(my quick reflections about conference from a CentreForum perspective are over on Freethink)
I have not been on top of the press in the last few days, but the Bournemouth Bubble is sufficiently porous for external impressions of conference to filter in. And some of them add up to a problem – the age-old story of division and confusion about important, indeed key policy areas.
I don’t include Tuition Fees. Oddly, the Lib Dems’ flagship opposition to the generally excellent Tuition fee policy is going to die a quiet death, smothered under the rubble of fiscal collapse. “We will do it when it’s affordable” will be up there with “We’ll climb to the moon when they build a long enough ladder” and “I’m looking forward to a really high quality coffee at the Bournemouth International Centre” for realism. Charlie Kennedy’s unimpressive defence of the policy went nowhere (no, no apoplexy)l. We all moved on. “Time’s up” flew off the shelves, in fact.
The division stories are, however, both fiscal – firmly “A balancing act” territory. In fact, while CentreForum did not invent this idea of rebalancing and/or supplementing council tax with a flat-rate fee above a threshold, Vince’s ‘mansion tax’ closely resembles a suggestion we put forward in that publication.
The problems in launching it to the press were many (see this letter from the FT). Apparently, one or two MPs, worried about the effect in their constituency, put out the story that it was a temporary measure, until local income tax came in. Problems of valuation were not addressed, and nor the entirely predictable issue of how to deal with low-income/high-asset widows and grannies. Finally, the fixed, media-friendly threshold of £1 million pounds (‘we go after the millionaires, the Tories give them money’) meant that the tax would be overwhelmingly paid in London*.
All of these were soluble, and I think all could have been better addressed through our approach. This should be presented as an extension of council tax. Abolishing council tax should be abandoned: instead, use this measure to deal with the lunacy that is (a) 80% of local income coming from central government (b) council tax being so regressive on wealth: a £400k property paying the same tariff as a £2m property. Make the threshold and charge a LOCAL matter: in Cornwall, £400k and 1%, in London £1.5m and 0.7%, and so on. Finally, I was disappointed that they did not go after capital gains on primary residences: lessening the returns to property speculation. And they could have tried to raise more money. Kicking up a sh1tstorm over £1bn is not worth it.
Some MPs thought this was a tax on aspiration. I think they were wrong. For a start, such a tax would also lower the value of the houses affected, making them more available to purchase for aspiring, hard working people. But, more importantly, the vast majority of property/land wealth has come from the passive enjoyment of rising values, during two enormous property booms that have made first-time ownership increasingly difficult for the young. This is not what anyone should be ‘aspiring’ to – a chance to buy a ticket on a destablising asset price ride.
The other major division was over whether Nick should have flagged up “savage” spending cuts (Steve Webb on the conference floor thought ‘no’). I’m with Nick here. A process of education is needed. As David Cameron knows, not even Thatcher managed to cut spending properly – not for many years, anyway – and the fiscal deficit is going to be much bigger this time round. It was just two years ago that political parties everywhere were able to talk about whether government windfalls should be spent or given back. The Tories were promising to stick to the government’s plans. Fiscal policy was easy. That state of affairs had lasted half a decade – it will need a long spell of savage talk to make people realise what an entirely new mindset we are going to need now. Now the windfalls have gone, and a big hungry bond market will ask for anything extra you can find. And robbing that market means robbing pensioners, so don’t think about it.
So it is better to understand this now, than act with shock and horror when arithmetic becoming crashingly obvious.
*Also (this one of mine): the threshold would incentivize a ‘mansion’ owner to split his property into several sub flats – a convenient tax dodging fiction.
PS. Why do people consistently misused language and talk about Northern Rock COSTING us £100bn (here on Liberal Democracy)? It does not cost in the same way that a Trident submarine costs. Even Lord Skidelsky does this in his recent book on Keynes. We had to borrow that much on the markets to fund NRK’s operations, but we have not ‘spent/lost’ that money – in fact, we will probably make a pretty OK profit on it. So comparing it to the nuclear commitment is worse than apples and pears. In fact, NRK is a bargain compared to a nuclear missile.