When is a cut not a cut?

DO-NOTHING insists we’re in too  much debt, as a nation and individually. That’s why he’s said a future Conservative government will spend less than a Labour one.

So how would he pay for today’s announcement scrapping tax on savings for standard rate tax-payers?

I hasten to add that I’m not dismissing the proposal out of hand; it deserves consideration. But it will cost, and where would the money come from? Presumably not by borrowing, so… cuts?

According to the Conservative Central HQ guidance on the 2.5 per cent VAT cut, it isn’t a “cut” because it “will need to be paid for by other means (such as general taxation) so it’s effectively a loan anyway.”

So if the VAT cut isn’t a cut, what would Do-Nothing’s latest plan be? It’s surely not good enough to suggest (as many Tory commenters are surely about to on this very site) that if it’s carried out by a Labour government, it’s not a cut, but if it’s carried out by a Tory government, then it is.

UPDATE @ 8.27 pm: On reflection, I think this post is a tad ambiguous. I’m talking about two separate things: tax cuts and cuts in expenditure. So is Do-Nothing’s proposed tax cut an actual tax cut, or is it (as the Tories would have it) in the same league as the VAT cut and not a tax cut? Have I just confused things even further?

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18 Comments

Filed under Conservative Party, David Cameron, Economy

18 responses to “When is a cut not a cut?

  1. Simon

    Cameron said it would be paid for by restricting public sector spending increases in 2009-2010. So it’s not a cut.

    BTW. Calling Cameron “do-nothing” is a little childish. Since Brown did nothing to prepare for this recession, you could say he has actually earned the title.

  2. Rory

    That’s the way Tom. Say it often enough and you’ll start believing the Labour party line.

  3. richard

    I’m delighted that your post has given me the opportunity to impart some of my (dubious?) wisdom. This may get a bit technical so I’ll clarify any questions later;

    A “cut” is where the government spends less money then they did the previous year, an “increase” is where the government spends more money than they did the previous year.

    Sounds simple doesn’t it? No? I’ll try again;

    Shuffling the money from one pot to another (i.e. paying pensioners more money by reducing spending on quangos) isn’t a cut, it’s a “redistribution” of funds.

    A 2.5% “cut” in VAT isn’t a cut if you it causes a £12Bn shortfall which you fill by borrowing an additional £12Bn. It would only be a cut if it was accompanied by a similar reduction in the level of general taxation and/or a lowering of spending in other areas.

  4. John

    What do you have against cuts Tom? Public Services are spending more money than the country can afford. So only one of three things can happen:

    1) Perpetual borrowing in order to make up the shortfall (something that’s both impossible and unaffordable)

    2) Slashing the budgets to a level we can actually afford (the only realistic option)

    3) Magically discover a MAJOR new source of income (Can unicorns be involved? Ooh ooh, can they?)

    Which do you advocate then Tom? The Tories agree with option 2, and your own party will be following option 2 should you win the next election.

    Either way, cuts are going to happen, so I really don’t see the opposition to them tbh?

  5. //Cameron said it would be paid for by restricting public sector spending increases in 2009-2010. So it’s not a cut.//

    It’s a cut in expenditure over what would otherwise be spent. That’s a cut.

  6. richard

    We’re paying millions of public sector employees money that we can ill-afford and bankrupting the country to do it.

    We need cuts. Lots of cuts. Great big whopping cuts. Cuts all over the place.
    -=-=-
    Let’s start by reducing the budget of every Government department (apart from Defence) by 30%, reducing government advertising expenditure by 90% and cutting consultancy spending by 90%.

    My (admittedly quite rough) estimate is that that would equate to a basic-rate income tax cut of 10p in 2010.

  7. With such confused thinking, I’d expect you to have a treasury post at the next reshuffle.

    You will have to accept the facts sooner or later that Gordon Brown is the great deceiver and you have been taken in.

    After the next election you will have time to consider things in opposition (assuming the SNP don’t take your seat) and align the Labour Party back on the left as it should be.

  8. This is certainly not a “Do-Nothing” policy. It’d motivate people to save more and spend less, thus deepening and prolonging the recession. Cameron wants to “turn Britain from a spend, spend, spend society into a save, save, save society” – obviously he’s very worried about the current boom in consumer spending…

  9. Loki

    It’s difficult to keep up the “do nothing” line, when you are actually reporting on things he is proposing to do!
    Do keep up, Tom.

  10. Anonymouse

    Are there a couple of “n’s” missing from the fourth and seventh letter of your headline?

  11. Johnny Norfolk

    Tom Just look at what this governments wastes. It must run into billions. We cannot continue like this. Healy tried and failed and you will also. You want to try putting your own house in order before you critisise the Tories.

    You cannot just spend your way out of a slump.

  12. Well I am certainly confused.

    But first I still want to know about the VAT cut.

    Let’s use a bit of management speak. (Fairly first base management speak so those at the back should keep up)

    Was the VAT cut SMART?

    1. Specific – Objectives should specify what they want to achieve.
    2. Measurable – You should be able to measure whether you are meeting the objectives or not.
    3. Achievable – Are the objectives you set, achievable and attainable?
    4. Realistic – Can you realistically achieve the objectives with the resources you have?
    5. Time – When do you want to achieve the set objectives?

    There is no use going into more detail. By each objective, the temporary reduction in VAT fails to convince:

    Mr Darling said “the best and fairest approach” for stimulating the economy. “It will make goods and services cheaper and, by encouraging spending, will help stimulate growth.”

    Stephen Robertson, the director general of the British Retail Consortium, said he did not think the move would have the desired effect. He said:”The VAT cut will have a very, very modest effect in the short-term. It is not enough to kick start the economy (Telegraph)

    Moreover, it will not and has not helped the poor, because essential items like food and clothing are VAT exempt.

    I was concerned that Mr Darling thinks spending is a good thing. Not only that, he means spending on things we don’t need like skinny lattes and plasma TVs and he is saying that spending should be encouraged.

    It’s not a cut though. It’s plainly a stab. In the dark.

    Let’s have a look at Cameron. (I am not a fan by the way.)

    You can apply the SMART test if you like, but what seems appealing to me is the underlying assumption that saving is good and should be encouraged.

    So you have Darling: Spending is good
    and
    Cameron: Saving is good.

    If there was ever a demonstration of how far apart the two ideologies are, this is it.

    Please tell me if I am missing some vital part of the puzzle out.

  13. So… who’s at the back?

  14. Much prefer my nickname for them, Comedy Dave and Boy George.

    Much like the Government, they have shown themselves to be clueless. The problem is the bankers, and their hoarding of the bail-out money to shore up the books which show the mistakes which brought us here. Tax cuts here and cuts in spending there really is akin to re-arranging the chairs on the Titanic.

    None of the proposals from either side have attempted to tackle the problem here, and that is the static flow of money from institutions to businesses. Do we have to wait for another “Woolworths” to go under before our leaders get the message and target the real problem, the Bankers!

  15. Auntie Flo'

    My ex-husband proved to be a fraud and a compulsive debtor. His huge debts in our joint names (from a number of lame duck businesses that he recklessly established without even telling me) destroyed our marriage, made us homeless when I was pregnant, ruined my daughter’s childhood and made me ill.

    This fool’s solution to his debts was to keep borrowing more – in our joint names – until no one would trust him with a brass farthing any longer and his debt mountain came crashing down around us.

    It took me years to repay that debt – he refused to pay it. I did repay it too, every penny, though it pauperised me for years to do it. Now, aside from a very small mortgage, I don’t owe anything to anyone…

    except for the debts Gordon Brown has recklessly accumulated in my name.

    I feel as sick to my stomach and deeply stressed about the debts that Brown is running up in all of our names as I did about my ex-husband’s profligacy.

    Because debt solves nothing, it’s the coward’s way out, a downward spiral, and the biggest wrecker and destroyer there is.

    And it’s all going to end up crashing down around us.

  16. Rapunzel

    I think I must be at the back. And now I know I am seriously confused and genuinely bewildered.

  17. Oh, here’s an idea. Let’s nationalise the means of exchange (the banks) and the means of production (the factories, what’s left of them) – we could call it our not-Clause Four moment and then the world would be a better place.

    Oh, and we could start a new political party called….. oh, here’s another idea: we could have a competition to name it, on ITV every Saturday night, with members of the public putting forward their suggestions. Sure to be a winner.

    And you could be on the panel, Tom! Now there’s a job you’d enjoy.

  18. wrinkled weasel

    I am moved by Auntie Flo’s post. It must have been hell. I also agree with her that this spend, spend, spend fecklessness that GB is indulging in, at our expense, makes me sick.

    You cannot spend your way out of debt. Seems obvious doesn’t it? And yet, Mr Brown has succumbed to madness. It is even more galling that, even with an odious and weak opposition, Labour would lose an election. In effect, they have no mandate, no consent of the people. We are in a terrible crisis. The moral thing to do would be to call an election now to give the PM a clear go ahead and the personal approval of the electorate or change to the Tories.

    Of course, Brown will not call and election unless it looks as if things are going to be far worse in 2010.

    If only he could put the country first and starting cutting public spending.

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