Wednesday, 12 May 2010

All changed, changed utterly, a terrible beauty is born....or is it?

UK politics, we are being told, has changed beyond recognition. The coalition of Tories and Liberal Democrats is historic and things will, if we believe the commentators, never be the same.

Whether you buy that analysis, and whether you think that the Tory/Lib Dem alliance is a good or bad thing, or if it will work, is a matter of choice. At the moment nobody really knows what is going on, how the arrangement will work out, and what impact it will have on the parties and the country.

But one thing hasn't changed, and that's the ability of our Liberal Democrat friends to fool themselves and the public about their "caring" policies. During the negotiations with David Cameron the Lib Dems made a big thing about protecting their policy of raising tax thresholds above £10,000 "to help the very poorest", which is, on the face if it, a laudable aim.

But it seems that they have got their sums wrong, or their policy. Tim Horton and Howard Reed of the Fabian Society have conducted an investigation into the policy and its effects for the blog "Left Foot Forward".  

Horton and Reed conclude that the policy fails by;

- Ignoring the poorest

- Giving less to poorer households and more to richer households

- Increasing inequality between the bottom and the middle

According to their report;
the Liberal Democrats’ proposed tax cut fails the fairness test.

Spending £17 billion on increasing the personal allowance is a very poor way to help those on low incomes. It could actually harm the welfare of low-income households by increasing inequality and relative poverty
In fact the Fabian team conclude that the policy, which costs around £17 billion, is really a mechanism to distribute money from the well off to those on middle incomes. The bottom 10% of earners will benefit least of any earnings group.

Left Foot Forward has a more detailed report ....

£17 billion pounds is not peanuts, and already the Conservatives admit to having a problem about how to find the cash to pay for the Lib Dems promise.

I suspect the Tories will be quite happy that the policy is not nearly as redistributive as is claimed. It's the low earners (and those who care about them) who voted Lib Dem on the strength of this promise of improvement in their finances that are bound to be disappointed when they open their pay packet after the first coalition budget and find that, in fact, not a lot has changed.

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