Darling admits NI hike will cost jobs

Whilst appearing in front of the Treasury Select Committee yesterday, Alastair Darling admitted that the 1p hike in National Insurance will cost jobs, an about face from his previous position on the subject.

His admission came after a Paxmanesque performance from the committee's deputy chairman Micahel Fallon, who asked eight times how many job losses it would cause. Finally a defeated Darling admitted "We think that the impact is manageable"

George Osborne, who announced Conservative Conservative plans to scrap the planned increase for 70% of people responded to the news by saying 

"Alistair Darling admitted his National Insurance tax rise would cost jobs.

"How many? There must be an internal Treasury estimate - so what is it? Either he knows and is not telling us, or he doesn't care."

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Why Labour blocked party funding reform

Previously unpublished documents (previously held back by Jack Straw despite Freedom of Information requests, under the fact that the information contained within them was given in confidence) have shown the real reason why Labour blocked Political party funding reform in October 2007.

The newly published papers reveal the true extent of the union funding of the Labour Party and why it is impossible for it to reform party funding to be more reliant on smaller individual donations rather than large scale individual (Ashcroft, etc) or union funding:

• Many union members would not pay a political levy to the Labour Party if given a choice.
• Some trade unions affiliate more individuals to the Labour Party than they have union members paying a political levy (only money from the political levy can be used for political purposes).
• From 2001 to 2006, the unions gave the Labour Party £45 million in cash.
• Trade unions pay £1 million a year to the Labour Party at a local and regional level, tying in local Labour Party branches through binding “Constituency Development Plans”.

The chair of the meeting Sir Hayden Phillips apparently drew up detailed option papers showing how the political levy could be reformed to give union members real choice, however they were blocked by the Labour party negotiators. One of his options is below.

“The trade union would be able to collect donations from its members, and would be required to pass the donation to the political party of the individual’s choice. Where members decided to donate to the political party the union had affiliated to, these payments would form the collective affiliation fee. The union would therefore be affiliating based on 100% of its members who contributed towards the affiliation fee. The union would continue to collect a political levy from members to fund other political activities. Trade unions would annually ask each member whether they wanted to make a donation and if so, how much and to which political party” 

Shockingly figures revealed by the Labour party at the meeting also showed that in 2001 Union funds represented 81% of all cash donations to the party averaging 66% of all donations between 2001 and 2006.

	Total donations in cash to Labour Party	Donations from trade union (including affiliation fees) to Labour Party	Percentage of cash donations from trade unions
2001	£12 million	£9.7 million	81%
2002	£11.3 million	£6.7 million	59%
2003	£14.7 million	£8 million	54%
2004	£15 million	£10.7 million	71%
2005	£20.6 million	£11.8 million	57%
2006	£11.7 million	£8.5 million	73%

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Yesterday's budget response

Just a couple of quick things from yesterday's budget. See my tweets for more and Nadhim Zahawi's piece on it as well.

I was happy to see that David Cameron, or his speech writers, have been reading my blog and agreeing with my figures and conclusions. Firstly I pointed out just last week that Labour plans to cut the deficit in half over the next government would leave us with  £1.3 trillion pounds of public debt, yesterday Cameron said:

"They told us they would be prudent but the Chancellor has just said they will be borrowing £734 billion over the next six years, giving us to a national debt of £1.3 trillion."

Secondly I pointed out last month that HMT was a department that was not fit for purpose with regards to forecasts and estimates. That piece was about the cost of the war in Afghanistan which was orriginally costed at "100s of millions of pounds" and has actually cost to date £9.3 billion s. Cameron though pointed to econmic growth forecasts, also produced by the Treasuary and used by the Chancellor:

"Look at their record of predicting growth. In 2008 they said we’d grow by two per cent. In fact the economy grew by 0.5 per cent.In 2009 they predicted decline of 3.5 per cent. In fact we shrank by 5 per cent. Now they say that the economy will grow by [3.25] per cent, the independent experts say 2.1%."

I'll pop by CCHQ later to collect my consulting fees.

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Neil Basnett - the "local" candidate?

News reached me late last night that local travel agent Neil Basnett plans to stand as an independent candidate in Stratford at the forthcoming general election.

I attended his public meeting last week along with approximately 40 others , many of which urged him not to stand (hardly giving him a larger local mandate to represent local conservatives than Nadhim Zahawi who was selected by a vote of nearly 200 people). What was interesting was that he refused to be drawn on policy with the exception of his views on Afghanistan (that troops should be brought home immedieately leaving a potential security vacuum in the region) and that he was pro the building of more affordable housing in Stratford.

Many of his issues, and those of his supporters are those dealt with at a local council level, the Bancroft gardens, parking in the town etc. These are obviously important issues to residents of the town (who make up less than a third of the constituency electorate) but what about flooding in Shipston or the state of the economy which affects the whole constituency, not just empty shops in the town. Does Mr Basnett think the deficit should be cut quickly or slowly, does he even know the difference between debt and deficit?

The other worrying thing that came from both him and his supporters was that they felt that a damaging hung parliament was inevitable and would actually be a benificial thing for Stratford if he was our MP. Never mind that interest rates would rise, that the government credit rating would be cut from triple A increasing the cost of borrowing, Neil Basnett's independent vote would be courted by all parties, stroking his ego suitably.

So lets compare the options. On one hand you have Nadhim Zahawi, a strong Conservative who decided to support his country by registering with the Conservative party to become a candidate before a cushy local seat became available. Someone who since being selected has made his home in the centre of the town. A businessman who built a business from 2 men in a shed to a multinational corporation that floated on the stock exchange for over £200 million pounds. He is a Conservative candidate, whose election would help return a Conservative government locally, with strong views on the economy, defence, Europe and immigration.

On the other hand you have Neil Basnett. A man who admits he had no interest in becoming a politician until his local seat became available and he disagreed with who the local party selected as candidate. A local travel agent running one travel agency in one town, for whom Stratford is also an adopted home. A man who has no policy except for Afghanistan hardly a local issue, but that admits that his views on immigration are the same as Nadhim Zahawi and that has publicly stated that Stratford needs to have more houses built. An independent candidate whose election would help to return a hung parliament rather than the new Conservative government this country needs.

Who would you choose?

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Public sector vs consumer debt

There’s an interesting thing about the way public sector debt is reported which  means that the general public can’t understand it.

Generally as well as the headline figure (currently £848.5 billion) it is also reported as a percentage of GDP (currently 59.9%). So it’s reported as a percentage of the entire wealth created by the UK economy. The problem is that people look at that figure and compare it to themselves. They think well I earn X and I owe Y and that’s about 60% of my annual salary so what’s the problem.

The problem is that the annual salary of the government is not GDP, the annual salary of the government is tax revenues, which in the past 12 months have been £463.27 billion (about 32% of GDP). As a percentage of the public sector “salary” borrowing is actually 183% or 1.8 times income.

No problem says the man on the street, when I got a mortgage for my house the bank was willing to lend me three times my salary so the government could borrow 1.3 trillion and there will be no issues. Except that public sector borrowing isn’t the same as a mortgage. It’s unsecured, if you default on your mortgage the bank can swoop in and reposes your house if we default on our debt China can’t swoop in and repossess the Houses of Parliament and government estates.

Public sector debt is like an unsecured loan, or a credit card. If you take an average private sector worker earning £22,152 a year then to be the equivalent of the government they would owe £39,873 in unsecured loans and would be paying in interest alone £157 a month on their debt (the government is currently paying £4.3 billion) and continually putting off repaying the capital.

If it were credit card debt then using standard credit card minimum payments (3%) it would take that member of the public 27 years to pay that off at an interest rate of 12.9%, even at the public debt interest rate of just 5% it would still take them 20 years. If the the government was making the equivalent of a credit card minimum payment of 3% a month (which it isn’t) then it would take 21 years for the debt to drop below a billion pounds and 43 years to drop below a million in total it would take over 50 years to pay it off.

In reality it will take even longer than that. The government has said that it will halve the deficit (the amount of money they are spending above their income every year, not the debt) by 2013 so that’s another 3 years of borrowing at our current levels of £151.27 billion a year followed by who knows how long of adding at least £75.6 billion a year. It will mean that by 2013 the public sector net debt would be £1.3 trillion.

Under Labour plans to halve the deficit, if the government was an average private sector employee it would owe £62,272 in credit card debt (2.8 times their annual income) and under standard credit card interest rates would be paying interest of £669 a month and a minimum payment of £1,868, pretty difficult when before tax their monthly salary is only £1,846.

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The non-local candidate

In november 1995, the Conservative MP for Stratford-on-Avon, Alan Howarth, announced that he was defecting to the Labour party.

The Conservative association quickly moved to select a new candidate to replace him, a short-list of six was selected which included John Maples and Maureen Hicks, the local candidate, who although she had previously been MP for Wolverhampton East was local and had been a district councillor in Straford for 5 years from 1979 to 1984.

On the night of the selection John Maples, an outsider from London (although a party insider and previous MP who had lost his seat in ’92) was selected as the MP and went on to be the consituency MP for the next 13 years.

Fast forward 15 years from then and we see the Conservative Association again selecting a replacement candidate for what has been a safe conservative seat for decades if not nearly a century. John Maples had announced his retirement so close to a general election that by-election rules were in force meaning that a short-list of six candidates would be given to the association to choose from.

At the selection 4 female outsiders and one male outsider, a Londoner who also happened to be an Iraqi Kurd whose family claimed asylum in the UK over 30 years ago, were up for selection. They stood alongside a local candidate,  Phillip Seccombe, a long terms resident of the Constituency, local estate agent and chairman of the Conservative Association, a total shoe-in as far as the residents of Stratford were concerned.

On the night though the association overwhelmingly choose the outsider, Nadhim Zahawi, co-found of international polling organisaiton YouGov and a man who began his opening remarks with the line “With a name like Zahawi I can hardly claim that my ancestors have lived in Stratford for generations”

Both in December of 1995 and February of 2010 the Association choose the outsider, the candidate that had no local links but that they felt would be best placed to represent them.

How did the residents of the consituency, the strongly Conservative voting population of Stratford take this?

In 2010 the Stratford Herald’s letter pages have been full of correspondents bemoaning the fact that Nadhim Zahawi is not a local candidate, in the 4 weeks since his selection the letters page has contained little but letters about him, mainly suggesting that his non-local status excludes him from representing the electorate. In total there have been 13 letters questioning his suitability as MP as well as the promise that a local “independent conservative” will run against him given enough support.

A bit of time spent sat at Stratford Library’s microfiche machine looking through back issues of the Herald shows that the situation was very different in 1995. Following John Maples selection there were just 2 letters questioning his suitability due to his non-local status, other letters were either in support of him or on a different subject altogether.

So what has changed so much in Stratford in the last 13 years that to be non-local is such a crime. John Maples, despite his role as Deputy Oarty Chairman, has been seen as an excellent constituency MP so it can’t be that residents feel they have been burned by their past choices.

Is it instead that Stratford’s issues are so unique and complicated that an outsider will never be able to understand them, perhaps but it's issues of transport, planning issues despite housing shortages, and empty shops are hardly unique.

Or has non-local become a code-word for something else? Has Nadhim Zahawi’s selection revealed a darker underbelly to the pretty market town of Shakespeare’s birth?

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Guest Post - Unemployment figures and clients of the state

Today’s headline unemployment figures show that on the face of things at least, the country is getting back on track, however when you look at the details a different picture emerges.

The headline figures show that the employment rate has risen by 0.3% so there are now 28.86 million people in employment, whilst unemployment fell by 0.1% to 2.5 million people, 1.59 million of which are claiming jobseekers allowance.

What is more interesting though is the detail, the bit that is never reported and specifically the bit that tells us about this government’s approach to resolving unemployment and creating jobs. That is the split between employment in the public and private sector.

If you delve into the figures you can see that the number of people employed in the public sector in the last year was up by 7,000 workers to 6.1 million, whilst the number of people employed in the private sector fell by 61,000 to 22.76 million. This means that a little more than one fifth (21%) of all employed people in this country are employees of the state, bringing in no tax revenues for the government and supported in their entirety by the tax revenues of private sector jobs.

And oh how they are supported. The ONS figures show that the average private sector employee earns £22,152 per year whilst the average public sector employee earns £23,972 a difference of £1,820 a year, a figure that excludes their gold plated pension scheme and other benefits.

What about pay rises then? Well, whilst the private sector has spent the recession battening down the hatches and freezing pay over the last year the same cannot be said about the public sector where average pay is actually up by an inflation beating 3.8%

Stop and think for a minute. Those workers represent a public sector salary bill alone of £146.3 billion pounds, if only 10% of those jobs were in the private sector instead that would be at least an extra £4.7 billion pounds of income tax and National Insurance every year and would save the exchequer at least £14.6 billion a year in salary costs. That’s £19.3 billion gone from our record 101.3 billion pound deficit in a stroke, but instead of trying to create private sector jobs over the past decade, Labour and Gordon Brown, have instead focused on creating jobs in the public sector.

Since 1997 the number of public sector jobs has actually risen by 11% a record figure. Why? Because Labour, and specifically Gordon Brown, wants to make everyone a client of the state. Whilst at University, Gordon Brown wrote an article that pointed out that if the Labour party could make a majority of the population clients of the state, that is either dependent on the state for employment, or dependent on it for benefits, then they could remain perpetually in power.

For the last 12 years, both whilst he was Chancellor of the Exchequer, and now as Prime Minister, he has been doing everything in his power to deliver on that vision for Britain, but it won’t work. Why? because the Conservative Party don’t want to see our great country reduced to that, so we will fight against it, becuase private business refuses to see the world that way, acting to subvert it, creating jobs and growing not because of, but despite, red tape and bureaucracy, and most importantly voters can see it for the scam it is and will vote against it come election day.

Nadhim Zahawi is the Conservative Prospective Parliamentary candidate for Stratford-on-Avon for more details see his website at www.zahawi.com

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Immigration, are you thinking what I’m thinking

In recent week’s the Conservative Party have begun swinging further and further right, refining and strengthening their anti immigration messages. It began with a change in language for our pledge to cut immigration from “We will cut net immigration by 75%” to “We would cut net immigration from the current threshold of hundreds of thousands a year to tens of thousands”.

This was an important step towards introducing a cap, in theory that language provides a nominal cap of 99,999 immigrants per year. In reality it gives space for it to be even below that.

Then last night came the news that the Shadow Home Secretary, Chris Grayling, thinks that it should be a priority that everyone coming into the country can speak English. Speaking in response to Home Office figures that showed an expenditure in the past 6 years of £68 million on translation services he said:

“This all really has to change. It’s important that people who come to the UK should be able to speak English so that they can play a proper part in our life and culture. Of course there will be times when we give sanctuary to refugees who can’t speak English but it really should be a priority that everyone coming into the country can speak English.”

This is probably some of the strongest language yet on immigration from a senior member of the party, and seems to show, if not a shift in behind the scenes policy, a move to bring it to the forefront.

Before I go on, I should hang out my colours and say that just as I’m not a staunch eurosceptic, neither am I totally against immigration. Like Byrne Tofferings I believe immigration has an important economic benefit to the country, plus much of the immigration that most people have rallied against in recent years is from Europe, upon which we really have little control.

Public perception of immigration though is a very different thing. Poll after poll shows that after the state of the economy, and regardless of party affiliations, immigration is their biggest issue, however to date the Conservative party have been afraid to go near it.

In 2005, immigration was front and centre of what was effectively a failed campaign. The slogan “Are you thinking what we’re thinking” was supposed to apply to all of the manifesto issues but was so closely linked to immigration that it was easily jumped on as racist and even more easily attacked by the left. Was it actually meant to appeal to the UKIP and BNP voter? I doubt it, I suspect it was one of those seemed like a good idea at the time things which when plastered across billboards all over the country suddenly looked very different.

So, will shining a light on the immigration debate move the polls apart again after their seemingly inexplicable and unstoppable coming together? Maybe. Immigration is certainly an issue that mobilises the base, one of the things that won the Stratford Conservative Association over to Nadhim Zahawi was that despite being an immigrant and refugee himself, he has a very strong position on immigration (a position that includes the need for a cap and that all immigrants should speak English, so recent announcements now bring him in line with the party position).

Does it move a floating voter though? Who really knows, the polls would say yes, but then the polls say a lot of things. I titled this piece “are you thinking what I’m thinking?”, maybe though it should have been “are you thinking what they’re thinking?” The answer to that would be no. In this election we’re seeing a far greater divergence of positions and issues than ever before, campaigns are being fought on local issues in local areas, immigration will hit the button of voters in some areas, but in others it will be the economy, defence policy, schools, or healthcare.

So far the Conservative Party have been pilloried for not having a simple and clear set of three or four policies that relate what they stand for on a national level. What they have instead is a toolbox of ideas, policies and positions that local candidates can choose from to develop their own campaign on their own local issues. It’s a uniquely Conservative approach, the message isn’t being developed or pushed from the centre but devolved to the local level, where the local candidate knows best what is needed, not some faceless central office staff member.

Unlike in 2005, the party knows that you’re not thinking what they’re thinking, it’s understanding it’s own base principles and recognising that it’s their local candidates that are thinking what the voters are thinking, not them.

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HMT - Is it fit for purpose?

So it's been revealed through a Freedom of Information request (which David Cameron raised at PMQs) that the Treasury costed the entire additional cost of the Afghanistan war as being in the hundreds of millions of pounds or even much lower. In their own words in September 2001:

"Of course the cost could be much lower. But unless a disastrous beginning forces the US to back down, UK engagement is likely to be significant. It could well be in the £100's of millions

Lets see what has actually been spent:

2001 - 02:  £221 million
2003 - 07:  £2.91 billion
2008 - 09:  £2.5 billion
2009 - 10:  £3.75 billion (estimate)
Total:        £9.377 billion

So they were only off by an order of power, the total cost to date has been in the billions of pounds not hundreds of millions.

The FOI itself (see below) doesn't state who authored the documents that estimated the original and hence budgeted cost of the war, I would though imagine that it was civil servants not political appointees.

The question is that if HMT can get an estimate like this so terribly wrong then what else can it get wrong. Are it's economic forecasts to be trusted, what about it's estimates of the cost of new policies. Expected increases in tax revenue from the 50% tax bracket. I would argue that if HMT gets something like this totally wrong then it is not fit for purpose and needs some radical root and branch reform.

Osborne will not only have to face an economy in ruin if the Conservatives get in, but potentially a department as well.

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Ashcroft or Cashcroft?

I've deliberately steered clear of the whole Lord Ashcroft row, because honestly I don't think the general public care (queue thousands of comments saying I'm wrong). However I think everyone, on both sides of the House has felt a little uncomfortable about Mandelson being the lead attack dog on what he has been calling an issue of integrity and honesty.

Also all parties take money from non-doms and "tax avoiders" it's a matter of life, rich people try to pay the least tax, it's why higher tax rates on the rich don't deliver substantially more money, they'll find ways to avoid it.

I did smile though at this ITV News transcript from yesterday:

TB; ‘You talk about transparency, well we have been asking the Labour Party for some days whether your donors, like Ronnie Cohen, are non-doms or not. We haven’t got an answer, so perhaps you’d like to give us one sitting here.’

Lord M; ‘The Labour Party should give the information about its donors in the way that–’

TB; ‘It hasn’t.’

Lord M; ‘In the way that it is required to do and in response to legitimate questions.’

TB; ‘Let me ask you; is that a legitimate question? Be fair. Is it legitimate for us, given all this, to ask whether your donors are paying full tax on their worldwide income?’

Lord M; ‘I think it is perfectly legitimate.’

TB; ‘What’s the answer?’

Lord M; ‘How do I know what the answer is?’

And later:

TB; ‘Are you saying that all labour party donors should be full tax payers; ie, paying tax on their worldwide income in this country? And if they aren’t, should the Labour Party pay the money back?’

Lord M; ‘What I’m saying is that Labour Party donors should be clear and upfront about what they are donating, what their domicile or tax status is, or whatever, just as donors who give money to the Conservative Party should be.’

It seems that ITV News have  since asked the Labour Party to confirm which of their donors are non-doms and have once again received no answer.

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An EU direct tax, on petrol?

Firstly I should preface this article with a quick admission. I am not a raving Tory eurosceptic, there I said it, you can all hate me now. I support the idea of a European Union, specifically the ideas of free trade, and free movement of workers across borders. What I don’t support is the encroachment of it on sovereignty, the creation of a giant super state, oh and green taxes that are designed to raise revenue.

The telegraph is reporting that the EU, currently short of cash and unable to find member states willing to provide more, is planning to introduce a  EU wide “green levy” on all usage of fuels, that is usage of petrol, coal and natural gas. The funds raised by this levy will go straight to EU coffers not to member state governments.

Why? Well it turns out that all of those new institutions introduced by the Lisbon Treaty, the High Commissioner for Europe, the EU President etc cost a lot of money to run and no one thought about where that money might come from before everyone signed on the dotted line. Recently Hervé Jouanjean, Director General of the European Commission's Budget department, said that the EU was “very close to paralysis” because stretched national treasuries were unwilling to provide more funding.

In 2005, the EU proposed a direct rate of taxation of £9 per tonne of CO2 produced, which was shelved at the time as politically unpalatable. Too right, it would have, and still would, cost British Business and consumers £3.2 billion a year. This at a time when FTSE 100 companies are saying that they are paying 57% of their gross profits in taxation already, and the British consumer has seen tax on petrol rise by  nearly 11.5% since November last year (just over 3 months ago). In comparison the Austrian consumer has seen tax on petrol rise by only 2.25% in the same time.

No sane British government would ever allow the EU to collect direct taxation from it’s citizens. Except that we signed the Lisbon treaty, which has meant we’ve lost all kinds of vetoes and given the EU all kinds of powers that the public don’t really understand and I sometimes wonder if even the government does.

Ahhh but it’s for climate change will say the EU president, Gordon Brown the French and the Swedes. No it’s not, we should reply in unison. If the revenue being raised is going towards anything other than dealing with the effects of climate change then a so called “green tax” is nothing of the sort, it’s just a way of raising revenue. Why? Well think what will happen if it successfully changes behaviour. If this tax on the CO2 emissions of fuels makes people use less fuels then it will raise less revenues, and Baroness Ashton and Herman Van Rompuy won’t have any money to pay for their buildings, staff, expenses and everything else.

So in summary, a direct EU tax on fuels is a crazy idea because:

1. The EU should have worked out how it was going to fund it’s new shiny things before it proposed them;
2. The British tax payer, is already over taxed;
3. Green taxes shouldn’t be used to raise revenue;

Oh and 4) A flat rate levy isn’t progressive!

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