75% of the entire working population in my home town. The net effect is that the aim of most of the school leavers is to get a job with the council.

    The public sector has crowded out the entrepreneurial spirit in my home town. If you want to make something on your own, you leave.

    Is that your vision of the UK. 25% of the working population in the private sector trying to support 75% of the working population (and the non working population)

  • Comment number 29.

    Setting a fixed term Parliament suggest these two parties are terrified of facing the electorate any time soon. That they have chosen 5 years as the period only reinforces this view.
    What sort of coalition is it that allows one of the parties to abstain on certain issues. Indeed how principled is it that a party will sit on it's hands, whilst legislation is enacted to which they are vehemently opposed.
    I just hope the LD enjoy their period in the sun, for a very dark place awaits them 5 years from now.

  • Comment number 30.

    I see the Scottish Nationalists and presumably the Welsh and Irish are already making noises about maintaining their already bloated budgets. I think that if there are cuts they have to be across the board with no favours to anyone.
    I think the Scottish, Welsh and Northern Ireland Offices could be scrapped as these areas have their own assemblies. Any residual legislative oversight could be done by the Home Office or Treasury.

  • Comment number 31.

    Stephanie a great and historic day for the Nation. Many do not see it this way which is fully understandable. However, from a right leaning Liberal's point of view this is brilliant.

    In the tradition of William Gladstone Liberal Prime Minister 4 times over we are back. Much of the very best bits of our manifesto are coming to pass and some of the worst Tory ideas are stopped. We have a solid chance of doing good. For those 'liberals democrats' running to the Labour party today in shock and disgust - fair enough and bye. Perhaps it was they that were socialists all along and not true liberals and need reminding that the Liberal party was formed from the Whigs and existed 60 years before Labour - the original 3rd party. I am sure that we will make new friends and garner new support as the nation pulls together through these difficult times as it always does.

    Either way i wish our new government success for us all regardless of where any of them went to school or the fact the PM is a Tory.

  • Comment number 32.

    1. At 11:38pm on 11 May 2010, Caledonian Comment wrote:

    And doubtless "the markets" will be glad their brother Tories are in Downing Street."

    The markets have benefited more from Labour than from the Conservatives.

    The 'markets' are so significant to the UK's economy because Labour has borrowed so much money from them.

    They will be happy that the Conservatives are in office because now there's a chance they'll get their money back.

    If Labour hadn't borrowed so much money, then the Markets' opinions would have been much less relevant.

  • Comment number 33.

    8. At 07:23am on 12 May 2010, kevin colwill wrote:

    These cuts will reduce services, take away jobs and deny opportunity."

    They will reduce services and take away some jobs. I'm not sure how they'll "deny opportunity". In the medium term they will increase opportunity.

    "Before you cheer on the jobs axe consider this- In many parts of the country the public sector is the only employer offering decent jobs and meaningful careers. "

    Blame Labour for that. Rather than doing what they should have done (as a Labour government) and creating real jobs, they just created non-jobs in the public sector. It is plainly not sustainable to have large areas where the public sector is the main employer. The public sector is meant to be there to support the private sector, not to replace it.

  • Comment number 34.

    More and more experts coming out of the woodwork, just like the credit crunch bunch, WE TOLD YOU SO! UK Industry that actually contributes to positive GDP has been hammered, with some just hanging by their finger tips, so the next logical step is to hammer public services but wait a minute that will add to jobless mountain, which in turn adds to even more public debt. You do the arithmetic! Only the inflation proof breed have nothing to worry about, its all $ta$hed in off-$hore accounts.

  • Comment number 35.

    Let's face it. We all knew that none of the political parties were telling us much about their budgetary plans prior to the election. Sadly, anyone who came clean about how bad it will be would have been pilloried by their opponents, and the inevitable conclusion is that it's going to be tough for us all.
    Lots of cuts and tax rises must be on their way, however I can definitely foresee the end of the index linked, copper clad civil service pension. It is indefensible in today's economic climate. My pension is linked to the profits that can be made by investment in the stock market (seriously negative over the past few years), and Gordon Brown stole a large part of that in 1997 and ever onwards, and squandered it.
    The logic that "a civil servant takes lower pay than the private sector and works for the benefit of society and therefore deserves to be rewarded with a lovely pension" is flawed - we all take what jobs we can get and it is small businesses like me, working 14 hours per day, who will lift this country out of recession - and not another target affirming bean-counter in the NHS. Cut the targets, loosen the red tape, reduce the gross nanny state and "efficiency savings" will drop out of this equation in their billions. Yes, this will mean job losses, but the alternative is a Greek style implosion a few years down the line which will be far worse.

  • Comment number 36.

    #12

    Welcome to the world that a large part of the rest of us inhabit.

    The public sector has been bolstered and protected by an overspending, debt-ridden government which was prepared to keep on doing the same thing for at least another year, i.e. spending money it hadn't got. I'm not sure if the public sector has really understood where we are as a country and that just on the matter of public sector pensions, let alone all the other expense, we are simply BUST.

    A frightening graph of the effect of the post-war baby boom shows that from February 2011 the line of retirees will be steeply rising - and the productive workforce diminishing. This should have been tackled at least 10 years ago but the last government was happy to keep on spending, spending, spending and now we are beyond medicine to cure the patient. Some amputation will have to occur.

    My pension? I funded it completely myself, saving each year from my self-employed earnings. No employer contributions. Just me. I forgo on some luxuries, I worked 50 weeks a year, 10+ hours a day and have done it for over 40 years. I'll have a half-decent retirement but I won't have as decent a retirement as my good neighbour who has worked in the public sector for just 30 years who gets a pot twice as large as mine mostly funded by my taxes.

  • Comment number 37.

    I tend to agree with many of the earlier posters that there is a lot of detail awaiting us from this new government. It is also true that we have a new type of government which we are not used to.
    However the notayesmanseconomics web blog has pointed out a problem with the conservative maifesto and plans.
    "If we look back into the past the Conservative administration when Ken Clarke was Chancellor had a successful retrenchment policy in the early 1990s but here the split between public spending cuts and taxation was 50/50 rather than 80/20. So we are asked to believe that an untried coalition government can do more in the area of cutting public expenditure than what an experienced single party one could do. If you have your doubts about this so do I."
    So at the least there are big challenges for the new government and I hope that they are up to them.

  • Comment number 38.

    Is the United Kingdom truly omnipotent in world financial markets?
    The BBC's market report claims that UK Bond Prices have risen in reaction to our election result. That looks rather odd.
    A quick look at Government Bond prices in Europe & N America shows that ALL Bond Prices have risen by almost parallel amounts. The yield gap on 10 year UK Bonds vs German Bunds has crept up to 89 bp.
    Whilst some might applaud a BBC vision that 'Britain rules the markets', others (including me) suggest that your reputation for objectivity and public information is a little at risk here!
    Stephanie, I suggest you have a quiet word with your editorial colleagues.

  • Comment number 39.

    Stephanie

    For myself, I am not at all surprised by your news. I think that we are watching the early stages of a workable political and economic strategy by the new government, where two groups, (1) low income working families and (2) pensioners, are protected as much as possible from the pain to come. So the minimum wage might continue to inch ahead; it will be very interesting to see what the new government will do about plans for earnings upratings of pensions.

    The spending cuts will therefore have a disproportionate effect on three groups:-

    (1) those receiving benefits for having no job (no uprating of benefits);
    (2) better paid public sector workers (pay freeze in 2011 (the Tory measure) and very small increases thereafter, in line with LibDem election proposals) ; and
    (3) public sector pensioners, with the end to automatic indexation.

    There will also clearly be some retrenchment in capital spending, although not too much lest it affect private sector profits and employment.

    Add in a gradual rise in VAT to 20% and more taxes on financial services and polluting activities, such as aviation, and a strategy that could work in economic terms and be politically acceptable is starting to emerge.

  • Comment number 40.

    24. At 10:06am on 12 May 2010, Andy Leslie
    “The best way to destroy an enemy is to make him a friend.”


    In politics this is certainly often the case. The question is which way around?

    This seems a potentially sane outcome from what was an exquisitely awkward election result. It is in no way my first choice for government but a choice was required from what we had and nothing else looked any better. There is great risk for both sides, which may be its strength.

  • Comment number 41.

    #12 ja0005. Ah yes interest rates, bit of a tricky one that.

    If you start to raise rates then the entire economy crashes and a lot of debtors get to understand why being in debt is not a good idea. Can´t have anyone needing to accept responsibility for their actions so the answer is you don´t raise rates.

    Only problem with that is that external lenders don´t want to lend money to basket cases for nothing, therefore the cost of external funding rises. Not a problem - just print some moeny so that you don´t need any external funding, and you can keep interest rates at zero.

    This works quite well, right up until the time that the entire economy implodes, and people no longer care whether interest rates are 1% or 1,000%.

    Happy days.

  • Comment number 42.

    I had to sit down when reading some of these comments!

    Where do people think the money comes from? Out of thin air? This country has been living on its overdraft for the past 10 years, all the savings have gone and the credit cards are maxed out.

    And no, just shoving up taxes and stealing more money isn't the answer. The taxes need to be cut, quickly. The amount of investment leaving this country is staggering - reason - too much tax.

    Someone please explain to me why we need around 400,000 more people in public sector employ since 1998? And what extra benefits have I seen in that time - errrm - None. Just paying more tax! Lets look at the facts:
    1. NI - up - threshold removed
    2. Pension tax credit - removed
    3. 50% tax - bonkers
    4. Stealth taxes - too many to mention.

    Cameron has to get this sorted and quickly - else the City will destroy him.

  • Comment number 43.

    Lots of talk about protecting the NHS and yet the NHS is knee deep in Managers often managing budgets of millions of pounds with no managerial qualifications or experience.
    If Health is an 'industry,' let's have some quality management.

  • Comment number 44.

    I do hope that our new 'Government' take the opportunity to radically overhaul the tax system. About the only two things I agreed with LibDems on were the raising of tax threshold ( but £10k is about 4 years out of date) and scrapping the Child Bond or whatever it is called. Remember how Labour used to crow about our flexible labour force? Great, but for the fact they kept putting obstacles in it's way by relentlessly putting up fuel duty. Restricts the radius in which you can take up employment. Look to UKIP manifesto if you want some ideas on how to cut Public Spending so much of which is totally wasted.

  • Comment number 45.

    12. At 08:47am on 12 May 2010, ja0005 wrote:

    As a side note - who has any idea what will happen with interest rates? A few percentage points up, and I might be in a tent.

    Ja0005, you will end up in a tent...question is do you buy one now or later to get the best price?

    1] Interest rates will at some point rise - enough to cause you problems.

    2] Your wages are capped.

    3] Inflation - oil price now £1.24 at the pumps will continue to rise and in turn affecting everything you buy at the shops = rising monthly expenditure to live. This erodes the value of your already marginal income.

    4] New tax measures will be coming down the line to further suck out of your pay packet what is believed to your contribution to the fiscal deficit.

    5] last winter we had the first of, what in my opinion, will be the continued rise in household fuel bills. We are at 2010 and from 2012 the uk's aging nuclear power stations will start to be reduced, ie, there is a trend to reduce output or start switching them off. Therefore energy prices will continue to rise, and most of the companies behind this energy supply are in foreign hands. They'll do you no favours.

    In short you'll be squeezed any which way you look, and, what money you hoard away will be being devalued over night.

    One day we will look back at this and remember them as 'the good old days' :)

    I used to work for the Sussex Pct [or NHS for those not familiar] until last month, so I am already making my contribution to the reduction of our fiscal deficit by being unemployed.

    Short of walking into a company with an ak47 and taking out some existing employee's...where are the vacancies your hoping to apply for?
    The ex nhs workers are already forming and they'll be there when your ready to join them....don't forget your tent - it may be better than my cardboard box :)

    Confidence is what you hold on to before you realise the truth of the situation your in.

    with that aside...since the weekend crisis meeting for the euro quantative easing program...no..errm...bailout package...ermm...no...euro support package, yes the euro support package, since we are atleast members of the IMF and therefore our contribution is going to be some £8 billion....

    when are we going to start dealing with the reduction to our deficit??

    The shiny new PM may be twaddling around looking for a reduction of £6 billion...but please, surely this means we've just added another £2 billion to our lot?

  • Comment number 46.

    #34 redrobb Stashing $´s in offshore accounts will not save anyone. Check out the price of gold.

  • Comment number 47.

    24 - Andy Leslie wrote:
    “The best way to destroy an enemy is to make him a friend.”
    - Abraham Lincoln
    ___________________________

    Are you sure you actually understand what this means?
    I'll give you a hint - It's not about destroying enemies, it's about making friends.

    Of course the liberals have always been the tories friends - after all, a loyal opposition legitimizes a system rather than challenging it.
    Not sure new labour are any more radical, of course, but whatever the case, the markets should be quite happy with the new order, and the policies to come.

  • Comment number 48.

    I worked in the Private Sector for 20 years before becoming a Civil Servant for 5. I then returned to the Private Sector 2 years ago. I know and understand the drivers and the differences between the 2 (and some of these are quite fundamental). There is a lot of wastage in the Public Sector and most of it has not been in "frontline services", so a 1% saving this year is not "unmanageable" if done appropriately.
    One way these savings (and more) can be attained requires a review on Public Spending. Civil service "savings" are returned to the Treasury (rather than being used buy the department making the savings). The "savings" made within departments usually mean 9 months of OTT austerity follwed by a spending spree between December and April (if they don't use all of their annual (already reduced) budget, they get even less next year). If Departments were given more autonomy and allowed to keep the savings they make, more efficient long term planning and strategy would occur (minimising spend) and many other savings could be found without affecting the great work Civil Servants do. (There are many to be made and the Civil Servants know where they are, it's just that the system prevents them from making them without increasing their own suffering.)
    Private Sector workers 'gripes' about pensions and job conditions are unfounded with regard to the Civil Service (the Senior Civil Service is a completely separate animal) especially when you consider that (on average)Civil servants work for 20% less salary. There are 4 types of Civil Service Pension at present, depending on when you started and the majority don't get the "good ones".

  • Comment number 49.

    28. At 10:21am on 12 May 2010, Justin150 wrote:
    #8 "In many parts of the country the public sector is the only employer offering decent jobs and meaningful careers"

    I grew up in one of those parts. The public sector + those on benefits amount to about 75% of the entire working population in my home town. The net effect is that the aim of most of the school leavers is to get a job with the council.

    ---------------

    I don't think anyone is defending the status quo - this is clearly an untenable situation.

    The question is - if you remove those jobs without doing anything else, what do you end up with? You've still got 25% of the population supporting the other 75% - its just that vast majority of the others are now unemployed.

    In the election campaign we've just had no politician addressed where the growth is coming from - and how that is going to be chanelled to the areas of the country that will be adversely affected by the cuts. If I felt that there was a plan for that then I would be an enthusiastic supporter of cuts - however politicians of all parties seem to think that growth will 'return' - implying that the early part of this decade was the norm rather than an unsustainable bubble.

  • Comment number 50.

    #7 - my objection to "the markets" pressurising politicians has nothing to do with my being "Socialist". I'm not. Rather it is an objection to "the markets" causing knee-jerk economic decisions to be made before mature reflection is applied. The issue is admirably addressed in an excellent "Times" article today : http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article7123345.ece Caledonian Comment

  • Comment number 51.

    I have no doubt there is plenty of scope for public sector cuts without affecting front-line services. Just look at all of the failed and grossly over-budget IT projects of recent times. The fees being paid to the consultancies involved, who have a persistent record of failure (Accenture anyone?), are astronomical and poor client management ensures they get away with it.

    The people affected here won't be poorly paid workers, they are rich consultants who have milked the system. Interestingly, many have been donors to the Labour party over the past 13 years e.g. Capita.

  • Comment number 52.

    My point is that the public sector provided opportunity for good careers of genuine service in areas of the country where the private sector simply does not offer real employment pospects.
    Sneer as you might when these opportunities are gone the best the private sector can do is minimium wage monkey work. We're heading for an ecomony full of university educated shelf stackers.
    Quality of jobs is as important as quantity and there is never a recognition of that.

  • Comment number 53.

    If state spending per capita in NI, Scotland & Wales were to be reduced to levels in England, would there be a significant saving to be made?
    Surely a Tory Government that is mainly supported in England could push through that sort of change without losing future votes?

  • Comment number 54.

    THere is of course the issue of Equitable Life as well

    Labout have been recently kicking the issue into the long grass for as long as i can remember (one recent article i saw claimed that the report by John Chadwick didn't even really cover the compensation scheme evertyone is waiting on). Also they said that not all policyholders would get compensation. To be honest i tihnk they may have been putting it off to see if they get re-elected.

    the Lib Dems and Conservatives both recently said that they would compensate all policyholders. So presumably a coalition of these two parties will do the same.

    Will they be able to find enough savings in other areas to do this though?

  • Comment number 55.

    @Kevin : The systematic replacement of private sector jobs with public sector jobs over the past 12 years leaves non SE regions in that situation. Labour should have been investing in initiatives to encourage sustainable jobs, rather than bribing local voters with jobs funded by borrowing from the Chinese and squeezing private industry/tax payers. Initiatives such as banking, private medical care and research, higher education all targeted at overseas ‘customers’ to bring in cash and balance our trade deficit.

  • Comment number 56.

    43. At 11:40am on 12 May 2010, Phonytony
    You are so right! And we're not just talking NHS **England**, which is usually the inference. NHS Wales has more Senior managers than you can shake a stick at, all on inflated pay scales.

  • Comment number 57.

    Let's see if I've got this right. We now have a "fixed term Parliament of five years" which means that, if by some quirk of fate the coalition government becomes exceptionally popular, they cannot call a snap election in an attempt to win more seats for the Tories or the Lib-Dems.

    How about the opposite, surely it also means that in the event of a defeat of a piece of flagship legislation or a vote of no-confidence, that same coalition is not duty-bound to go to the poles.

    Hardly surprising then that William Hague - now Foreign Secretary - was able to announce on National TV that, despite the fact that the Cabinet details have not been finished; despite the fact that the Queen's Speech is a little way off and despite the fact that, in his own words, this needs Primary Legislation to set it in train, the next Geeral Election would be in May 2015!

    The next Queen's Speech could be the shortest on record "My government will sit round on its backside and do nothing" at which point, the MPs will quietly file out of the House of Commons, switch off the lights, lock the doors and go fishing. They will then claim their rod-licence fees from the sucker tax-payers who elected them.

    Seems to me, there's no way now of holding this shower to account - so much for Electoral reform !! So much for Parliamentary democracy !!

  • Comment number 58.

    #43 PhonyTony I agree I have a close friend working in the NHS in the front line. However there appears to be a disproportionate amount of managers to front line staff. I think a cull of some of these people would do the NHS and other public sector areas the world of good. I have to admit though I don't see it happening just more nurses being stretched too far as positions are not filled when vacant.

  • Comment number 59.

    It's been laughable listening to the old 'working class v Top Hatted toffs' rhetoric ---not only is there next to no real difference between the Tories and Liberals..there isn't any between those two and Labour..

    New Labour was old labour with the labour bits taken out so it become an election-winning machine ..now it's lost one it's lost it's whole rasion d'etre, in a way. But the plain fact is that Lib Lab and Tories battled this election out in the same piece of Middle class, Middle England Middle ground and with the various markets calling the tune whatever will happen would have happened whoever got in---- the so called point of difference (in the timing of the cuts , whether 'now' or 'later' ) is another non-issue issue---- 2010 the year of holding off is already almost half done..by the time of any budget and it taking even first stage effect it will be 2011 anyway

    Pub Quiz: How many Lords and Barons were in the last 'working class' government? How many Lords and Barons are there in this new one?

  • Comment number 60.

    Re: CGT - given that its paid on profits on investments (after allowing for inflation), why should earnings via this route be treated any differently to earnings via any other route?
    Indeed couldn't capital gains and income be combined into a single earnings tax, perhaps with additional allowances for long term holdings to encourage investment rather than speculation.
    ..and then of course there's the exclusion of people's main residence that has helped fuel house price inflation, the exclusion is for a home, not a speculative asset, as houses now seem to be seen as more the latter than the former, why should people get money for nothing tax free, when others generally less fortunate have to earn theirs and pay tax on it?

  • Comment number 61.

    "At 09:39am on 12 May 2010, MischaRuffside wrote:
    Stephanie - I dread reading that King is to speak since in the past it has seemed that every time he has opened his mouth the pound has fallen."

    King has been a dreadful B o E Governor. I don't think he ever quite got over the fact that Brown did not rate him. A more confident person would have been able to brush aside that apparent snub. Instead, to this day King has been trying to get his own back even if it means harming our economy. Let's hope he ll grow up under the new govt.

  • Comment number 62.

    43 & 48. I agree totally. I work part time as a receptionist in the NHS. Last time I asked my manager to take 1 day of annual leave (a week in advance & having checked there would be cover) she had to check with her manager first! Cut some of the management layers. I've worked in the NHS in a variety of roles for several years and I can't believe how many layers you have to go through to get a decision. The waste isn't on frontline services if anything they don't get the money they should do. Pandatank is so right money ends up getting spent on things that we don't need just so the budget isn't lost for next year while other budgets are always overspent. Funnily enough the amount you need to spend differs year on year. The system needs changing. I've seen private sector workers come to the NHS and they struggle, not because of the people but the system. Imagine you need a new printer cartridge to print an outpatient letter but that budget is overspent so you can't have one. On the other hand we don't need any more uniforms but we haven't spent all that budget so we buy some spare ones anyway because otherwise that budget will be cut next year. In the real world you could spend the spare uniform budget on the things you really needed but not in ths NHS!
    I stay because the patient contact is so rewarding and because despite a 2.1 Biology degree this is the only work I could get within a 45 minute commute. I have my reasons for staying in the area but it is no surprise that the best young people leave this county in droves.
    My other 3 days a week are spent doing admin for my partner who is self employed and believe me 36. I know exactly where you're coming from. We've been lucky his business hasn't suffered too badly from the recesion but we can't grow until the banks will loan us money again. The work is there but we can't deliver without funds to buy goods to sell.

  • Comment number 63.

    Steph

    what I would like to see on your site and other government site is a current basic balance sheet that simply shows the level of

    Income
    Spending
    Fixed by contract
    Discretionary
    Debt
    Borrowings
    Liabilities
    PFI Debt
    Pensions

    Balance + or -
    Date of budget balance

    Published by an outside body so that the politician cannot hide it in future.

  • Comment number 64.

    1. At 11:38pm on 11 May 2010, Caledonian Comment wrote:
    And doubtless "the markets" will be glad their brother Tories are in Downing Street.
    **************************************************

    I think you'll find that Brown did a lot of good things as both chancellor and prime minister for the City, traders and bankers alike. Then it all crumbled because it was built on sand; the government responsible for the biggest, most delicate economic bubble we have ever experienced HAD to follow. That's from a traditional labour voter.

  • Comment number 65.

    In all this talk of budget cuts. Why do they always seem to be in things that most of us want - school budgets, small hospital funding, day care centres, police on the beat, road repairs, University grants; and NEVER cuts in our horrendously enormous funding of the unelected, interfering and unwanted EU, or sending money to rich India or China for stuff they should pay for eg. books, or paying for the umpteeth child of a welfare scrounger, or supporting anybody from anywhere in the world arriving and demanding housing/doctors/schools/cultural deference to them???

    Never mind a referendum on voting, let's have lots of smaller referendums on where our hard earned money is spent, I wager a lot of surprises would emerge! Let those who think 'this needs money' have it taken off them and not me who thinks 'no way in heck mister'.

  • Comment number 66.

    @Alastir - regional policy to boost private sector employment outside the South East of England has rarely worked. The quality of the jobs created has been poor and the grant money would have been better spent directly employing people in the public sector.
    Let's leave aside gloating and sneering (not that Alastir has done either)and consider how meaningful employment prospects, as opposed to dead end minimum wage jobs, will be created outside the golden triangle of South East England.

  • Comment number 67.

    @ point 8:

    ============
    These cuts will reduce services, take away jobs and deny opportunity. Before you cheer on the jobs axe consider this- In many parts of the country the public sector is the only employer offering decent jobs and meaningful careers.........
    ============

    The logical extension of this is that all jobs should be funded by the tax payer, either removing the private sector engine of nationalising the private sector! It is just not sustainable for 56% of the working population to fund the 44% remaining. Lets hope the balance moves to 65/35......

  • Comment number 68.

    >>>>>>>>>>>>>>>>>>>>>

    65. At 3:07pm on 12 May 2010, SALongden wrote:

    In all this talk of budget cuts. Why do they always seem to be in things that most of us want - school budgets, small hospital funding, day care centres, police on the beat, road repairs, University grants; and NEVER cuts in our horrendously enormous funding of the unelected, interfering and unwanted EU, or sending money to rich India or China for stuff they should pay for eg. books, or paying for the umpteeth child of a welfare scrounger, or supporting anybody from anywhere in the world arriving and demanding housing/doctors/schools/cultural deference to them???

    Never mind a referendum on voting, let's have lots of smaller referendums on where our hard earned money is spent, I wager a lot of surprises would emerge! Let those who think 'this needs money' have it taken off them and not me who thinks 'no way in heck mister'.

    >>>>>>>>>>>>>>>>>>>>>>>>>>

    be careful what you wish for.

    Next thing you'll know, you'll start suggesting we should change our political system to a Democracy.

    That would never do. Heaven forbid!

    After all, the ministers would have to vote themselves out of office, which is at odds with our capitalistic me me me wheres my pay packet philosophy.

    No. Be happy with your once every four year voting system for a party that hides most of its manifest until it is elected, and then reserves the right to not do any, all or some of its manifested policies as it sees fit.

    Actually, get back on your hamster wheel and keep earning...so we can be assured of taxing you, there's a good fellow. The systems are so complex that the electorate couldn't possible understand them and I need to attend a ministerial banquet so I haven't got time to explain what I don't understand.

    WHEEL... PLEASE....ATTEND!....Your wheel please.






  • Comment number 69.

    Regarding my earlier post on Equitable Life an announcement has been made

    http://news.bbc.co.uk/1/hi/business/10111378.stm



  • Comment number 70.

    Regarding my earlier post on Equitable Life an announcement has been made
    http://news.bbc.co.uk/1/hi/business/10111378.stm


  • Comment number 71.

    @ #7
    #7 - my objection to "the markets" pressurising politicians has nothing to do with my being "Socialist". I'm not. Rather it is an objection to "the markets" causing knee-jerk economic decisions to be made before mature reflection is applied.

    This is rubbish. To argue that politicians are (finally) being forced into fixing this in some countries is a fair comment, but to argue that this is the cause for a knee-jerk reaction is wrong. They've had years to address this, and have chosen not to.

    What has changed over the past 12 months is that "the markets" have started to move on to "perhaps they are not going to sort it before the cost of borrowing goes up". Put yourself in the place of an investor - would you have been more comfortable buying UK bonds before or after the government just took out a separate £200B loan?

    We've been spending more than we earn since 1997 right across the biggest boom in our history (the figures are far far far worse than has been publicly admitted if you look at the upcoming demographic shift). Now we're coming out of one of the biggest recessions in our history with by far the biggest debt ever, and it is projected to get worse! None of this is new - we've had years to fix this.

    By the way, "the markets" are not a third party: you and I are both very much an intrinsic part of "the markets". This term specifically includes individuals (you and me), investors, pension funds, sovereigns (local and foreign), consumers (you and me) and anyone else who has some involvement in economic activity from time to time. When you buy something in a shop you are part of 'the market', and like anyone else in the market you can either choose to execute or not to execute any given trade.

  • Comment number 72.

    48. At 11:58am on 12 May 2010, pandatank wrote:
    is a lot of wastage in the Public Sector and most of it has not been in "frontline services", ......... Civil service "savings" are returned to the Treasury (rather than being used buy the department making the savings).

    I Have to agrre with this post. In the private sector the cornerstone of good business is that increased production or reduced waste is rewarded in some form via bonus/promotion/etc. In the public sector that I have observed it has the opposite effect and not spending your full budget is punished by giving the dept less next year. Until this poor business practice is resolved no Govt dept is going to be 'cost conscience or efficient'. Why would they be?

  • Comment number 73.

    Why must the government take so much of our money? i live in an establishment where the household income is a four digit number and surely the government can bite the bullet and splash out some money out of individual MPs' wallets. We must all be aware that they have copious amounts of disposable income by now. Stop punishing the public.

 

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