Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday 27 October 2015

The accidental tax credit cuts?

This is a sort of companion piece to my earlier post about the centre-left in UK politics

I complain a lot about the UK media and its coverage of economic issues, so I should in fairness note the occasions when it does its job well. Here is Newsnight last night - look around 18 minutes in. The House of Lords have just voted to delay Osborne’s cuts to tax credits. We have a discussion chaired by Evan Davis between the Labour peer who helped achieve that vote, and two Conservative politicians: Jacob Rees-Mogg from the right of the party and Tim Montgomerie from the left.

The first good point is when Rees-Mogg trots out the standard government line that although these cuts to tax credits will hurt the working poor (a lot), taken as a package with the increase in the minimum wage and changes to tax thresholds they will not. Everyone, including Evan Davis (who once worked at the IFS), turns on him to tell him he is wrong. That is good journalism: when a government tells lies they should be called out. Rees-Mogg’s response about being naive in trusting his Chancellor is a delight.

In contrast Montgomerie acknowledges what the cuts do and how contrary they are to the government’s rhetoric about helping people into work and reducing poverty. The second, and even better point, is when at the end Davis asks Montgomerie where on earth he thought the pre-election welfare savings the Conservatives proposed were going to come from if it was not cuts to tax credits. It was an excellent question, and the response was I suspect quite honest (as Montgomerie tends to be). The Conservatives never expected to win the election. Instead their manifesto was an initial bargaining position, and things like cuts in tax credits were expected to be traded away in coalition negotiations.

This tells you how weak the centre-right is within the Conservative party right now. If the Chancellor and the majority of Conservative MPs thought the same way as Montgomerie, then their response to their election victory would not be to carry out the elements in the manifesto they expected to bargain away. It would be so easy for the Chancellor after the election to find some pretext not to cut tax credits. Instead Osborne went ahead, hoping that his control of so much of the media (and what the Treasury publishes) would mean that he could get away with the gulf between what he claims and what he actually does.

The weakness of the centre-right in UK politics has been masked for a long time by Cameron’s pre-2010 spin, a few progressive social policies and the restraining hand of the Liberal Democrats within the coalition. As I wrote in that earlier post, I strongly suspect a strong political centre (left or right) is vital for good governance, and that both the UK and Europe is suffering from its absence.The big question people like Montgomerie have to address is why, over the next five years, they will not suffer the same fate as the centre-right within the Republican party in the US.


    Peston on tax credit cuts. Media macro.

  2. Montgomerie's comment re the unexpectedness of the Tory election victory, and the ensuing baggage of over-egged austerity manifesto pledges, was a real eye-opener.

  3. Tim Montgomerie is not a Tory MP I think, although his role in the Commons has been taken by David Davis - who was still going on about appeasing the markets by reducing the deficit by 2020 by the way.

    Davis too said that the Troy manifesto was an initial bargaining position and they did not expect to win the election.

    I did though enjoy the constitutional crisis predicted by Fleece-Smog and his reference to 1678, in which no crowds assembled outside Parliament this morning despite Nigel Lawson joining the Bishops in their worship of craven images, the Sun roundly attacking Osborne on its front page while the Daily Mail went in for the rhetoric of silence. Just like 1830-2 or 1909-11 really.

  4. One big difference between Conservatives and the US Republican Party is that the direction of policy in the former is "top down" (Cameron/Osborne have a lot of political capital after their election win) while in the latter it is bottom up (the Republican base has clearly dragged their party further away from the centre than most Republican lawmakers would have liked).

    By this measure, it's the UK Labour Party which is most similar to the Republicans, with talk of deselecting MPs who are too far away from the party base.

    If this is right, it's hard to imagine that centrist Tories have much to worry about. I'd much rather be in the position of Heidi Allen than John Woodcock, for example.

  5. More astonishing is that the conservatives' pre-election welfare savings proposals - the well publicised £12bn of cuts and the associated extremely likely huge cuts to tax credits - did not put off millions of people who would in fact be negatively impacted from voting the conservatives into power with a majority. Like turkeys voting for Christmas.

  6. I don't think the Tea Party/Corbyn parallels will stretch very far; the "talk of deselecting MPs" seems to exist mainly in the form of "talk of deselecting MPs is unhelpful, say Labour sources". On the other hand, while I wouldn't deny that there is a bottom-up element to the Tea Party, big Republican donors - who would previously have backed more conventional right-wingers - have played a large and opportunistic part in organising it.

  7. Perhaps Neofeudalism is even better than neoliberalism?
    For the very few.

  8. The Spectator pours very cold water over Osborne too:

  9. I have it on good authority that a significant percentage of party members who reside the centre-right of the Conservative have not renewed their membership fee. Is David Cameron still refusing to release membership totals for the last few years?
    It does appear that the Chancellor has got himself shackled to the wrong policy. Boris must be overjoyed.

    1. The last membership figure I could find was for a year ago at just under 150,000:


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