Sunday, 30 May 2010

A week is a long time in politics....

A cliche often over used but for poor David Laws this really is appropriate. He was lauded by all following his performance in the Commons in the week, passionately and eloquently defending his £6.2bn spending cut plans. Even senior Labour figures were publicly impressed, and some believed he was beginning to outshine his boss, George Osborne.
However after just 17 days in his role of Chief Secretary to the Treasury, David Laws was yesterday forced to resign from his post after it was revealed, once again by The Daily Telegraph, that he had claimed over £40000 in second home expenses whilst cohabiting with his long term partner. It's a sad state of affairs, particularly as it does genuinely appear that Laws was trying to protect his privacy and that of his lobbyist partner, James Lundie. Perhaps though Law, a millionaire by the time he was 28 after a glittering career in the City at JP Morgan and Barclays, could have taken a hit from his own pocket rather than putting through the claim if he were so keen to keep his sexuality in the closet?
No doubt a blow to Clegg and Cameron as the first 'old politics' scandal strike the very heart of a rising star of the 'new politics'. Both have focussed heavily on the need to clean up Westminster and therefore could not afford to back Laws, especially as Cameron has so publicly disciplined his own MP's accused of similar crimes during the last parliament. Both men did express their desire to see Laws return to the cabinet, perhaps when the dust settles; in the meantime he will be replaced by the current Scottish Secretary Danny Alexander, who worked alongside Laws and senior Conservatives during the coalition talks in May.

The above news closes a busy end to May for our new government which several big announcements including the publication of the full Coalition Agreement, the report on the first wave of spending cuts and the Queens Speech on Tuesday. Cameron then made his first key speech as PM in West Yorkshire, focussing on ending the benefit culture and rebuilding the manufacturing sector.

Key points to come out of the coalition agreement include the following:

  • Parliamentary reform which will be lead by Nick Clegg. This will include a referendum on the Alternative Voting system, to be held in this parliament. Other elements will include the reform of the House of Lords, fixed parliamentary terms and the controversial move to change rules relating to the dissolution of parliament. Clegg compared the proposals to those of the 1832 Reform Act and vowed to act swiftly. However the announcement of the new peerages at the end of the week smacked of old politics with several Tory donors entering the house including Simon Wolfson, Chief Executive of Next, who is was a key signatory of the 'anti jobs tax' letter that played such a large part in the election campaign. Dolar Popat, who has donated c £200k to the Tories was also given a peerage. On the Labour benches John Prescott and Angela Smith were amongst the names entering the Lords, along with a number of Gordon Browns personal advisors.
  • Big changes were announced in Education this week also, with all schools now given the opportunity to apply for academy status. This is a change from the previous governments policy which only allowed failing schools to apply in an attempt to inject private money and improve performance. Initial fears are of a two tier system of education where struggling schools are left to implode and 'outstanding' schools turn into academies and increase their resources. The news has met with a mixed reaction within the education sector. Meanwhile it was also announced that any spending promises made since January 2010 by the Labour government will now be reviewed, threatening several school building projects across the country. The Institute for Fiscal Studies confirmed at the end of the week that it would be impossible to continue with the current school building projects and go ahead with the proposals relating to academies. It is starting to become apparent that education is going to be a key department for change in the early months of the coalition. 
  • The changes relating to Health were largely expected with the announcement of changes to the way the senior positions in the NHS are appointed. There is to be an elected board of executives, although we await more detail of how this will work. There will be a reduction in administration costs within the NHS of 33% according to the agreement. The Tory proposal to rename the department the Department of Public Health seems to have been quashed. Some disappointing news though, the Tory pledge to build a new hospital in the North East to replace aging facilities in Stockton and Hartlepool has been scrapped. The £464m project, called Wynyard Park was backed by the Health Secretary, Andrew Lansley prior to the election.
  • Royal Mail is backing the news after the coalition detailed its plans for the troublesome service. It announced that it plans to sell off Royal Mail, whilst retaining Post Office Ltd under government control. The policy, which was scrapped by Labour earlier this year will be controversial given the strength of the unionised workforce, market changes and the difficulty in finding a buyer for the business. Peter Mandelson was forced to scrap his own policy; blaming the lack of interest from the private sector. The coalition proposal has not ruled out the possibility of employee ownership.
  • European policy was largely as expected with a pledge that no further powers will be devolved to Europe during the lifetime of this parliament. a stark reminder to Nick Clegg, the most EU friendly of all senior political figures that he is dealing with a Conservative Party that still views Europe with enormous suspicion. 
  • Increase in Capital Gains Tax, this is a policy where we are awaiting more detail and already has caused ripples of discontent. CGT currently stands at 18%, much lower than the normal rates of income tax and therefore creating a convenient tax loophole that is exploited by many. The government is under pressure to ensure that those close to retirement age are not penalised as well as protecting small businesses. 
  • An interesting proposal is the changing of the laws around rape. The government is proposing that men accused of rape will, like victims, will be entitled to anonymity until such time as they are found guilty. The thinking behind this is that a large number of those wrongly accused find that their reputations are irreversibly damaged and that they are unable to return to their previous lives after the court case. However, the move has been widely critised by women's groups and those representing rape victims. One commentator noted that this was like going back in time by 25 years, and will stop women coming forward to report crime. A number of men have been convicted as a result of more victims coming forward when their rapist is identified, most recently in the case of John Warboys the 'Black Cab rapist'.
The coalition agreement covers some 400 legislative proposals in total, but still has a lack of detail especially on the Immigration Cap which we know will apply to all non EU citizens although we are still none the wiser as to how the cap will work or what the number will be. There are clearly still some areas over which the Tories and Liberal Democrats cannot find agreement, such as the Human Rights Act and Social Care and the interim solution here seems to be to set up a number of commissions. There are at least nine to be set up, many of which have one year to report back.

Monday 24th May saw the publication of the first wave of spending cuts announced at the Treasury by George Osborne and the aforementioned David Laws. As promised during the election campaign £6.2bn (gross) spending cuts were announced, making little more than a scratch on the surface of the current deficit but still managing to grab headlines with cuts such as the following:

  • Scrapping Child Trust Funds completely by the end of 2010
  • Reduction in ministerial spending, ministers will be encouraged to share cars and travel second class (although one of my followers did spot Teresa May and her leopard skin shoes in the 1st class carriage returning from the Police Federation conference on the South Coast to London last week....). However it later transpired that ministerial red boxes will have to travel by car for security reasons....
  • £80m cuts from Education QUANGO's
  • Reduction of 11% in costs from the Department for Business
  • Reduction in the number of extra university places from 20000 to 10000 this year
  • Scrapping Regional Development Agencies in the South of England
  • Several cuts in transport budgets, likely to lead to an increase in train fares
  • Huge 'wastage' cuts from the Local Government and Communities departments
  • £27m cut from the Olympics budget
The general theme of the cuts was, as promised during the election campaign, to cut government wastage. Across most departments we see proposals to cut spending on IT projects, administration, recruitment, consultancy and property costs. There is to be a freeze on all non essential public sector recruitment effective straight away.

So far things seem to be panning out as expected, and to be fair, as promised. The government is continually warning us that tough times are ahead and these initial policies are only the tip of the iceberg. What lies ahead in the next few weeks and months? All agree that the emergency budget on 22nd June will include deeper and more harrowing cuts in public spending and more than likely are increase in VAT to this space.....

    1 comment:

    1. wow...i'll forgive the lack of activity. I need a cup of tea...