In yesterday's Daily Post, our MP Albert Owen was given a bully pulpit to pen his verdict of the first hundred days of the new coalition government. As we are in the dog days of August and there doesn't seem to be much else happening, here is my review of Albert's review:
"The decision to increase VAT is deeply unfair and unjustifiable. Even the Lib Dems said as much during the election campaign. They were right to call it a regressive tax, because unlike Labour's tax proposals it disadvantages people at the bottom of the pay scale most."
I think it is pretty much accepted that the deficit needs to be cut, therefore the issue is how to fund that cut. It is possible to argue both ways whether a 2.5% rise in VAT is "fair" or not - however we should note that certain 'essential' purchases are 'zero-rated' for VAT and therefore are not affected. Those items include food (not from restaurants though), young children's clothing and footwear, public transport, books and newspapers and so on. Accordingly raising VAT will not effect the price of those essential items – however what Albert Owen fails to mention in damning the 2.5% VAT rise is that ALL products and services are affected by inflation which is currently running at 3.1%. Why is inflation so high? Because the previous Labour government ran up the biggest deficit in Britain's peacetime history and then resorted to printing money (or "quantitative easing") in order to fund its operations. What happens when huge amounts of extra money is pushed out into the economy? Prices rise to reflect the reduced value of money, i.e. inflation. If Albert Owen is so keen to protect "people at the bottom of the pay scale" then perhaps he might have condemned at the time his own Government's annually growing deficit and policy of quantitative easing which inevitably leads to run away inflation, and, unlike VAT, affects those on lower pay without exemption.
"Just yesterday, it was revealed that the NHS in Wales will be given a £20m VAT bill as a result of the Tory and Liberal tax hike. That is money that could have been used for vital equipment and more trained nurses."
There has been a lot of scaremongering regarding this figure in the last few days so firstly lets put that £20m VAT bill into context. The total Welsh Health and Social Services budget is £6bn. Therefore this £20m rise represents a minuscule 0.3% of the total budget (£20m/£6bn). Personally the question I would ask is why is the NHS paying VAT anyway? If this extra £20m VAT bill for a 2.5% VAT rise rankles Labour so much, surely by extension the NHS has been paying an extra £140m ((17.5%/2.5%)*£20m) a year in VAT all the time that VAT has been set at 17.5%. If Ann Jones AM and Albert Owen are so concerned, why didn't Labour exempt the NHS from paying VAT during its 13 years in power?
"People say ideology does not play a strong role in politics any more, but when you look at the decisions being made by David Cameron and the equally fiscally conservative Nick Clegg, those decisions are based on deeply held but outdated, bankrupt beliefs"
Firstly considering the current size of the deficit, "bankrupt" is probably a word best avoided by members of the Labour Party if they wish to avoid ridicule. Secondly, which "outdated, bankrupt beliefs" is Albert referring to? Is it an "outdated" concept to suggest that the Government should live within its means and not burden current and, more importantly, future generations with huge debt? As Paul Myners, Labour's former City Minister said recently, "there is nothing progressive about a Government who consistently spend more than they can raise in taxation, and certainly nothing progressive that endows generations to come with the liabilities incurred by the current generation".
"Independent economic experts have already said that the Government's budget will reduce anticipated growth in the economy. That is bad for business, bad for jobs, bad for our communities"
As already discussed, in order to avoid saddling our children and our children's children with our debt, we have to act to reduce it now. That means bearing some pain in the short term in order to improve the country's finances and prospects of future growth in the long term.
"But the macho political desire of this Government to slash public spending outweighs those considerations".
Macho? Its worth noting that even with the spending revisions proposed the Coalition, it
will not pay down a single penny of national debt by 2015 - the date of the next election. Furthermore, believe it or not, in cash terms, government spending will actually continue to rise over the next 5 years from £600 billion to £700 billion. So during the length of this parliament, the only thing being cut is the deficit, i.e. the rate by which the national debt rises each year - not the actual debt itself.
"...the June budget is estimated to put an extra 150,000 people out of work - people the experts say would still have a job under Labour"
Albert is talking here mainly about public sector workers. Although any job losses are unfortunate and regrettable, this country needs to move to a more sustainable economy. State jobs which, due to the massive deficit, are purely supported by by taxation on your children and your children's children are not sustainable. As even Peter Mandelson said earlier this year: "First and foremost we need to foster a new climate for enterprise in Britain. There is no substitute for this – no substitute for the drive and ambition that it brings … it is the single most important engine of economic progress. The recovery cannot be driven by consumer debt or public spending. It will be driven by private sector investment and private enterprise". Of course Albert Owen was part of Gordon Brown's cabal therefore probably uninterested in the utterings of Mandelson.
"The Future Jobs Fund helped thousands of young people in Wales find real work and under Labour it would have helped thousands more - it was one of the first things the Tories and Lib Dems axed"
I have said everything I have to say about the 'Future Jobs Fund'
here.
"I take no pleasure in forecasting difficulties for our communities, but the coalition is taking the wrong course of action"
As opposed, I suppose, to the right course of action taken by Labour over the last 13 years... [here, unlike the unselfaware Albert, I am employing irony]
