An ideological Tory budget

Compassionate Conservatism has come to an end with yesterday's budget. David Cameron and George Osborne can no longer claim that they are on the side of the lest well off. We've all been given a tax cut, but this helps the richest more than anything else.

Replacing a tax on earned income with a mansion tax means many of the top 1% will be much better off, while the few who buy £2m+ homes will be worse off, but there aren't many of those. There are plenty more pensioners or low paid working families reliant on the savagely cut tax credits.

The Tories have been brash and bold. This was an ideological budget, cutting tax for the rich while squeezing the workless poor. It also did nothing to stimulate growth, so crucial in creating jobs and easing the pain for those at the bottom.

This was both brash and risky from the Tories, who are now upsetting an ever widening set of key groups:

• Doctors - unnecessary reorganisation of the NHS
• Nurses -  unnecessary reorganisation of the NHS
• Teachers - cuts
• Police - cuts
• Army - cuts
• Pensioners - cutting their tax allowances
• Families - cutting access to child benefit and tax credits
• Students and middle classes - trebling tuition fees

How big will the list become? Will Labour be able to take advantage? It can if it continues to focus on the tightening belt on the squeezed middle and not on class war. This represents a golden opportunity for Labour to capitalise on the government's growing unpopularity. The narrative for the next election has been set by the cut to the 50% tax rate. What hasn't been decided is whether it will make any difference. Except to the top 1% of earners who are quids in. 

Why I'm a progressive

Progress or stagnation? That is the sort of question politicians like to pose at election time. The one asking the question is usually the one who thinks they will provide progress, while tainting their opponents as the bastions of stagnation. That language framed the 2010 general election. David Cameron told us he offered change and progress, while the then incumbent, Gordon Brown and Labour, offered stagnation.

Nearly two years later, what have Cameron's Tories delivered?

Almost nothing. But stagnation. The economy was growing when they came to power. Now it is contracting. In total that has left Britain with a paltry 0.3% growth since George Osborne's spending review.

Disturbing. Pathetic. Very worrying.

Any fool knows you need people in work, paying taxes, spending their wages to guarantee growth and pay off government debts. Everyone except Cameron and Osborne that is.

There is an alternative. That is why I'm a progressive.

Londoners suffer the most from the Tories cuts

As we head into an avoidable cost of living crisis caused by the Tories' tax rises and cuts, evidence shows that Londoners will lose badly. The poorest will be worse off than the wealthy. Yet more evidence that we're not "all in this together" after all, but its much more a case of "I'm alright Jack" from George Osborne.

The cost of living is so much higher in London than elsewhere in the UK that any hits to living standards will be harshly felt. As the graphic shows, Londoners get a raw deal from the cuts. Couples with children will lose 8% of their income by 2014/15. The poorest Londoners will be 7% worse off, the wealthiest only 5%.

Ed Miliband's job is to make this clear, in simple language to ordinary people. The cuts are not fair or even. The Tories hit those who can afford it least in the pocket.

Budget 2011: plus ca change

Today's budget has done little more than tinker around the edges of plans already announced by the Tories' emergency budget. The Tories are not about to change tack on the economy and today's budget demonstrated that. There was some window dressing, such as painting changes to personal and fuel tax as reductions when they are far from that. Tomorrow's newspapers with personal budget calculators will show that.

Pickpocket Gideon Osborne has some nerve. When he claims that moving personal allowances for tax will mean we will be better off. We're all paying more in VAT, higher fuel costs and the inflation it causes. Everyone pays VAT. VAT goes on fuel so even though some items like food are excluded the cost of food goes up as the fuel required to get food to consumers costs more. VAT on fuel means any tinkering with fuel duty is more than wiped out.

Ed Miliband's response highlighted the holes in the Tories' strategy. Their medicine is painful. Disposable income, earnings and living standards are falling while unemployment and inflation are rising. Gideon wants people to thank him once this aggressive treatment has worked. I'm not sure it will and whatever happens most people won't thank him for hitting them in the pocket.

If ever there was an example of why you can't afford the Tories, this is it.

What it all means

The political and economic impact of yesterday's spending review are huge. Politically Labour is rightly trying to tread a careful path between accepting that some cuts were needed and proposing a realistic alternative. The economics can be laid out in tables and charts though the real impact won't be felt for another two years.

Politically Labour's response was encouraging. Alan Johnson contrasted with Osborne's tone and set out a viable alternative. This is based on believing Keynesian economics instead of the fiscal orthodoxy presented by the Tories. Protecting employment is the best means to protect and encourage growth. The Tory plan to lose half a million public sector workers is likely to lead to more lay offs in the private sector as many firms (like my own) rely on government contracts. Redundancies will increase the welfare bill, not cut it. I hope that Osborne's optimism that the private sector will automatically fill the gap created by the cuts will prove me wrong.

Economically the poorest will have to dig deepest as a result of Gideon Osborne's spending review yesterday. The government's own figures (page 98) show that the bottom 10% will lose a higher percentage of their income after yesterday's changes come into force. The spending review, shown in green, takes the most from those at the poorest end of the scale.

The spending review puts growth in doubt. When business and individuals are not confident about the future they spend less. Less spending and investment threatens growth. This sort of response to fiscal crisis has in the past deepened recessions, not made it easier.

I'm reminded of the 1997 Tory slogan: "yes it hurt, yes it worked." Then as now the Tories are ideologically opposed to the state investment Labour made. They want a smaller state as much now as they did in the 1930s, 1980s or 1990s. The Tories spouted the mantra of change at the election. They were right to, because they will change the social fabric of the country, but they haven't changed at all. This will certainly hurt. I'm not sure it will work.

Opposition is not enough

I wrote on Monday that it will be insufficient for Labour simply to oppose everything the Tories do. The 1980s showed that not being the Tories just wasn't enough to put Labour into power when Labour wasn't attractive to voters in itself.

A Politics Home survey of "informed political opinion" (yes, I did take part) released today bolsters this view. Asked what Ed Miliband and Alan Johnson should do in response to today's spending review, 60% stated that Labour should focus on providing alternatives, including cuts, to show how they would do things differently. Only 35% thought Labour should focus on the pain the cuts will cause. "Simply bashing the government for cutting spending will not work for Labour."


Notably Labour "insiders" were split almost 50-50 on which course of action to take. Those identifying with other parties much more forthright. This just highlights that a core-vote strategy won't work. Labour needs to persuade those who voted Tory and Lib Dem who feel let down and will be let down by this spending review and in the next four years. Their views are clear. I await Ed and Alan's response eagerly.