Saturday 23 October 2010

Right fears Coalition is losing the "fairness" argument; public agrees!

59% of people believe the CSR cuts are unfair because they hit the poor hardest, while 36% disagree. This includes 34% of people who voted Tory in May and 59% of those who voted LibDem in May. Only 30% believe the Chancellor's claim that the better off will bear the heaviest burden, while 64% disagree with that.

ComRes polling for Saturday's Independent 36% of voters think the LibDems should pull out of the Coalition because of the scale of the cuts (while 51% think they should stay in). This falls to 26% of LibDem voters at the election, and 27% of Conservative supporters, but is a stronger sentiment among younger voters.

The poll is causing some alarm at ConservativeHome, urgently promoting a backlash against the Institute for Fiscal Studies since Mr Clegg appears badly in need of reinforcements on that front.

So ConHome founder Tim Montgomerie is offering a fightback briefing - with his 20 progressive policy reasons to "forget" the IFS

We do so appreciate ConHome's appreciation of the left-wing blogs - with Next Left, Left Foot Forward and the Staggers singled out for apparently being at our "ruthless best" (most kind) in our "borg-like" propagandist dissemination of (err) thorough, authoritative and politically neutral IFS public policy analysis whose tediously reality-based factualness disrupts such a lovely Cameron-Clegg "narrative" about what they would like to be the case.

Montgomerie (no stranger to ruthless online advocacy) was especially impressed by Clegg's unfortunate claim that it would all look much better if the analysis was about public services, as well as tax and benefits. The Deputy PM couldn't be more wrong about that.

The very purpose of Tim Montgomerie's little list of pro-Coalition talking points is to reinforce and exemplify the Cameron-Clegg call for narrative selectivity. As Clegg said "I would ask people to have a little bit of perspective: if you look at some of the announcements we made yesterday, and add that to some of the announcements we made in the budget, I think the picture is a little bit more balanced than people are saying".

Whereas, if you look at all of the fiscal changes in the budget, and add them to all of the spending changes, you find out that Clegg and Osborne simply overclaimed. Montgomerie's own claim that "a large number of that list of twenty aren't even part of IFS calculations" is over-egging it too. Most of them are.

Still, if Tim Montgomerie wants to provide a list of 20 things that are fairer than fair, and Mr Isaby wants to recommend their borg-like repetition across the right, then it must surely fall to us to find out whether they stand up any better.

So here goes.

Do ConservativeHome's 20 claims for Coalition fairness stand up?

1. Benefits Reform and 2. Help into work

As the IFS analysis shows, Many of the changes in the CSR and budget have increased marginal tax rates and incentives to work, contradicting the government's policy area.

In principle, the government's universal credit is a good idea, though everything depends on the details, on which nothing substantial has been released. Several contradictory policy decisions have been announced: this week's IFS analysis show that the government's new council tax benefit changes entirely contradict the universal credit principles, and will make it more difficult for people to understand whether they would be better off working. There is also some policy dissonance with the (botched) child benefit changes: the Prime Minister and DWP Secretary have publicly contradicted each other over whether child benefit will be rolled into universal credit, or not.

3. Less tax for low income workers
- This is in the IFS tax and benefit changes. Indeed, the headline policy of raising the tax threshold to £10,000 contributes significantly to Coalition regressivity.
- As the IFS June budget analysis shows, most of the gains from raising the tax threshold goes to double-income households in the top half of the income distribution. The Spectator suggests the Tories should sell these tax cuts on that basis, by ditching the LibDem pretence that they are focused on the poor. (Investing in the universal credit instead of this headline tax cuts policy would be more progressive).

4. Protection for lower-paid public sector workers
Montgomerie is correct that the 1.7 million lowest paid public sector workers will not face the two year pay freeze which75% of public sector workers face, meaning a real terms pay cut. (However, everybody "protected" is still likely to face a real terms pay cut, albeit mitigated, since the flat rate increase of £250 amounts to 1.25% for somebody on £20,000, or 1.67% for a worker on £15,000, while inflation expectations are over 3%). In addition, public sector workers will also be asked to make higher pension contributions, further reducing their take-home pay.

The government projects that 1 in 10 public sector jobs will be lost during this Parliament, while the CIPD suggesting this 495,000 lost jobs figure is a "best case scenario", so many of those "protected" will also be vulnerable to losing their job.

5. More generous state pension.
- The initial changes are in the IFS tax and benefit changes. George Osborne attacked Labour for being miserly on pensions. That's daft when, because of Labour's sustained redistribution, pensioners are at a lower risk of poverty than other adults for the first time in British history. Osborne complained about the rising welfare bill, conjuring up images of unpopular benefits (unemployment benefit) which fell, and ignoring the fact that these were largely increases for pensioners and families with children.

6. Continuation of winter fuel allowance
- This is reflected in the IFS tax and benefit analysis.

- It also forms part of the rising welfare bill which Osborne attacked. The decision to protect pensioner benefits is unpopular on the right, but reflects David Cameron's election pledges under pressure. Both the IFS and TUC analyses shows that these choices explain why childless pensioner couples do much better in the spending review cuts than families with children or the disabled, who lose out heavily.

7. Protection of NHS spending
- This is reflected in the TUC Fabian/Landman spending analysis. The IFS points out that the marginal real terms increase will not keep pace with demographic pressures, even before the costs of the major NHS reorganisation come out of the same budget.

The IFS said the NHS was getting a real terms increase of 0.1% but referred to a piece of work they had done with the King's Fund which called for the NHS to get a 1% rise if it is to keep pace with an ageing population and the rising cost of drugs – the coalition's stated aim.

8. Taxes on the wealthier
- These are included in the IFS tax and benefit analysis.
- The Conservative Party has pledged to reverse these by the end of the Parliament, though doing so would lose the one 'progressive' claim which stands up: that, by keeping Alastair Darling's tax proposals at the top, the top 2% are contributing more (while the distribution across over 90% of the income spectrum is regressive). ConservativeHome wants the higher rate on earnings over £150k reversed, to help the "striving classes" in the 'squeezed middle'!

9. Schools budget protected against inflation
- The better than average schools settlement is reflected the TUC Fabian/Landman spending analysis.
- However, the IFS analysis shows that the real terms spending per pupil will fall, contradicting the government's claim to the contrary, because the 0.1% real terms increase is smaller than the increase in the number of students, and because funding for new academies comes out of the same resources.

10. Better schools for all.
- The Coalition's new academies are considerably less focused on disadvantage than current/Labour academies, which means that any comparative shift in resources to these schools will work against the pupil premium, rather than reinforcing it.
- The evidence from Sweden suggests free schools failed to improve standards, and that the policy there increased social segregation.
- The Department of Education is privately projecting the loss of 40,000 teaching jobs.

11. More pre-school education
- This is a good policy. However, the TUC has been almost alone in highlighting the very sharp CSR reductions in support for childcare through tax credits, with cuts of up to £30 a week for some working families on modest incomes: this is one of the less noticed and tougher benefit cuts, and among the changes to have negative work incentives.

12. Pupil premium
"As part of a £7bn package schools will receive additional funds to offer targeted help to every pupil eligible for Free School Meals"
- The IFS analysis suggests this is not true. As Martin Kettle noted, the promise of "additional funds" (from outside the DFES budget) appears to have disappeared since Friday.

A week ago, Nick Clegg made a speech previewing the progressive content of the spending review and highlighting the pupil premium's importance in an enhanced schools budget. The briefing about the speech was quite explicit: I have it in my notebook. This was new money, over and above the budget for existing programmes. It had been placed in the review because ministers knew they needed to show real progressive grit and put a genuine Lib Dem stamp on what would inevitably be a grim general contraction. Now, as a result of the IFS analysis, that claim appears to have been false.

13. 75,000 more apprenticeships
- A good policy, continuing and building on policy of previous government, though this will cost only one quarter of the £1 billion cut from adult training. The CSR committment to creating 75,000 apprenticeships in four years includes the 50,000 announced earlier in the year, while the Conservatives promised 100,000 at the election. Business groups are among those concerned this welcome move is not enough to counter the impact of public sector job losses.

14. Higher earning graduates to pay more
- The detail to be announced; it will also involve most graduates paying more than at present, and the proposal to have no fee cap at all is likely to be challenged both within and outside the Coalition on "fairness" grounds.

15. Controlled immigration
- Contentious. The means of implementing a temporary cap (ahead of a longer-term arrangement) have been criticised by the Business Secretary and the CBI for being clumsy and potentially economically damaging.

16.Freezing council tax and licence fee
- The Council Tax freeze is voluntary but incentivised. This may seem a slightly strange policy for a government committed to localism. Council budgets are being cut very heavily. These moves may help household budgets, though there are several other areas (increased bus and rail costs; increased childcare costs) which will increase household costs.

17. Big society bank: new funding for innovative community groups.
- The proposal to use dormant bank accounts builds on the policy if the last government. Whether and how far this involves real new money remains to be seen. Funding for community groups is be cut very sharply overall. ACEVO predicts the £470m of new funding will be dwarfed by up to £4.7 billion in lost income.

19. World leader in global poverty
- Yes, the government should be congratulated here. The commitment to excepting the 0.7% aid target from austerity cuts shows just how much the Labour governments from 1997-2010 transformed the cross-party political debate on development aid. It would be too soon to say that the political or public argument has been won. Tim Montgomerie's readers hate this policy.

20. Better aid targetting
- The detail remains to be seen. Development charities are concerned that too great a shift towards post-conflict nations may see DFID lose its core global poverty focus.


Of course, what the right too easily forgets is that the distributional fairness test is not (only) a preoccupation of leftist pointy-heads.

The main reason it has such headline prominence is that this is the central "progressive austerity" promise made by Cameron, Clegg and Osborne themselves.

The regressive graphs had less impact the day after the Thatcher-Lawson 1988 budget - because that government had been quite open about its "let our people grow tall" promotion of inequality, publicly rejecting the idea that any real poverty still existed in Britain.


fondant said...

Re No. 4 - Given that many local authorities (esp Tory ones) are still refusing to pay that £250 to their lowest paid workers, I wouldn't recommend Nick Clegg crows about it too much.

Robert said...

Then why did Labour not force the Tory council to pay it.

But in the end right now if an election came tomorrow and Labour said vote for us, sorry I could not.

The fact is Newer labour has nothing to offer except sound bite.

I always remember the immortal words of all governments when they come to power, we will stick with the previous spending plans, and I suspect if labour win the next election hardly anything will change.