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Spending before saving

Nick Robinson | 09:34 UK time, Thursday, 13 March 2008

Britain's most effective pressure group appears at first glance to be... the Conservative Party.

Want cuts in inheritance tax?
. .

Want a tax on non-doms?
then .

Want a tougher crack down on incapacity benefit claimants?
Yes, you've guessed it, the Tories called for it and today .

Now I did say "at first glance" because the truth is, and the Tories privately acknowledge it, that many of the ideas they've called for have originally come from the Labour Party or - to be more precise - from Blairites.

Take today's example. It was Blairite John Hutton who, as minister for welfare, commissioned the which recommended new medical tests for all existing incapacity benefit claimants. The Tories took up the idea when they saw Chancellor Gordon Brown resist it.

Their claim that they could cut taxes with the money saved convinced Prime Minister Brown that he was, after all, in favour of it.

So it is with the more important part of today's welfare announcement which is a dull-sounding accounting change but which has huge significance. It's called AME-DEL - not after the names of two benefit claimants but as an acronym of two budget headings - Annual Managed Expenditure and Departmental Expenditure Limits.

Benefits - a whopping 拢37 billion for those of working age - are paid for under AME which are controlled annually as the name suggest. Back to work programmes are, however, paid for from the much smaller three year departmental budget set aside for them - around 拢420 million in 2006/7 - covered by DEL.

David Freud - who was commissioned by John Hutton - had the idea - which he borrowed from America - and - and which the government will today announce pilot schemes for.

The idea is to make money from AME and give it to DEL. In other words, to change the rules to allow ministers to spend some of the money they've set aside for future benefit payments on getting people back to work now.

Simple sounding but a truly radical step for the Treasury as they'll be spending money before they've saved it.

Comments

  • 1.
  • At on 13 Mar 2008,
  • David Ginsberg wrote:

This is a big change but most worringly for me as a working tax payer is that the benefits bill is running at such an unsustainable level. At a time when the economic situation is so precarious the budget should have offered more to the working taxpayer to guarantee the tax revenues of the future. There was nothing in it for me and when the economic situation gets worse I have little confidence that Mr Darling will be able to influence the situation positively. Money for pensionners and child benefit is all well and good but do we really want a nation were whole areas are propped up by the state. 拢37 billion is being spent on people without any real effort to get them off benefit. These changes might reduce that bill slightly but this huge burden will remain. We have had over 10 years of a financial system that has allowed the public sector and welfare state to grow unhindered. Like the January credit card bill the day of reckoning is fast approaching. Mr Darling needs the taxpayers more than ever to weather the economic downturn and continue funding the state monolith, I don't feel we will. If that happens there could be a panic cuts in expenditure which will hit the most vulnerable hardest.

  • 2.
  • At on 13 Mar 2008,
  • Charles E Hardwidge wrote:

I generally support the idea the unemployed are worth investing in. This is likely to result in creation of new jobs on the simple idea that power, status, and wealth flow to where the attention is. So far business has been procrastinating but that's mostly a leadership issue. "Tough managers" and "solid unions" have projected their own failure and held things back. By developing success the government will show a better alternative is possible.

In time I expect Britain to slide closer to the Japanese model of jobs for life, crime to reduce to ten percent of current levels, and healthcare to be preventative by default. This should mean that Britain is a more productive, safer, and happier country within a generation. Some people may think that is a little strong or disagree but complaining is easy and gives no sense of direction. Clear and unambiguous ambitions help cut through that noise.

By developing confidence not arrogance, and kindness not partisanship, the government is setting a lead in turning Britain around. Asset stripping, greed, and cowardice have driven Britain to the edge of the cliff but under Prime Minister Brown's leadership the nation is turning to face its enemies. They are all conveniently lined up and, as sword saint Miyamoto Mushashi comments, by engaging them we will cut down a goodly portion of them.

All hail Blessed Leader!

  • 3.
  • At on 13 Mar 2008,
  • Terry wrote:


I think you have to be a little careful about where you go with who-said-what first. I would look at it this way. When in opposition the Labour Party criticised everything that the Tories attempted to do, even as far as Terrorism legislation and the Falklands war. If bad eggs caused salmonella, then it was the tories fault. When there were a scare story about the contraceptive pill it was the Tories fault. When the Tories wanted stricter limits on immigration and detention centres it showed they were racist. When they targetted benefit claimants they were positioned as heartless. When they enacted Trade Union laws they were anti-working class. When they removed milk from schools they were the "snatchers"; these days finding a school is a problem, and finding a good one is even harder. It appears to me that the Tories are now re-discovering themselves since the Labour Party has started to talk the (old) Tory language. What Labour saw easy to criticise when in opposition they found themsleves agreeing with when in Government, since for the main part in opposition it was simply political posturing. Insincere? Clearly. Politically expendient? Absolutely. Unprincipled? To the extent they never could have believed their own propaganda, of course. The problem is that such behaviour has followed the Labour Party into Government. The accounting change you refer to is interesting; what it means in practice is that there are physical limits on what can be spent by Departments over a three-year period. Departments are prohibited from exceeding the limits, and there are strict rules on what happens when limits are exceeded. Shifting from AME to DEL simply means controlling expenditure; the idea it really means anything else is misleading.

  • 4.
  • At on 13 Mar 2008,
  • Paul wrote:

Nick,

We already know that the tories are magpies. It was always thus and ever thus shall be.

Yes, it was a dull and grey budget, unless of course you drink and like a smoke, in which case you might not be very happy.

But what the budget tells me is that both Labour and the tories are devoid of ideas and bereft of passion.

Consensus is one thing, but it's gone further than that. The two leading parties in this country have decided to ditch their principles and now only push policies that look and sound good.

We have entered a period of drift government and drift opposition, but the trouble is, it is us the people who have to bear the consequences of it.

  • 5.
  • At on 13 Mar 2008,
  • Robin wrote:

If the unemployed are worth the investment why did the Blessed Leader spend ten years rejecting the plan to put them back to work? He fostered this culture with his welfare system and refused to accept the recommendations put to him by Freud. Now the issue is staring him in the face this kind of flip flopping hardly inspires confience. It shows an arrogant disregard for received wisdom until there is no option but to accept it.

Brown's default setting that 'I know best' has so far played out disasterously in his brief tenure. His acolytes all behave in the same high handed way. They are true followers of socialist doctrine that the political classes know best and the rest of us are vermin who should be scorned. This imitation is Brown's biggest tribute to Stalin.

The reality is we can't be 'stakeholders' in a society where the political classes think they own all the preference shares.

  • 6.
  • At on 13 Mar 2008,
  • Iain wrote:

That's it I am convinced that either Charles E Hardwidge is a master of irony or he is Gordon Brown and totally detached from the real world.

This government is partisan in everything they do (nothing unusual or particularly wrong in that) and is quite astonishly arrogant and patronising (how many times have we been told they know whats best and they must spend our money accordingly, or we must change our lifestyle to fit some left wing PC ideal).

By far the worst however is that it is dangerously divisive. The main areas I would see as follows:

- A large increase in English, Scottish and Welsh nationalism.

- Immigration becoming a bogey man due to the failure to have any control or present an honest case for immigration, causing resentment and racism.

- An increasing view that benefit and incapacity claimants are useless scroungers - unfair but the failure to deal with those who are tars the genuine with the same brush.

The above are creating a nastier and more divided society with a reduced consensus that those in need should be supported. I fear that this goverment will leave office having done immense damage to the cohesion of this country and to the idea that there is any liberal consensus (in its broadest definition rather than a narrow political one) as to what society means and should do.

  • 7.
  • At on 13 Mar 2008,
  • Ethel G. wrote:

I think "Terry" hits the nail on the head,its a waste of time ,the whole "who did what" thing and as for "Robin"-socialist? are you kidding there's nothing remotely socialist about this lot!

  • 8.
  • At on 13 Mar 2008,
  • Charles E Hardwidge wrote:

The government's New Deal was good on paper but failed in the face of opposition from the likes of the CBI and TUC. The steel jawed heroes of business didn't want to invest and dear comrades didn't want to redistribute. This procrastination merely served to perpetuate unemployment, ill-health, and financial loss. Faced with the inevitable mountain of misery people find it easier to beat their chests and wag their fingers. Better just to drop it and be happy.

All hail Blessed Leader!

  • 9.
  • At on 13 Mar 2008,
  • David Osborne wrote:

I think it's wrong for alcoholics having to foot the bill for children's poverty. Alcohol is a class "A" drug. This additional tax should be funding programs addressing Britain's binge boozing culture.
The Chancellor is playing the same role as a drug dealer, raking in booty from society's weak to pay for Government failures.

  • 10.
  • At on 13 Mar 2008,
  • John K wrote:

Nick

We all seem to be forgetting that the politicians were keen on incapacity benefit at least in part because it kept a lot of people off the unemployment statistics.

Does Mccavity Brown not care about these any more? Or is the calcualtion that a rise in unemployment numbers is worth it to be seen to be tough on benefit claimants? If so, how very New Labour.

Worth asking the question of some of your contacts, Nick?

  • 11.
  • At on 13 Mar 2008,
  • Justin wrote:

The Tories are the biggest joke going. It's just a shame so many people fall for it every four years.

They steal ideas from Labour or the Lib Dems, bicker about the ideas they've stolen then pretend they thought them up first.

On the occasions they've failed to steal ideas in time, they just oppose the government's solutions without offering their own.

To be frank, it is embrrassing that these people are allowed to be the Offical Opposition. Personally, I think The Muppets would be more effective.

  • 12.
  • At on 13 Mar 2008,
  • Robin wrote:

Nobody should drop the pressure on this self satisfied government who think they can continue to soak the coping classes with tax after tax.

The most effective pressure group in the country is the Conservative party because the government is bankrupt of ideas. It's own ideas are tried and failed and its supporters are well aware of it which is why they are calling for more time, the big picture, patience, a new vision from the Blessed Leader and the like.

We now have the highest personal tax burden on record and all the 'Childrens' secretary' can say is "so what?" So what are you doing with our money because if you can't get results after eleven years then give it back. I'm afraid it's as simple as that.

  • 13.
  • At on 13 Mar 2008,
  • gary marshall wrote:


Being an old codger,would someone tell me when I will get my fifty quid?

  • 14.
  • At on 13 Mar 2008,
  • Albert wrote:

So everyone admits that even after 11 years of a Labour Govt. we are not yet in a recession. Even though this Govt. did not have the billions and billions from the selling of entities like Trains, rail tracks, power generation Companies, etc. etc. and all this besides the revenue that the Tories had from the North Sea Oil which they finally sold. Now if there was a Govt. that was in a position to save for a rainy day, that was the Tory years, when oil was selling at 26$a barrel. Now let us have a look at what actually happened:
91热爆 economics editor 鈥 Evan Davis says:
The painful parliaments are those where we have to reassess our whole view of the strength of the economy.
For example, the problem in 1992 derived not from a slowing economy. It derived from the fact that by 1992 we realised the late 1980s boom had been a temporary aberration, and not the permanent turnaround we had thought.
Once we sat down it became clear that the rise in government borrowing was not a blip caused by a recession; it was STRUCTURAL.
The economy was simply not as strong as we had been thinking for several years and consequently it would never generate as much tax as we needed.
So taxes had to be raised - or spending cut back.
What hypocrisy from the Tories Nick, what hypocrisy!
Can you see the difference Nick? I should hope you remember those years! Have a nice day Nick.

  • 15.
  • At on 13 Mar 2008,
  • Bob JOnes wrote:

Today, we are a day closer to the end of the Labour government. However, if they keep swapping policies like they do with the Tories, I despair for what type of Tories we are going to get.

Having said all that, The simple policy which can be implemented to sort out this country is to reduce the spending on everything by 25% and reduce the level of tax in this country by 15%.

Between these two numbers will be millions of unemployed media types and non job public sector workers - and the economy will get stronger thanks to their absence!

let battle commence!

  • 16.
  • At on 13 Mar 2008,
  • David Lester wrote:

To solve this problem, let's consider a typical case of an incapacity benefit claimant. The individual is an Oxbridge science graduate with manic depression, and has been on IB for over ten years. For the last two years the drugs have barely been containing her illness. This situation arises because mental health is not one of the governement's targets, and is excacerbated by the local mental health trust being one of the worst in the country. Ten consultant psychiatrists in eight years is not very good for "continuity of care".

Finding an employer willing to employ someone with such a patchy record of employment would be merely the first hurdle. Next, any hint of high stress in the job will cause hospitalization, which, given that it would be for a minimum period of two or three months would be expensive for both the local health authority and the employer who'd need to find temporary cover. I predict that without legislative changes, she'd be out of her job by the time she was discharged from hospital.

What needs to happen:

(1) Employment legislation to ensure the rights of non-registered disabled mental health patients (many of whom are clever and wish to work, just in non-high stress roles).

(2) A properly financed Mental Health Service. Much crime (assaults), drug misuse (many mental health patients "self medicate" with alcohol or illegal drugs when their symptoms become overwhelming), and prison overcrowding can be attributed to funding deficiencies in the Mental Health Services. It is with grim irony that she refers to current mental health policy as "neglect in the community".

(3) Training. She used to be an audiologist, a job she enjoyed. This now requires an MSc. Payment towards the cost of obtaining such a degree would be most helpful.

Frankly, as someone who's bidding for five million of government funds this year, which will pay for a handful of leading researchers and the kit we need to do the brain experiments, I'm deeply unimpressed with the sum of 100 million to help one million benefit claimants, many of whom will have mental health issues.

  • 17.
  • At on 13 Mar 2008,
  • Aoife Tobin wrote:

I find these proposals for those on Long Term Incapcity Benefit very worrying. I have been on Incapacity Benefit since I had to be signed off work (from the four part-time jobs I had) in May 2005 because I became ill with Myalgic Encephalomyelitis. This change, therefore, will affect me.

If it is done well it could be fantastic. I want to work. I was signed off when I was nineteen years old, and I had worked every year from the age of fifteen. Currently I am struggling through a University course with only 8 hours of contact a week. Without Incapacity Benefit I would not be able to buy food, as there is an expectation that University students will have a job whilst they study (demonstrated by over half of my University's accomodation costing more than the available student loan). I cannot currently attend eight hours a week in any week, because I have to be excused due to my illness regularly. In the summer holidays, however, I have nothing else to do, and six or eight hours supported work would be a welcome thing for me. Currently, it is very hard for me to get permitted work without the DWP arguing that I am fit for full time employment and taking away the benefits I need to survive.

If these work capability programs take actual needs and abilities into account, and allows a continuence of long-term-rate Incapacity Benefit, or and instant return to that rate if after a short period of trying to work it makes me too ill to continue, then I will welcome this scheme with open arms.

HOWEVER.... my experiance thus far in the world of benefits is that measures designed, supposedly, to help and support, turn out kicking very ill people off of benefits and leaving them to fend for themselves. I know too many people bedbound with ME receiving little or no benefits, reliant entirely on being cared for by family members, because they've been too ill to attend medicals or appeals processes. This is unacceptable.

Please do the right thing with this legislation and actually help those who need it, instead of treating everybody claiming Incapacity Benefits as work-shy scroungers!

  • 18.
  • At on 13 Mar 2008,
  • Alex Brodie, London wrote:

Nick - when can we expect these heroic Tories to call for an immediate halt to the obscene "snouts in the trough" scandal exposed on this website today by the 91热爆's story "MPs' 拢10,000 kitchens on expenses"?

  • 19.
  • At on 13 Mar 2008,
  • Colin wrote:

Shouldn't we have think up a new word for 'Blairites' now?

  • 20.
  • At on 14 Mar 2008,
  • f clarke wrote:

all this talk of "getting people off benefits " worries me as no-one has yet suggested who will employ them ? employers are already required to employ a proportion of disablesd peole where feasible but few do - the government cant just withdraw benefits without offering an alternative - so what is the alternative ? - fruit and veg picking (seasonal work) or maybe work schemes to blur the figures like the tories community programme in the 80's - we had 30 staff members running the city farm at that time - all "off the dole" for one year only ... or maybe they could work for mp's - oh no you have to be a family member for that don't you? perhaps employers will be compelled or bribed with incentives to offer jobs to the sick and unemployed rather than promoting within the current structure... maybe they will offer them your job have you thought of that ??
meantime although living on benefits no one is exactly rich at that level - have a look at what the benefit system will give you to furnish a house then compare it to the mp's expense allowances! All this policy does is pay large amounts to outside firms to harass the long term sick back to work without offering any solution to why they might be ill or who will employ them. its nothing short of a witch hunt and everyone should consider how they would like to be treated if they lost their job or health before they judge

  • 21.
  • At on 14 Mar 2008,
  • norman cater wrote:

It seems to me that the contributors to this blog are members of the Labour and conservertive parties.

  • 22.
  • At on 14 Mar 2008,
  • geoff wrote:

One thing this is definitley all doing is pushing non-front bench conservative opionion out to the right.

Just read some of the views on this page from tory supporters, or the normally moderate views of someone like iain dale who seem to be joining the chorus of voices saying our taxes and spending is fundamentally too high and there needs to be a shift.

Is brown doing what blair did to hague? mercilessly occupy the middle ground and shift your opponents out to the right? My sense is cameron wont fall for it in quite the same way, but nick robinson and andrew marr both seem to detect a move to the right.

  • 23.
  • At on 14 Mar 2008,
  • Russell Holmstoel wrote:

The fact that we have just had one of the best decades of growth and prosperity of our time and that nothing has been put aside for a rainy day speaks volumes about this teams 鈥減rudence鈥.

  • 24.
  • At on 14 Mar 2008,
  • Michael Hargrave wrote:

At one point during the Chancellor's speach he used a phrase which hit me in the head:

He said:
"We are going to do everything in our power . . . . "

Sound familiar?
Who wrote the speach??

  • 25.
  • At on 14 Mar 2008,
  • Peter Holland wrote:

Astonishing! The MP's belonging to different parties spur each other to taking up ideas. The "opposition" makes constructive criticisms and co-operates with some of the governing party. Influential factions within the governing party find they cannot block ideas on doctrinaire grounds.
Is it possible that the workings of Parliament are not entirely devoted to party advantage?
Why does your commentator assume they should be?

  • 26.
  • At on 14 Mar 2008,
  • Mark wrote:

Albert said:

"Even though this Govt. did not have the billions and billions from the selling of entities like Trains, rail tracks, power generation Companies, etc. etc."

And I was there thinking that it was the Labour Government that benefited from selling off "3G Frequencies" to the tune of billions - thanks for corrrecting me!

"and all this besides the revenue that the Tories had from the North Sea Oil which they finally sold. Now if there was a Govt. that was in a position to save for a rainy day, that was the Tory years, when oil was selling at 26$a barrel. Now let us have a look at what actually happened"

Much the same as when Gordon Brown sold off our Gold reserves at a low - compared to todays prices?

The Labour "Economical Miracle" is built on billions of pounds of debt, the UK (including the Government) has prevented a recession by borrowing and spending big. Now the credit crunch is coming there is the realisation about how bad things are.

  • 27.
  • At on 14 Mar 2008,
  • greg white wrote:

Labour, Conservative, no difference. Grass roots politcs ceratinly has it's different ideologies and beliefs but the higher up the chain you look the politics stays the same but with slightly different rhetoric.
Is every one fooled that because there are 2 horses in the race that they are not being controlled by other instutions that hold the real power?
If a labour or conservative govt are in power will it make any difference? No, you will still be taxed on your fears (climate change, defence, binge drinking) and we will remain the most watched people in the world.

  • 28.
  • At on 14 Mar 2008,
  • Richard wrote:

Firstly this country is effectively bankrupt, really! The government (local and national) has estimated debt of 1.4 Trillion Pounds and the population have massive debts too, so collectively over 2 times GDP of debt, and all the obscene interest payments which go with that. Money supply and thus inflation are out of control, plus we have reached Peak Oil! The main political parties and their support structures are corrupt as hell, thanks to the rise of the damned Political Class.
We are totally screwed if we carry on as we are, that leads to EU dictatorship or third world Islamic Dhimmitude.
We need fresh political blood, yes Nationalists, who want to serve, not suck, and mend the deep wounds in the culture, morals, resources and finances of this much abused country.

  • 29.
  • At on 16 Mar 2008,
  • derek wrote:

This whole inheritence tax debate makes my blood boil. The sort of people most likely to be affected by inheritence tax are also the people most likely to have had a decent start in life anyway by virtue of been born to relatively well off parents.By the time they are in a position to benefit from their parents wills most of them will already be middle aged and financially secure.It's not as if they are even taxed on all of their inheritence. 拢300,000 of it is tax free anyway.This is, after all, un-earned income and should thus be treated as such.Why should Mr. Smythe-Jones get a tax free windfall because his parents did well when Mr Smith and Mr Jones are struggling on a pension?

  • 30.
  • At on 16 Mar 2008,
  • JR wrote:

Nick - David Freud's report didn't call for tougher tests for incapacty benefits. He did manage to call for that a whole year later in an interview with the Telegraph and he didn't understand the system anyway. What's happenening is that the revised test which was announced last year will be applied to existing customers as well as new customers.

On the DEL/AME thing - that's not used in America. Freud's analysis was that payment by results should be expanded and paid for by recycling benefit saving. Strangely enough that was what was agreed for the so-called Pathways to Work scheme in 2006 - Freud thought what he was supposed to think to back up DWP's Blairite Ministers positioning in wanting to expand the agreement with the Tresury with the support of Number 10. It's just ironic that the expansion has happened when the main road block is now in number 10.

And to take that all back to the politics - the PM has indeed probably changed his mind and backed this because it steals back the Tories main policy plank.

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