Ed Balls, Syriza vaguely talk sense: shock

From City AM:

To those who say that Labour is anti-markets, Balls replies: “We have shown a huge understanding of how the markets work. Markets are really powerful in driving incentives but you need to write the rules of the game. Without them you get a lack of investment, collusion and a lack of competition.”

His first sentence is an outright lie, the middle sentence is correct and that last sentence sounds borderline Georgist, if only he realised landowners' role in the economy.

“Markets alone won’t deliver long-term infrastructure, or stability for the energy industry or vocational learning. Markets can not fund a basic science base. But a proper plan must understand the dynamism of a market economy and ensure that government plays its proper role in assisting that.”

Good list! That's what good government is all about, no more, no less.

(Yes, we know that he was quite senior in the last Labour government which got it wrong on both sides: two much intervention where it was not needed; not enough intervention where it was needed; and f- all 'investment' in roads, electricty generation or proper education. And we also know that, John Major aside, each UK government has been worse than its predecessor, so whether Labour or the Tories get in this year, they will be worse than the current Tory-Lib Dem coalition, but hey…)
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From the BBC:

It is not just the poor who voted for Syriza but the middle classes as well. [Home] owners in Athens's leafy, northern suburbs were enticed with the promised abolition of a hated annual levy on [homes].

Known as "Enfia", the tax was introduced in 2011 as an emergency measure but made permanent under the previous government. Instead, there will be a tax on luxury homes and large second [homes].

Fair play, their Enfia was a lot less than our Council Tax but it was more like a Poll Tax. If they make it more proportional to land values, then that must be a good thing. We'll see.

Ed Balls, a slow learner (but stumbling vaguely in the right direction).

From Ed's guest article in yesterday's Evening Standard:

[The first ten or so paragraphs are the mix of obligatory meaningless politician's apple pie platitudes, O-level economics and hypocrisy, skip those, what's interesting is when he starts talking about the practicalities.]

... it is also why we have proposed a tax on properties worth more than £2 million. How can it be right that the foreign buyer last month of a £140 million flat in Westminster will pay just £26 a week in council tax — the same as the average-value property in that council area?

We would put the revenues from a tax on ultra-high-value properties to cutting income tax for 24 million working people on middle and lower incomes — including more than six million across London and the South-East — with a lower 10p starting rate of tax. This is part of our wider plan to tackle the cost-of-living crisis and balance the books more fairly in the next Parliament.

The couple of billion the tax would raise is not going to allow much tax cutting, and ten per cent band is more gimmicks, far better is a zero per cent band, i.e. a higher personal allowance, or getting rid of regressive taxes...

But I am clear that the mansion tax must be done in a fair way and follow three principles.

First, the tax must only apply on properties worth over £2 million and that limit must be raised each year. Instead of simply raising it in line with the overall rate of inflation it should be raised in line with average rises in house prices to ensure that more modest properties are not brought into the scope of the tax.

Why should it be raised at all? Nobody's forced to bid up house prices above £2 million, if people are prepared to pay £2 million or more for something 'modest' then good luck to them.

Second, there must be protections in place for people who do not have a high income but happen to live in an expensive property — for example because they are long-standing residents in areas that have seen dramatic rises in property values. We will look at a relief scheme or allowing those on modest incomes to defer payment until the property is sold. Labour will only support a mansion tax that is fair to those who are asset rich but cash poor.

Exactly, thereby defusing the 'Poor Widows In Mansions' bomb. Well done. It's not like we Land Value Taxers haven't been saying this for decades, but hey...

Third, the tax must be progressive so that those with properties worth tens of millions of pounds make a significantly bigger contribution than those in houses just above the limit.

Yup.

But it must also be administratively simple. The original proposal by the Liberal Democrats for a one per cent annual charge on the value of the house above £2 million would require detailed valuations each year and fails that test.

I believe a better way would be to use a banded system, which avoids the need for detailed annual valuations. A banded system — £2-£5 million, £5-10 million, £10-20 million and over £20 million — already applies to the Government’s new tax on properties bought through companies.

Yup, the banding is a bit rough and ready, but it's in place and it works; it's administratively simple and everybody knows what they are letting themselves in for.

In fact, we know the Government has done detailed work on how a mansion tax would work. Ministers should publish it now so that we can have a proper debate on how to do this in a fair and proportionate way.

Exactly. The current government has actually introduced the a banded Mansion Tax for £2 million-plus homes not owned by named individuals as an experiment, which has worked a treat. Properly rich people just pay it out of petty cash without a murmur, it turns out that not many legit Poor Widows live in mansion owned by offshore trusts etc.

What poor old Ed overlooks it that they are going to add two new lower bands for £500,000 - £1 million and £1 million - £2 million. We could just call them Council Tax bands I, J, K, L, M and N, of course and have done with it, which would defuse the debate a bit.

He lets himself again at the end though:

Getting more houses built, cutting income tax for working people through a new 10p starting rate and making sure foreign buyers make a proper tax contribution to this country. This is how we tackle the housing crisis, back millions of Londoners and get the deficit down in a fairer way.

Building more houses achieves, in isolation, absolutely nothing.

A higher personal allowance, i.e. a bigger zero per cent band must always be better than a smaller zero-rate band and a ten per cent band.

Hooray to making 'foreign buyers' make a contribution, most other countries do this, for example Switzerland gives wealthy foreigner the option of paying Land Value Tax instead of income tax (which ironically, the Swiss lefties hate) and the UK gets away with charging wealthy residents who claim non-domicile status a flat charge of £30,000 or £50,000 per person per year; I'm sure they'd rather pay the Mansion Tax, however much it is, and be left in peace.

And there isn't a housing crisis as such, there's a concentration of land ownership crisis, and we know how to reverse that, we managed it between 1945 and the 1980s, but hey.

George Osborne does a bit of Indian Bicycle Marketing, Ed Balls goes off-script

He's really gone round the clock of DoubleThink this time, from The Daily Mail:

Economic doom-mongers who insisted cuts in public spending would stifle economic growth have been ‘proven wrong’, Chancellor George Osborne will say today.

In a speech in the US, the Chancellor will point out that Britain’s economy has grown faster than that of any other major country over the last year - and is now forecast by the International Monetary Fund to do the same in 2014.

Mr Osborne’s remarks are a swipe at Labour, which [sic] predicted his austerity measures would push unemployment up by a million, and the IMF itself, which was warning him to change course as late as last year.

Firstly, is the UK economy really recovering? The agreed script is that the Tories will say "Oh yes it is!" and Labour will say "Oh no it's not!"

So people who are doing reasonably well will vote Tory next time and those who aren't doing so well will vote Labour.

But they can't both be right, either the economy is recovering or it isn't (and if you ask me, Labour are right but for the wrong reasons, it's just another debt-fuelled pre-election binge).

Secondly, the script also has the Tories promising to "rein in public spending and eliminate the deficit" and Labour wailing on about "Savage Tory cuts."

So people who'd prefer smaller government will vote Tory and those who'd prefer a bit more government spending will vote Labour.

But on the facts, the Tories have not reined in overall public spending one little bit and they are running larger deficits than the previous Labour government (whether Labour would be spending even more, were they in government is open to debate).

Only Labour can't point that out because it's not in the script. To say this out loud would completely give the game away and mean that there is little point in voting either Tory or Labour.

Ed Balls is desperately trying to square this circle:

Labour’s shadow Chancellor Ed Balls conceded that wages would start to rise faster than prices this year - ending the squeeze on incomes. But he insisted changes in tax and benefits meant a family with children was ‘well over £2,000 or £3,000 a year worse off’.

"The economy is finally getting stronger and thank goodness. My argument with George Osborne was that he inherited an economy in 2010 that was growing. I think he made big mistakes in 2010, it knocked confidence," he added.

"He said he would balance the budget in this Parliament and he’s not going to do to do that at all, and it’ll take us in the next Parliament to do that."

Which is a pretty nuanced argument, subtext: the economy is growing - but not fast enough and the government isn't spending enough - but its deficits are too large. Wouldn't spending more not increase the deficit?

"Hard working pensioners"

From the BBC:

Labour has said spending on state pensions is likely to be included in its proposed cap on welfare budgets.

Shadow chancellor Ed Balls told the BBC "at the moment" Labour intended to factor pensions into its calculations for a three-year cap from 2015-16. The opposition said it was committed to maintaining the value of the state pension but welfare expenditure needed to be looked at "across the piece".

The Conservatives said the plans would hit hard-working people (1)...

But [Ed Balls] said including pensions, which forms the largest part of the multi-billion pound structural benefits bill, made sense.

"Look across the whole welfare state and ask what are the drivers of expenditure," he explained, "I think many people watching your programme will not realise that actually today the clear large bulk, most welfare spending is in fact going to people over 60. That is the truth.(2) We should look across the piece"...

Treasury Minister Sajid Javid said: "Now we know when Labour say they want to cut welfare, what they actually mean is cut the basic state pension."

And Conservative MP James Wharton tweeted: "Labour plan to cap pensions spending, really? Hitting those who've worked hard all their lives."(3)

1) Most pensioners don't work any more, and if they did, then they wouldn't mind or notice too much if their pension was less.

2) Yes Ed, anybody who bothers checking the figures is perfectly aware of that. But you and your ilk constantly moan about "Britain's bloated £200 billion welfare budget which consumes a third of government spending" to whip up public indignation about the unemployed, without mentioning that two-thirds of cash welfare spending (and indeed NHS spending) is for old age pensioners.

3) That is a wild generalisation isn't it? There must be plenty of pensioners who have in fact been unemployed for large parts of their lives.

Joined Up Thinking Part 2

Ed Balls, the shadow Chancellor, has warned that an incoming Labour government would set a limit on its welfare budget that would include pensions, because pensioners also have to share the pain as the UK struggles to get its economy back on track.

Mr Balls also appeared to have contradicted the Labour leader, Ed Miliband, whose staff had briefed journalists only days ago to say that Labour would protect the so-called ‘triple lock’, which guarantees that state pensions go up every year.

But Labour spin ministers emphasised that Mr Balls was not planning to scrap the ‘triple lock’, which guarantees that pensions rise annually in line with inflation, earnings, or by 2.5 per cent, whichever is the greatest. They said that the basic pension would continue to rise annually under Labour, while they looked at long term possibilities for cutting the cost, such as raising the retirement age.

"We will look at the details of the government's cap when it is announced in the spending review as we develop the details of our own."

Update: A few hours on from Ed B's morning appearances, and the various spokespersons for the various players now seem to have between themselves reached some sort of agreement as to what it was Ed actually said, and are now busy passing it on so that those of us who plainly weren't listening with the requisite attention can now correct our faulty memories of the event, something that Nick Watt at the G is only too happy to help out with so Ed Balls clarifies Labour's plan for curbing welfare spending via three-year cap in event of a general election victory in 2015  is the sub-heading to Nick's piece and the first paragraph runs:-

"Labour will target housing benefit and will examine the case for further rises in the retirement age as the main ways of curbing welfare spending through a three-year cap if it wins a general election victory in 2015.

Party sources moved to clarify the "tough" decisions on spending Labour is drawing up after Ed Balls appeared to signal a major change of tack by saying pensions would be included in the cap".

See, he never said pensions would be covered by the cap, he just clearly explained that Labour was considering "upping" the retirement age as a means of keeping spending on pensions within "a cap".  I hope we have all got that now, the job of being in opposition is tough enough without us all constantly "mishearing" what Ed says.

Oh what a pair of teasers!

Ed Miliband and Ed Balls to set out Labour approach to public spending shouted the G Headline. Two key speeches will seek to define spending priorities and remove perception of party as indecisive promised the subheading. Gosh, I thought, that is precisely what the country has been awaiting with bated breath, they are going to be such big events people will be selling their tickets to them on E-Bay.

Ed Miliband and Ed Balls plan to make two major speeches on the economy next week setting out their approach to public spending, including a commitment to cap spending on what is described as structural welfare spending as opposed to spending increases caused by recession.

“a commitment to cap spending on what is described as structural welfare spending “ – is this Labour’s version of George Osborne’s commitment to cap Annually Managed Expenditure? Surely Labour aren’t proposing to bring in means testing of pensioner benefits like free bus passes, TV licences and Winter Fuel Allowance? This gets potentially better and better in terms of the prospect of some “blow you away” speeches.

And then Patrick Wintour went and burst the bubble.

Ed Balls's speech is not expected to state Labour's specific spending plans for the next parliament, something that will be left to closer to the election in the light of the scale of any economic recovery by 2015.

His aides acknowledge that his five-point plan set out in the first year of the Conservative government has lasted longer than originally intended because of the unexpectedly long recession, and the time has come for a broader approach on spending.

Balls has already promised a zero-based spending review after the election, and has also said his deficit reduction plans will be guided by rules overseen by the Office for Budget Responsibility (OBR).

I don’t think I shall be joining in that “ticket frenzy” on E-Bay after all, sounds to me like Ed and Ed are going to very carefully explain that “they haven’t really got anything to tell us at all. Yet. But do watch this space!”

"Ed Balls admits being caught speeding"

From the BBC:

Shadow Chancellor Ed Balls has confessed to being caught speeding, saying he was "bang to rights". The Labour MP said he snorted powdered amphetamine in a 50mph zone on the motorway in his West Yorkshire constituency.

Writing on his blog, he said he had paid a fine and attended a drugs awareness course rather than accept penalty points. Mr Balls was fined £60 during the 2010 general election campaign for using Ecstasy behind the wheel.

The Morley and Outwood MP attempted to laugh off his latest drugs offence, saying he felt as if he had been going "too far, too fast" - one of his favourite attack lines against the coalition's budget cuts.

"Like many local people, I was caught out by the never-ending roadworks on the M62," said Mr Balls. "Pulling on to the motorway at Morley, I realised too late that I was in for an afternoon of traffic hell, so I had some crystal meth just to keep myself awake. I was caught and bang to rights - doing a quick line in a 50 mile restriction zone. Going too far, too fast, you might say. I paid my fine and chose to attend a drugs awareness course. I currently have no points on my licence and would like to keep it that way."

His wife, Shadow Home Secretary Yvette Cooper, condemned "drug driving" and a spokesperson confirmed that she always waits until the children are tucked up in bed before taking a nice mellow armful of heroin "... or maybe poppers if Ed's in the mood."

Fun Online Polls: Lib Dem and Labour crackpot ideas

The results in last week's Fun Online Poll were as follows:

Which are your favourite Lib Dem crackpot ideas of the week?
Use your pension fund as a mortgage deposit: 75 votes
Vince Cable to lead the Lib Dems into a coalition with Labour: 26 votes
The Business Bank: 26 votes
Wealth taxes instead of LVT: 18 votes
Other, please specify: 7 votes

So Nick's pensions-for-homes idea pretty much swept the board there.
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Ed Balls is set to open the Labour Conference with an even better plan:

The billions of pounds raised from the sale of 4G mobile licences will be used to help young people get on the property ladder, shadow chancellor Ed Balls will pledge.

It will provide £500 million to spare first-timers paying stamp duty on properties worth up to £250,000. The rest of the cash – another £2.5 billion – will be spent on building 100,000 more affordable homes.

So a strong start there! The Labour conference runs until Thursday, so please leave your nominations for "Most moronic policy suggestion from the Labour Party conference" in the widget in the sidebar, I can then sort our the official poll, and then the week after that we can do "Most twattish ideas from the Conservative Party conference".

"Shoddy and deceitful: Bank of England governor Sir Mervyn King blasts Britain's tailors"

From the Evening Standard:

Sir Mervyn King today lashed the "shoddy and deceitful" behaviour of Britain's tailors, as yet another scandal heaped disgrace on some of the rag trade's most trusted names.

The Bank of England governor demanded a "real change in the clothing industry culture" in a fierce attack on the fashion community. He hit out at "excessive levels of compensation, shoddy treatment of customers and deceitful manipulation of the price of a three-pack of men's briefs". Pressure snowballed for a Leveson-style inquiry into manufacturers and retailers, with Shadow Chancellor Ed Balls formally calling for an independent probe.

David Cameron backed the call for change and pledged new laws but ruled out an inquiry, agreeing with the governor that action is the priority. "We turned a blind eye to what those shits at the banks were up to, but we didn't realise that the rot had spread to high streets and shopping malls," announced the Prime Minister, tugging at a slightly itchy collar on his £200 Jermyn Street shirt, which was actually made in a sweat shop in Jiangxi province in China, "I think we've all been stiched up."

"Crippling"

Allister Heath uses his favourite adjective twice in today's editorial about Blinky:

Ed Balls’ series of proposals probably amount to a debt-financed boost to demand of £18bn, roughly 1.2 per cent of GDP. This includes his proposal to cut VAT back to 17.5 per cent, and his bid to move forward infrastructure projects, partly compensated for by yet another crippling £2bn-£3bn tax on banks (additional to Osborne’s own new tax) (1).

From a Keynesian perspective, it would make only a small difference. Even on its own terms, it is only just better than a gimmick. It certainly wouldn’t mark a major intellectual shift. Even if it did trigger more consumption, quite a lot of this would be on imported goods, which reduce GDP. A lot of the construction spending would be conducted via imported labour, thus failing to dent domestic unemployment by much. So even if one were to believe Keynesian models in an open-economy context, and pretend that the markets wouldn’t panic, the boost to GDP would be marginal, probably half a per cent or so in the first year and less in subsequent years.(2)

In the longer run, taxes would have to be hiked; given that Balls is obsessed with (3) cutting taxes on consumption (4), that would mean even higher incentive-destroying taxes on income and capital (5). It was interesting that Balls said yesterday that "the issue of land taxation is one which we should actively look at" – in other words, he is moving closer to the kinds of crippling wealth taxes (6) beloved of Vince Cable.

It is strange that Balls appears to think that what the UK needs more of today is debt-financed consumption; in reality it needs to rebalance towards investment, savings and exports. (7)

1) UK banks are in rude financial health (partly propped up with subsidies), swiping £2 or £3 billion back again (or not giving it to them in the first place) is not going to "cripple" them.

2) I'd pretty much agree with this paragraph. UK government spending is wildly out of control, it's far beyond the point where it can possibly add to output and is well into the level where it decreases it.

3) Note the use of the emotive word "obsessed". It just so happens that VAT is the most damaging tax, economically (whether Blinky wants to cut VAT for good or bad reasons is secondary). It's just that Allister Heath's paymasters are ultimately banks and so on, who are hardly affected by VAT, so he's following the rule that a tax is a good tax as long as somebody else is paying it.

4) VAT is NOT a tax on 'consumption'. Taxes on fuel, fags, booze are taxes on consumption thereof for the simple reason that demand is price inelastic and supply is price elastic; but a general tax on gross profits ('value added') of non-favoured industries is NOT a 'consumption tax', however you dress it up.

The fact that VAT appears on till receipts and not in company accounts is a red herring, you cannot change the economics with accounting rules. It is more or less impossible to design a general spending or consumption tax which doesn't act in exactly the same way as income tax, but far worse.

5) Tax on income = bad, but not as bad as VAT. He doesn't define what he means by "capital" so let's ignore that.

6) Aha, "crippling" again? "Crippling" to whom? Will all the mansions in London and the South East keel over sideways if Vince gets his way? Nope. Might their selling prices drop a bit? Yup. But who will ultimately end up living in them? Why, people who live and work in London, instead of them being forced to commute in from God knows where. Would that not a tad better for the economy? So who's been crippled here exactly, the poor South East home owners who see prices knocked back to 2005 levels (or whatever)? The people who will find it easier to trade up to somewhere more convenient for work? Who?

In any event, a tax on land values is NOT a tax on wealth because land values aren't really wealth and certainly not net wealth; they are a measure of the wealth that flows from non-land owners to land-owners, so the income and the expense net off to precisely £nil.

7) As a front man for the financial services sector, Allister loves high house prices because they enable/force people to take out more debt; some use the debts to buy the house (that's good for banks and vendors) and others use the new borrowings for, er, "debt-financed consumption". It's a simple fact that had house prices not risen so much, there would have been less debt-fuelled consumption - during the boom years, mortgage equity withdrawal alone added about six or seven per cent to people's disposable incomes.

Tough on debt, tough on the causes of debt

Ed Balls has surpassed himself and made the emptiest promise of all time*

Ed Balls will bid to boost Labour's economic credibility by vowing to spend any windfall from the sale of bank shares on paying off the national debt.

Genius.

We know that it was Labour who a) allowed the banks to get into such a mess and b) made the decision to throw taxpayers' money at them and that as things stand, the taxpayer has suffered a huge loss from his or her forced investment in banking shares.

We also know that some pol's have been merrily promising to give the shares back to the taxpayer, or to create a People's Bank etc. So Blinky isn't promising this sort of thing, but under what circumstances will bank shares rise above the price that his government paid for them?

If the government were in a hurry to show a profit on the bank shares, what would it have to do? It would have to allow the banks to become much more profitable, by encouraging households to take out much bigger mortgages and get deeper into debt. But beyond a certain point, bank profits aren't profits at all, they are just rental payments extracted from mortgage payers. It's a negative sum game.

So it would be a lot cheaper and effective to increases taxes to repay the debt, rather than to blow another credit bubble, siphon vasts amount of money to the banks, a small part of which goes into increasing the share price in order to pay off a tiny fraction of the national debt.
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In any event, the total cost of the taxpayers' forced investment in RBS and Lloyd's is widely quoted as being £66 bilion, and they are currently standing at about half that; so even if they were to treble in value from today's date, the book profit would only be equal to six months' worth of deficit spending (or about five per cent of outstanding UK public sector debt).

* Since the last one and until the next one, at least.

Treasury Tomfoolery

There's been an outbreak of common sense at the Federation of Small Businesses. From the BBC:

The FSB is urging VAT be cut to 5% in the construction and tourism sectors. "Consumer demand is a key barrier to economic growth so such a cut would encourage people to spend in these areas," the FSB said in its Voices of Small Business Report.

The FSB said: "Evidence from other EU countries shows that any lost revenue to the Exchequer by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity."

Although the basic EU rule is that the standard rate of VAT has to be at least 15%, it appears that countries can reduce the rate on specific sectors, which is what Ireland seems to have done recently. So far so good. The depressing bit is right at the end of the article:

A Treasury spokesperson said: "Reduced VAT rates of the kind suggested would make a significant impact on revenue. Any claim that a boost to foreign tourism or construction would outweigh these effects would need to be looked at very carefully indeed."

In other words, they didn't give these secondary effects any thought whatsoever when they hiked VAT from 15% to 17.5% to 20%, did they? Even Ed Balls seems to have finally grasped that you cannot keep merrily increasing VAT and expecting overall tax receipts to keep going up, for crying out loud.

Ed Balls gets his sums wrong - shock

Ed Balls starts off by talking sense:

His proposal to repeat the temporary cut from 17.5% to 15% implemented in the final stages of the New Labour government is the most significant policy proposal to emerge from his lecture to the London School of Economics this morning.

This January saw VAT increase from 17.5% to 20% - a move which former Labour chancellor Alistair Darling had privately acknowledged would have been necessary had Labour won a fourth term in power.

Mr Balls argued that the 13-month temporary cut had made a real difference which helped the economy return to growth, however. The Institute for Fiscal Studies called the cut an "effective stimulus", he pointed out...

But lets himself down badly at the end:

Mr Balls accused Mr Osborne of implementing his plan because of "electoral politics", not the good of the nation... The plan also "uses the Liberal Democrats as a human shield" and hopes to "store up a Tory war-chest – bolstered perhaps with the proceeds from a quick sale of Northern Rock – to cut income taxes before the election", he claimed.

They only hope to make about £1 billion from re-privatising Northern Rock which is not even going to make a dent in the planning annual deficit of £150 billion, and even if there were scope for tax cuts, £1 billion would only be enough to cut income tax by 1% for about two months.

Indian Bicycle Marketing

From the BBC:

Mr Balls' comments came during an interview on The Andrew Marr Show, as he said Chancellor George Osborne was in denial on the need to switch from the economic policy of "crushing spending".

The major parties have clearly decided to co-ordinate their strategies: the Tories portray themselves as the party which wants to cut government expenditure and Labour portray themselves as the party which wants to increase it. So just for completeness, let us remind ourselves of the severity of those Tory 'cuts', shall we? Here's a handy chart from page 17 of the 2010 Spending Reveiew (click to enlarge):And for the avoidance of doubt here's what the current government says in paragraph 1.15:

Even after these spending cuts, total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09. At 41 per cent of GDP, this will be around the same level of public spending as in 2006-07. Spending on public services in 2014-15 will be higher than 2006-07 levels in real terms.

Hat tip Autonomous Mind, EU Referendum and no doubt dozens of others.

More lies and disinformation from yesterday's Evening Standard

Exhibit One:

Families on middle or low incomes could lose more than £2,000 a year under government plans to slash child tax credits, it emerged today... More than five million families get the credit (1), Labour's flagship benefit intended to help working people pay for childcare and other costs... Those on annual incomes of £25,000 get £2,850 a year for one child (2)...

Mr Balls... said the Government was preparing the ground for a “savage Budget raid on the tax credits of millions of families on middle and modest incomes. Families with children where both parents go out to work, but earn a modest income, will be among the biggest losers.(3)”

1) I somehow doubt that this is true (see below) but let's go with it. 'Families' implies 'households with children'. According to Table 2.2 of Social Trends 39 - 2009 edition there are 5.25 million couple households with dependent children and another 1.75 million lone parent households with dependent children. So why not say 'most of them'? (And if it is a nigh-universal benefit, why not make it universal, and save all the admin hassle and means testing? For higher earners, it would be like a small tax rebate, and I see no harm in that.)

2) The basic entitlement for a family with one child is £2,845 (Family element + one Child element from HMRC), but if your income is £25,000 you do not get £2,845. The amount is reduced by 39 pence for every £1 you earn above the First income threshold of £6,420, so if your income is over £13,728 you get precisely £nil (there may be other wrinkles to this, but you get the gist). If you had three children, your basic entitlement would be £7,445, which would be tapered to nil at a gross income of £25,509.

3) As it happens, the bulk of tax credits are paid out to lone parents who are not working, which makes a mockery of the claim that they are "intended to help working people". As to "childcare and other costs", see Exhibit Two. So not only are the Lib-Cons starting at the wrong end (there are very few savings to be made at the upper end), Ed Balls is lying through his teeth when he says it will affect low or middle earners.

Exhibit Two:

Labour leadership frontrunner David Miliband... also suggested... that private schools should lose their £100 million-a-year subsidy from the state, as part of a wider deficit reduction programme.

Actually I agree that the corporation tax exemption (it's not really a subsidy, is it?) for private schools is daft - it only applies to schools which manage to fit into the new definition of 'charity', which means that the Charities Commission can boss them around; it only applies to the tiny amount of a school's income that is not paid out as salaries or other expenses (which are taxable in full), and of course it discriminates against 'the circling sharks of international edubusiness' - but most importantly, that £100 million works out at a paltry £150 per private pupil per year on average (and the tax break is hugely regressive - the richer the school, the more the tax break is worth), which is a heck of lot less than the amount that the taxpayers saves by not having to fund a state school place for them.

In any event, in the print edition, the article was directly below one about Michael Gove's 'free schools', which is a modest step towards education vouchers; these would be worth about thirty or forty times as much as the laughable £150 corporation tax break. Vouchers is the way forward, and to hell with the £150 per pupil tax exemption.

Further, we do not need to pontificate on how and whether vouchers would work, as we already have them for nursery places for children aged 3 to 5. It is a fairly simple, non-means tested system (there's nothing that can't be made simpler, of course), so we can bin the Childcare element of tax credits (which is enormously fiddly) and bin the Employer nursery vouchers nonsense (why have three or four separate subsidies when one will do the job?) and just hike the nursery vouchers accordingly, which then dovetails nicely with education vouchers generally.

Exhibit Three is a fine example of muddled thinking (it would be a tad harsh to call this lies or disinformation as her heart seems to be in the right place):

[Child Benefit] is a benefit that from the start should have been means-tested and gone only to those parents who really needed it. Now the Government simply cannot afford to hand out £50 a week to people like me, who have benefited from both the housing market and the longest economic boom in modern history. For anyone over 40, even our higher education came free.

Quite clearly, Child Benefit (being the best kind of benefit, non-contributory, non-means tested and non-taxable, with tiny administrative costs and practically zero fraud and error) is, from the point of view of the better off, a straightforward tax refund, which is fine by me.

In other words, Child Benefit (which 'costs' around £10 billion a year) is more or less the opposite of Child tax credits (which 'cost' around £15 billion a year, but the exact figure are hard to track down). The redistributive impact of Child Benefit is probably minimal - what it does is smooth your income over your lifetime and it doesn't really influence people's behaviour. Child tax credits OTOH are not only redistributive, they redistribute in a very bad way as they encourage women with low earnings prospects to become an unemployed 'single' (officially at least) mother instead.

The knee-jerk hair-shirt idea put about by 'the middle classes' that they don't need Child benefit has some superficial appeal; but so does the idea that instead of giving our columnist £50 a week in Child benefit we were to give her and her husband extra personal allowances for their children which would save them about £50 a week in tax. The two ideas cancel each other out, and as Child benefit is administratively far simpler (we would end up with two parallel systems that achieve exactly the same thing, only there'd be loads of form filling when your income goes above or below whatever arbitrary cut-off point we choose), why not just stick with it?

More Labour Leadership/Venn Diagram Fun

In case my previous efforts were not quite puerile enough, here's another one:

Quick guide to Labour leadership election

UPDATE: For the benefit of JT:

Tory attack dog lands killer blows* in married-couple-allowance debate

From The Evening Standard:

David Cameron today put marriage at the heart of his election battle — but failed to say who would benefit from his flagship policy... But Labour claimed the policy would mainly benefit rich married couples where one of the partners stayed at home... Mr Balls claimed the transferable income tax allowance for married couples would cost £4.9 billion and penalise some couples. “You say to the widow, to the single parent You are going to get less, your child is less worthy of support,” he added.

The Tories' spokesman hit straight back:

"Don't be such twats! Do you not realise that although the UK does not have a transferable personal allowance, wealthier couples with a lot of investment income can simply transfer it into the name of the non-working spouse and use up his or her personal allowance and basic rate band that way?

So most rich married couples wouldn't benefit at all! It'll be yer average dad-at-work, mum-at-home-with-kids (I can't be arsed saying 'non-working spouse' all the time, who invents this shit?) family who benefits! And yes, we accept that the wife of a head teacher will benefit just as much as the wife of a postman, but so what? An extra £1,200 a year is worth a damn' sight more to the postman's wife than to the head teacher's. That's the whole rationale for redistribution and welfare - the simple fact that £1 is worth far more to a poor person that to a rich one. You knobs.

Oh, and by the way, don't spout this crap about 'social engineering' and 'all families being worthy of support'. Under your welfare system, the tax and welfare system rewards couples who split up by giving them an extra £10,000 a year. And it's Labour who's telling the widow and the single parent that they'd better bloody well not get married again or they'll take away that £10,000 again.

And on a final note, how the f*** can you cost our policy when we haven't said what it is yet? What we were considering is financing the transferable allowance by reducing the personal allowance slightly for all, so that would be fiscally neutral. That ain't going to affect your council house mum who doesn't go out to work and in fact (if you think about the maths), it would make most rich couples slightly worse off.

See you in Opposition, you suckers!"

Of course no Tory spokesman said any such thing, I just made that all up. Which leads me to believe that the Tories are, yet again, going to throw the election for fear of being in power when it all goes tits up.

* I'm not sure if an attack dog can actually land a blow, but you know what I mean.

The New Maths: Two minus one equals zero

It's little surprise that our state-education is churning out innumerates when our Children's Secretary (i.e. Education Minister) Ed Balls comes out with rubbish like this:

... Children's Secretary Ed Balls warned many parents would be left disappointed by the Tory promises [to allow parents to set up their own schools and get government funding] as they would struggle to find funding for the reforms without making swingeing cuts elsewhere in the education budget. He said: "The Tories need to come clean with parents about what their plans really mean. Michael Gove can only pay for his Swedish schools experiment by cutting billions from the budgets of existing schools and slashing our school rebuilding programme."

Assuming the new schools are funded by some sort of voucher-scheme, however heavily disguised, then for a fixed education budget, you could easily engineer an increase in funding per pupil who remains in a state school by setting the value of the vouchers at less than the cost of a place in a state-school.

More free publicity for the BNP

From the BBC:

Schools Secretary Ed Balls has ordered a study into whether members of organisations which "promote racism" should be banned from being teachers. He told the Labour conference he wanted to ensure there were sufficient "powers" available "to keep racism and BNP activity out of schools".