50 mistakes in 100 days (46-50)

By Howard Dawber

Over 100 days ago, Britain woke up to a new coalition government. In that time they have already displayed extraordinary economic illiteracy and are beginning to champion a dangerous mix of cruelty and cheerful incompetence, perhaps already worse than any government in living memory.

Here are the final five of the top 50 things they have done wrong … so far…

46. CUTTING EXTENSION OF FREE SCHOOL MEALS
The coalition is planning to stop the proposed roll-out of free school meals to the children of low-aid families. The decision will cost families earning less than £307 a week about £600 a year, equivalent to a penny rise in their income tax for each child.

Why is it a bad idea? Children from low-paid families are, statistically, more likely to get ill, more likely to be obese, and more likely to have an unhealthy diet at home. Making sure they get one balanced, nutricious hot meal each day is a good idea. The Child Poverty Action Group said that it was “stunned” by the ConDems’ move, which would have lifted 50,000 children out of poverty at a stroke.

47. CUTTING WINTER FUEL ALLOWANCES
On August 18th, as the 100th day of the coalition dawned, we learned that the Winter Fuel Allowance for pensioners might be cut, reduced or means-tested. A government website is already advising that women will now only receive this benefit after the age of 65 (instead of 60 as at present), and this may rise to 66 in line with the increased pension age. Iain Duncan Smith is apparently advocating cuts to benefits which go to the middle-classes like the winter fuel allowance and child benefit, to help pay for other benefits he wants to bring in. This is exactly the opposite of what David Cameron promised during the general election debates when he categorically stated, in response to a question from Gordon Brown, that the winter fuel allowance, free bus passes, and free prescription charges would stay. We now know at least two of these benefits will be cut – we have to wait and see if he goes ahead and cuts prescription charges, too. In the coalition document itself it says that the coalition will “protect” the Winter Fuel Allowance. Whatever that means.

Why is it a bad idea? The winter fuel allowance was brought in to save lives and stop older people suffering from fuel poverty over winter. Starting at £100 in 1998, it rose to £250 by last year and £400 for older pensioners. Being a universal benefit, the costs of administering the payment were very low, and this ensured that everyone who needed it, received it. This change may directly cost lives or contribute to ill health as pensioners who should get help with their fuel bills over the winter will go without, like they used to.

Osborne’s other problem is that even cutting £600m from Winter Fuel Allowance compared to Gordon Brown’s payments last year would not impact the deficit at all. The £2.7bn paid out last year included a £50 “bonus” for most pensioners and a £100 “bonus” for those over 80. So the figure in the budget for this year is only £2.1bn. To make any impact on the deficit, Osborne would have to cut the level further and / or means test the benefit. Means-testing the benefit will cost a lot of money – possibly even more than £200 per applicant meaning that there will be no real cost benefit in making this change.

48. PHILLIP GREEN TO ADVISE ON CUTS
Philip Green, the owner of TOPSHOP and BHS, has been asked by George Osborne to advise the goverment on cuts to government expenditure. However Green is avoiding paying tax on all his income by putting key business interests in his wife’s name. She “lives” in Monaco. According to several newspapers, this arrangement is thought to have saved them tens of millions of pounds in tax.

Why is it a bad idea? Bringing in outside experts to help with policy ideas is not a bad idea. But in a government and Conservative Party packed with millionaires, some of whom (Lord Ashcroft for example) have a dubious record of schemes to avoid paying their fair share in tax, another offshore-tax-avoiding millionaire like Green seems a bit over the top. There is something fundamentally wrong about bringing in someone who doesn’t ever have to worry about money to help decide which cuts are going to be made affecting those on the lowest incomes for whom every pound is vital. And Vince Cable apparently agrees with me.

49. THE WHOLE JUSTIFICATION OF THE DEFICIT REDUCTION PACKAGE
The ConDems have based their whole economic policy on the idea that the economy is tanking, that there is no spare money in government, but that growth is strong enough to cope with a massive reduction in public spending. In their analysis Britain’s deficit and debt puts us on a par with Greece and if we don’t take drastic action the whole economy will collapse. Labour’s plan to halve the deficit in 4 years, generally regarded as ambitious but workable by economists, is too slow. They want to halve it in two years.

Why is it a bad idea? The ConDems have their facts wrong, and on top of that have the wrong strategy as well. Despite being faced with the worst world-wide recession in decades, Labour took brave decisions to support the banks, stimulate the economy and keep spending under control. As a result, unemployment when Labour left office in 2010 was lower than when Labour came to power in 1997. Interest rates remain the lowest they have been for decades. Having got the economy out of recession at the end of last year, growth is now higher than expected – the economy grew by 1.1% from April – June. Unemployment fell in the last quarter and is lower in the UK than the EU average. Our banks have been stable and secure.

And what about our terrible, terrible debt – the reason the Tories keep talking about the “unavoidable” cuts? UK debt as a percentage of GDP reached 68.7% earlier this year and is still rising. That’s not great. But it is comfortably lower than the other G7 countries like Germany, the United States, France, Canada, Italy or Japan. Last time the Tories were in power they put up our debt from 34% of GDP to 51% to help get through the recession of the 1990s. This time they are doing the exact opposite to what most countries around the world agree is the right way to get back into sustainable growth. For a comparison with our major international competitors see this graph. The “savage” cuts programme is not just wrong because it is not based on a real understanding of the economic position of the country, it is wrong because it may reverse the positive trend of growth.

The Bank of England says that the ConDem plans will lead to a slower recovery and higher inflation than previously expected with Labour’s plans.

Finally we taxpayers are already £5bn in profit on the government’s investment in Lloyds and Royal Bank of Scotland. Within a year of the end of the recession Gordon Brown and Alistair Darling’s decision to step in with funding has been proved not just right but very profitable too. The Tories, incidentally, want to sell these shares off at a loss to benefit their friends in the stockbroking and hedge fund industry.

50. THE COALITION – A BAD IDEA FOR THE LIB DEMS AND THE COUNTRY
Finally, the worst decision of all. The decision by the Liberal Democrats to go into coalition with the Conservatives in the first place. Speaking on Newsnight on 18 August, Peter Hyman was right. A minority Conservative government, or one with a small majority, would have pulled to the centre, and been more cautious in its cuts, worried about Labour and the Lib Dems combining to bring it down. The inclusion of the Lib Dems (and even some Labour advisers) in the coalition allows the Tories to be more radical and to dare to make cuts that they would have thought impossible before the election. With the Lib Dems locked in, the Tories have been able to cast off their centre-right manifesto and instead unleash the full force of the neo-Thatcherite cuts programme.

Clegg and perhaps most unfortunately of all Danny Alexander – who are both decent, honourable people – are being used as the smokescreen behind which the Conservative Party can cut away savagely. When cuts are being announced it is Alexander who is asked to go in front of the media or to the dispatch box to face the questions. Originally David Laws was the fall guy for the first £6bn cuts package. While Dave jets off around the world, Clegg is forced to defend massive cuts to benefits and services, fighting off criticism from his own party as well as Labour and the media. The very presentation of the coalition – “in the national interest”, the rose garden photocall at Number 10, the mood music, has been used to hide the fact that we have, in the words of the economist, the west’s most radical government.

The Lib Dems are the crash-test dummies in a very dangerous and untested experimental vehicle – a government which ignores most advice and is trying the economic equivalent of fixing a car’s dented wing panel by crashing the whole car into a wall. It might work – conceivably – but the odds are it will break both the car and the wall.

While the majority of the public, and some media outlets, have so far swallowed the line that this is all Labour’s fault – and that Labour would have had to make exactly the same cuts, this is wearing very thin. A new Labour leader will have to nail this lie very quickly. But they won’t have to do much to tell people about the services they are losing – that will become very clear from the end of this year as things start to disappear and people feel the difference in their pockets. The party conference season – especially the Lib Dem conference – followed by the spending review a few weeks later, will mark the end of the coalition’s honeymoon. It might mark the beginning of the end of the Lib Dems, too.

Why is this a bad idea? The Lib Dems have paid a high price for their seats in government. Instead of being a critical friend and balancing factor to a progressive Labour Party in a red-yellow coalition, they have become the patsies of a rampant and dogmatic Tory Party in a yellow-blue coalition. They are already paying the price in the polls. After the first general election debate, Lib Dem support briefly rose to 34% in some polls. In the election they gained an impressive 23% of the actual vote. But by August their vote share was down to 12% in two polls, and as low as 8% in a less scientific Sky News survey. After all why vote Lib Dem if that just means you end up with a Tory government anyway? And no-one likes a party which is showing signs of serious division. May 2011 and May 2012 will probably see Lib Dems massacred in local elections – if the coalition lasts that long. And the next general election will be a disaster for them unless they can persuade the Tories to enter into an electoral pact in which they will not stand against each other and instead run as the coalition seeking re-election.

What have the Lib Dems actually got out of the coalition apart from their arses on the seats of some ministerial cars? They are not going to get voting reform – the Tories have given them a referendum on a system the Lib Dems do not really want (AV), but most Conservatives will campaign against it. It will almost certainly not get through even with some Labour support. They haven’t got the green policies they wanted. They won’t get the education spending they wanted. They did not get the £10,000 tax exemption they wanted although they did secure a promise to “work towards it”. They aren’t even getting those ministerial cars, either, they have been cut too and the Lib Dem Ministers are being expected to travel by tube and rail. What can any Lib Dem point to in the coalition’s programme and say, “we are proud to say that this policy is something we brought in and it would not have happened without us being in the coalition”? According to Tory peer and campaign adviser Lord Ashcroft, even in Liberal Democrat held seats, only a quarter of voters think the Lib Dems are having a significant impact on the policies of the coalition. (See PDF of report here)

The Tory negotiators played the game well – they were much better prepared than anyone else – and the Lib Dems have been seduced into a position where they will get all the negatives of being in government without any of the positives. The real decisions are being taken not by cabinet, but by smaller cabinet committees. Only Clegg himself and Danny Alexander have any real influence – and they are both only deputies to senior Conservatives. The Star Chamber, the crucial committee of the spending review process, which chooses what programmes will stay and which will be axed, is made up of four of the Tories’ top brains: Oliver Letwin, Francis Maude, William Hague and George Osborne and just one Lib Dem – Danny Alexander. It is difficult to shake off the impression that Alexander sits in that room to pour the coffee and write the minutes.

There always comes a time when a politician has to make a choice – do I want to be in government, but sacrifice some of my principles? Or be in opposition with my principles intact, but powerless? By entering into the coalition, the Lib Dems are about to learn that some governments are so extreme, and their actions so wrong, that principled opposition would have been the better choice.