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.