How Universal Credit and tax allowances will conflict

The introduction of the government’s flagship welfare reform, Universal Credit, introduces a major new challenge for any politician hoping to help struggling households with tax cuts. The design of Universal Credit means that, unlike under today’s tax credit system, cuts in taxes for low to middle income working families will be counteracted by reductions in a household’s Universal Credit entitlement. Put simply, under UC, tax cuts will not, in large part, reach low to middle income working households.

The reason can be summed up as follows. When someone’s taxes are cut – whether through an allowance increase or a 10p tax rate – this increases their post-tax income. However, in calculating the amount of Universal Credit a household receives, the government provides 65 pence less UC for each pound the family’s income increases after tax. This 65 per cent figure is known as the UC ‘taper’. Consequently, having cut taxes with one hand, it takes away nearly two thirds of the gain with the other.

Specifically, a tax allowance hike of £1000 would be expected to lead to a gain of £200 in post-tax income. However, this increase in post-tax income leads to a reduction of £130 in Universal Credit, and therefore a net gain of just £70. This means that rather than every taxpayer gaining a flat rate £200, those in the greatest need gain barely a third this amount – while those higher up, and not in receipt of Universal Credit, gain the full amount. With a tax cut achieved through a 10% tax band, the effect on Universal Credit is the same. Nearly two thirds of any benefit would be lost for those in UC.

This interaction between taxes and in-work benefits does not apply to large parts of the existing welfare system. While Council Tax Benefit and Housing Benefit are already assessed on the basis of net income, tax credits are assessed on the basis of pre-tax income, meaning that a tax cut has no effect on the amount of tax credit support received. The result is that, once UC is up and running (it is being phased in from later this year), tax cuts, already a relatively inefficient way of supporting low to middle income households, will become almost exclusively a policy for helping households on middle and higher incomes. For some time, as UC is rolled out gradually, those who happen to be on the new system will receive a far smaller gain from tax cuts than those remaining on the existing system.

Resolution Foundation: Will future tax cuts reach struggling working households? (pdf)

Welfare reforms: 42 cuts since May 2010

Duncan Smith argues universal credit will simplify the system, making it easier for people on benefits to make the leap into work. According to the government, a third of the 8 million households it covers will be better off. But about 450,000 disabled people will lose financially, according to Disability Rights UK, while 400,000 of the poorest households – such as single parent households with children – will be worse off by 2015, according to the Chartered Institute of Housing.

This latest phase of benefits reform will bring to 42 the bewildering number of social security cuts introduced by the coalition since May 2010. Collectively, these cuts mean households will cumulatively receive £16bn less than in 2010-11, says the CPAG. By 2015, ministers are aiming to save £18bn a year from the welfare budget, and they have signalled a further £10bn cut from 2016. The spending review in June is expected to set out further measures to contain the growing welfare bill.

Social analysts are concerned that deprivation levels are going back to those of 30 years ago, with the poorest families worse off than they were under Margaret Thatcher in the 1980s.Debt and food poverty are growing, homelessness is increasing, and demand on food banks is soaring – a sign of more people falling through the welfare net. The social impact of this impoverishment of Britain's poorest families – with more than 60% of such households in work – will unravel recent achievements in tackling poverty, say campaigners. According to Alison Garnham, chief executive of the CPAG, the coalition "is on course to leave behind the worst child poverty record of any government for a generation".

Others see the welfare agenda as presaging a profound shift in the relationship between the state and its most vulnerable citizens. "Last year I warned that we risk a decade of destitution. Some thought I was being over-dramatic," says Julia Unwin, head of the Joseph Rowntree Foundation. "I am more convinced than ever that we have a perfect storm brewing; the reforms to welfare, the economic slowdown and spiralling costs, together with an increasingly spiteful tone in how we describe people in poverty, risks the UK becoming a nation where people face destitution."

Patrick Butler, The Guardian

The Radical Government

“It’s mad when you can buy cans of lager for 25p or two litres of cider for less than £2. So we need to deal with that and this shows a radical government, not frightened of taking big decisions, rolling up its sleeves and getting on with the job.”

David Cameron, March 2012

Government to shelve plans for minimum price on alcohol - http://ind.pn/16pQUzF 

Guardian, March 2013

Britons have lost faith in George Osborne's austerity plan

A majority of people now believe that the government's economic policies are hurting rather than healing the British economy, a new poll reveals, as cabinet divisions over how best to stimulate a return to growth threaten to destabilise the coalition.

With 10 days until George Osborne delivers his crucial fourth budget, an Opinium/Observer poll shows almost three times as many voters (58%) believe the austerity drive is harming the economy as those who think it is the correct medicine to restore it to health (20%).

The findings, which follow a stinging rebuke to David Cameron on Friday by the government's own financial watchdog, will add to pressure on Osborne to change course as the UK hovers on the brink of a triple-dip recession.

The independent Office for Budget Responsibility rebutted claims by the prime minister that the government's deficit-cutting strategy was not responsible for choking off growth, stating that austerity had knocked 1.4% off GDP in the past two years.

In the first two years of the coalition, most polls showed solid support for the government's hard line on the spending cuts, though the Tory lead over Labour on economic competence has narrowed in recent weeks.

The stark poll findings come as home secretary Theresa May appeared to make a subtle pitch for the leadership of the Tory party, arguing in a speech to a ConservativeHome conference that the Tories must govern for the whole country, not just sectional interests. May said: "We're at our strongest when anyone and everyone can feel that the Conservative party is for them." The speech, resembling a leader's party conference delivery in its scope and tone, was seen as an attempt to raise her profile at a time when many Tories are losing faith in Cameron's ability to remain as leader beyond the next election.

In a further worrying development for the coalition – and for Labour – the poll shows Nigel Farage's Ukip at 17%, more than double the Lib Dems' rating, as the populist anti-EU party siphons off support from both the Tories, who are down 2% on 27% compared with a fortnight ago, and Labour, down 2% on 39%.

Even among Tory voters, only 55% thought the government's economic policies were benefiting the country. Among Lib Dem backers, just 24% thought they were helping to restore the economy.

Tensions over economic policy surfaced at the Liberal Democrat conference in Brighton, where business secretary Vince Cable – who has called for more borrowing to fund housing and other infrastructure – warned against allowing the Tories to carry on waging an "ideological jihad against public spending and public services".

Former Liberal Democrat minister Paul Burstow joined those voicing serious doubts, saying it was crucial that the rate of deficit reduction did not inflict "great damage" on the British economy's potential to bounce back to growth.

"The government has been very focused on deficit reduction quite rightly, but that shouldn't be at the expense of doing everything possible to encourage growth," he said. "There is a growing concern that quantitative easing is not putting real money into the economy and we need to look at what we can do differently to put money into the economy."

Former leader Paddy Ashdown, who is heading the party's election strategy, said he disagreed with Cable's call for more borrowing, arguing there was no reason to believe it would be a panacea for Britain's economic problems. While Ashdown said he wanted the party to make a habit of being in government, he acknowledged that it was a constant battle "with Tory heartlessness to fight, and tough decisions to take in government".

The conference was mired in controversy as a motion calling for an emergency debate on economic strategy was rejected.

Deputy prime minister Nick Clegg, grilled about the lack of growth during a stormy question-and-answer session, called for discipline from Liberal Democrats and stressed there was no "magic wand" that would pull the economy round in a hurry.

Asked by former Lib Dem London mayoral candidate Brian Paddick whether there would be more growth if the Tories were not leading the government, Clegg said there was no easy way to economic success.

This week Labour will step up pressure over the economy by calling for an urgent review of the Bank of England's Funding for Lending scheme, after figures showed net lending had fallen despite the scheme having been in operation for six months. Lending to businesses is down more than overall lending, which Labour believes is a factor in holding back recovery.

Meanwhile, a poll conducted in marginal seats by the Tory former deputy chairman Lord Ashcroft, based on interviews with more than 19,000 voters in 213 constituencies, showed the Conservatives were on course to lose 93 seats to Labour if an election were held today.

This is lower than the national swing suggested by headline voting intention polls, partly because Labour is finding it hard to break through in Conservative seats in London and parts of the south.

It suggested that Labour would win 93 of the 109 most marginal Conservative seats in which it is in second place. The swing to Labour would be biggest in the Thames Estuary, the Midlands and some northern seats, but lower in southern towns and suburbs of London.

Emphasising that the poll represented a snapshot not a prediction, Ashcroft said: "I don't want to see a Labour majority of four, let alone 84. But I hope this puts the challenge into some sort of perspective. We have a long way to go to hold on to the seats we gained last time, let alone pick up many more. But things are slightly less grim than the headline polls suggest and we have everything to play for."

A Tory source said the party did not believe the Ashcroft polling accurately represented the state of the parties.

"Private and public polling repeatedly shows when faced with a straight choice between [Ed] Miliband and Cameron the public choose Cameron," he said. "Historically opposition parties who go on to win are at this stage in the parliament more than 20 points in front. Labour are nowhere near that.

"One year ago today we were marginally ahead in the polls. A lot can happen in a year. We need to go out there and demonstrate our strengths to electors. We are already outlining things on our side – a reduction of deficit, more private sector jobs and more people in employment."

Toby Helm and Daniel Boffey, The Observer

Just one day in the life of this coalition of clowns

• NHS private sector climb-down a 'humiliating U-turn'
> Guardian

• Bedroom tax: ministers given 14 days to make case against judicial review
> Guardian

• Osborne outnumbered 26 to 1 on EU bank bonus caps
> Telegraph

• Eric Pickles to face judicial review over energy efficiency row
> Guardian

• Food banks are thriving, much to the government's embarrassment
> Guardian

• Ed Davey defends green deal interest rates
> Guardian

• Universal credit benefits system 'in meltdown', claims Labour
> Guardian

• Coalition policy on competition in the NHS is in utter chaos
> Guardian

King Rat deserts the sinking Tory ship

The Sunday Times reports that Lord Ashcroft has had enough of flittering away his money on his beloved Tory party and will withhold funding for its next general election campaign.

"Lord Ashcroft, whose finances played a crucial role in Tory efforts to win marginal seats in 2010, has told friends he has given enough money and is unwilling to devote further resources to securing an overall majority in 2015. It comes amid mounting pessimism among Tory supporters about the prospects of victory. Although Ashcroft has not publicly expressed doubts over the party’s ability to win, privately he is said to fear Labour is likely to secure more seats. A source close to Ashcroft said: “He feels he has done his bit.” "

Perhaps he doesn't like the anti-tax avoidance/evasion rhetoric coming from Downing Street. 'Lay off that, boys, and I'll see what spare change I have come the election.' Watch said rhetoric disappear fairly sharpish. Oh, and look ye hear - there's a budget coming up. Convenient. Never mind using your considerable wealth and influence to reverse the inequalities in this country, you just go ahead and sponsor the Tories to widen the gap between rich and poor even further.

Bankrolling the Tories - now there's an honourable pastime. 

Guess what happens when you go round disguising dogmatic ideological vandalism as fiscal probity

George Osborne has suffered his biggest blow yet as chancellor after the UK lost its triple-A rating, which he had repeatedly promised to protect. Moody’s, the rating agency, downgraded the UK one notch to Aa1 late on Friday night in the most serious critique yet of the government’s entire economic plan.

George Winifred Osborne: hoist by his own petard

Moody’s’ decision is highly politically damaging for the chancellor, who has pinned his credibility on retaining the trust of the bond markets. Last July, he hailed the UK’s credit rating, calling it “a reminder that despite the economic problems we face, the world has confidence that we are dealing with them”. The Conservative manifesto in 2010 promised: “We will safeguard Britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a Parliament.”

With the current structural deficit likely to remain until 2018 at the earliest, both of these promises have now been broken.

Financial Times (edit)

Back-to-work scheme breached laws, says Court of Appeal

University graduate Cait Reilly has won her Court of Appeal claim that requiring her to work for free at a Poundland discount store was unlawful. Three judges in London,  Lord Justice Pill, Lady Justice Black and Sir Stanley Burnton, ruled that the regulations under which most of the Government's back-to-work schemes were created are unlawful and quashed them. 

Reilly, 24, from Birmingham, and 40-year-old unemployed HGV driver Jamieson Wilson, from Nottingham, both succeeded in their claims that the unpaid schemes were legally flawed. Their solicitors said later the ruling means "all those people who have been sanctioned by having their jobseekers' allowance withdrawn for non-compliance with the back-to-work schemes affected will be entitled to reclaim their benefits".

In November 2011, Reilly had to leave her voluntary work at a local museum and work unpaid at the Poundland store in Kings Heath, Birmingham, under a scheme known as the "sector-based work academy". She was told that if she did not carry out the work placement she would lose her jobseeker's allowance. For two weeks she stacked shelves and cleaned floors. 

Wilson, a qualified mechanic, was told that he had to work unpaid, cleaning furniture for 30 hours a week for six months, under a scheme known as the Community Action Programme. He objected to doing unpaid work that was unrelated to his qualifications and would not help him re-enter the jobs market. He refused to participate and as a result was stripped of his jobseeker's allowance for six months.

After the ruling Public Interest Lawyers, who represent Reilly and Wilson, said the Court of Appeal's unanimous decision was a "huge setback for the Department for Work and Pensions (DWP), whose flagship reforms have been beset with problems since their inception". They said that "until new regulations are enacted with proper parliamentary approval, nobody can be compelled to participate on the schemes". 

Solicitor Tessa Gregory, said: "Today's judgment sends Iain Duncan Smith back to the drawing board to make fresh regulations which are fair and comply with the court's ruling. "Until that time nobody can be lawfully forced to participate in schemes affected such as the Work Programme and the Community Action Programme. All of those who have been stripped of their benefits have a right to claim the money back that has been unlawfully taken away from them."

Press Association

The House Interview with David Cameron (full transcript)

THE HOUSE: Cuts to child benefit are kicking in, and stay at home mums complain that they won't get much out of plans to help out with childcare payments. So they naturally start asking about marriage couple tax allowances ...

PRIME MINISTER: Well, you need to stand back from all the issues and sort of work out what is the, you know, coalition government trying to do here? First of all we have to deal with the deficit. We have to get the deficit down. We've made good progress. We're on the right track. But you can't ask.. you can't deal with the deficit, only by dealing with, you know, welfare issues at the bottom or high taxes at the top. You have to ask everyone to make a contribution. And that is why I think it is right to say to better off couples that, you know, if you’ve got someone earning over £60000 you don’t get your child benefit. I think it's a perfectly, you know, I thought it was proved again in the House of Commons yesterday, it’s a perfectly fair and reasonable argument. So that is why we're taking that step. I don’t want to take child benefit away from anybody but if you're trying to have a set of policies which is fair you need to do that. That obviously affects all people earning over £50000, particularly people earning over £60000, they won't have any child benefit. I accept that is a sacrifice. But we have to try and do this in a way which is fair. I think it is fair.

There's a separate question, what can we do for people who work hard, who want to do the right thing, who want to provide for their families and one of the biggest costs for people who work hard and do the right thing is the cost of childcare. Now obviously we help people with childcare through the working tax credits and we help people through the subsidised places for those two, three and four olds, but, you know, it would be good, wouldn’t it, for people who work hard, who need childcare, who see there's a very big cost, to give them some assistance, and not just those on tax credits, and that’s exactly what we're trying to do and that’s what we'll be announcing in the weeks to come, but to me the two issues are separate.

THE HOUSE: What about people who don’t qualify for childcare? What about the marriage tax breaks?

PM: We're also committed... [I] reaffirm that we are committed to recognising marriage in the tax system and we'll complete that during this parliament, but, you know, to me though it's quite a pressing issue, well there all pressing issues, but I think helping people with the cost of childcare…

THE HOUSE: Someone at No 10 suggested it would be sooner rather than later.... It won't be last minute?

PM: You'll have to wait and see. This is not an interview to give you policy exclusives…

THE HOUSE:  Boris has said child benefit helped pay for a handful of half decent skiing holidays – was that fair?

PM: Look. I'm not saying that taking away child benefit from people is easy. There are many people...I don’t think people who earn £50000, £60000 are rich. You live in an expensive part of the country, you’ve got big costs to contend with, and you're paying for the mortgage, you're paying for the season ticket to get to work, you're meeting all the costs of bringing up children, you know, life is very expensive. I don’t say people on £50000, £60000 are rich but they are clearly better off than people on £20000 or £30000. So as I say I don’t relish taking money from anyone and you know child benefit is a popular and successful benefit. It goes to the mum, you know, it’s a good slug of money, £20 for the first child, so I don’t relish taking it away from anyone and people I'm sure put it to good use, but you know to govern is to choose we have to make difficult choices about the deficit and I think this was the right choice.

THE HOUSE: What about cuts to elderly benefits. How much of an issue will that be in the Tory manifesto?

PM: We haven’t got round to writing the Conservative manifesto, it will be written in due course. I can promise you two things. It will be manifesto and it will be Conservative. You know, I’ve made a promise I’m keeping my promise and that’s all there is to it and I think that is important. I think you need to stand back from all these things and ask the bigger question. As the Parliamentary sort of season starts all over again what I think is so clear is the coalition parties and I would argue particularly my party have got a very clear view about what needs to happen this year. We’re going to go on rebalancing the economy – we’ve got a proper agenda to do that. We’ve got to go on dealing with the deficit – we’ve got a proper agenda to do that. Far from sort of running out of steam you can see from the Coalition on childcare, on road building, on paying for long term care, you know, proper crunchy policies that make a real difference to people in this country, a packed agenda, and what do you see, it struck me yesterday, what do you see on the other side of politics? What is there on offer? Absolutely  nothing, not a word to do with what to do with the deficit, how to grow the economy, how to increase the scale of the private sector, how to encourage business, what to do about education or healthcare, you know, it is extraordinary half way through a parliament, when I think of where we got to half way through the last parliament, now you might not have agreed with all our policies but we had huge policy commissions which reported, we were setting the agenda on a whole series of issues, whether it was education reform, or health reform, or welfare. Nothing. So I feel very fired up with a full agenda and a very clear mission of what the government is all about. Winning for Britain in the global race is… I think that if politics is about having a clear agenda, a clear passion, things that need  to be done, and difficult decisions that need to be taken, then we’ve got a very, very strong start to the year.

THE HOUSE: Do you have enough time to do that long-term, big, forward planning?

PM: Life is a mixture. It’s a permanent battle in this job to focus. You have to deal with short term issues you know, at any one time. You’ve got everything from what happens at the Downing Street gates to what’s happening on the other side of the world to what appeared on the news headlines. There’s always things that come up and the challenge of this job is to deal with the day to day but at the same time spend enough time on the long term strategic issues that the country faces. I think there have some sort of machinery successes. I think the National Security Council is a very good way of focusing government, politicians on long term challenges for Britain and I think it’s been effective in prioritising, you know, trade in foreign policy, a good shift for Britain. It’s good for the long term. I think on the economy we have very clear long term plan for dealing with the deficit and growing the private sector but it’s a permanent battle in Government, there’s no doubt about it, and I think we are far and away better than the last government which was absolutely short term...long term for it was about a week - but there’s always more than you can do.

THE HOUSE: What do you make of the break down of relations in the Lords?

PM: Look, I think the coalition parties have obviously got to support coalition policy and that should be the same in the Commons as in the Lords. Look, I didn’t recognise a lot of the stuff that’s been written frankly. You know, [ex Lords Leader] Tom Strathclyde did a fantastic job for 25 years on the front bench. I mean, I know when someone resigns and you’re not told in advance you think it’s somehow unfair so you have to invent some reason as to why they resigned.

THE HOUSE: That’s what Craig Oliver said…

PM: It was! I gather the Lobby were very upset they weren’t told first, like they've got a constitutional right to know. I mean, please! It may be unorthodox: cabinet minister rings Prime Minister and says I’ve served for 25 years consecutively, I’d quite like to resign and pursue another career. Prime Minister says yes, let’s announce it at the first available opportunity, oh what’s that, Monday? Let’s do it at the cabinet. How nice. You know...it’s not like he[OLIVER] sneaked on you? He did a great job. Look of course it’s difficult when you lose votes in the lords. But frankly, I mean was an adviser to a Conservative Government and we used to lose votes in the Lords. That’s what happens in the Lords. It’s a difficult environment.

THE HOUSE: So you will be rebalancing it?

PM: Yes, I will be appointing…. I will be making some further recommendations. I think it’s important to keep refreshing the talent in the House of Lords and obviously it’s important that we do so in line with what we said in the Coalition Agreement.

THE HOUSE: This year?

PM: Yes, yes, yes.

THE HOUSE: In the summer?

PM: Sooner. As I say, there’s a Coalition Agreement pledge about the House of Lords. I’m very conscious that this should be done in a reasonable and proper way… that you should have good candidates that will bring something to the House of Lords. I would say that if you look at the people that.. the nominations for Conservative peerages over the last two and half years I think we’ve got some very talented people who are now.

THE HOUSE: Like Helen Newlove?

PM: Yes, I’m delighted she’s going to be the Victims Commissioner. I think you’ve got Helen Newlove, you’ve got Tina Stowell...you’ve got a lot people who are now in the whips office or become junior ministers, you know, so you’ve got to always ask what will they bring to the House of Lords, what will they contribute, but I think we can be proud of the people we’ve got there.

THE HOUSE: And you think that that outside experience is a reason why the Lords is a great asset?

PM: I think it’s a great asset. Clearly at some stage there does need to be reform in terms of the size and you know, we need, to, at some stage... Obviously our proposals for reform did not find favour, we had to step back from that, but at some stage we have to work out, I don’t know, issues around.. to sort of normalise its size… but that’s not an agenda item right now.

THE HOUSE: You just gave your polling presentation to your MPs…

PM: Polling presentation!? It wasn’t, it was a proper discussion with MPs about, you know, what our plans are for this year, the Mid Term Review, what our campaign plans are for the next election, what our targeting strategy is, and yes, of course, very good to share a bit of polling information with them, but it was a proper discussion a political party ought to have.

THE HOUSE: It showed that Eds Balls and Miliband are still not popular. Are they your best chance of winning in 2015?

PM: No, our best chance of winning an overall majority is demonstrating the Conservatives in government have consistently delivered for people who work hard and want to get on and do the right thing. And you know we’ll be saying at the next election: It’s been tough, its s a very difficult time for our country, but you know we’ve got the deficit down, we’ve created private sector jobs, we helped you by freezing the council tax, cutting petrol duty, taking 2m people out of tax, we started to sort out the mess of Labour's education system, it’s now sharper, better, better prospects for schools, we’ve sorted out the mess of welfare, we're very sleeves rolled up, we were the people that have got Britain on the right track, don’t turn back, trust us to keep delivering, to keep providing, that’s what the message will be. I’m a great believer in the end parties make their own fortunes. You can’t sit back and rely on your opponents to make your arguments for you. Look I think it’s a real weakness Labour have that they simply refuse to accept that their over spending and over borrowing was part of the problem and until they do that I don’t think anyone will listen to them, but I’m not sitting back thinking they will never realise that. I want a positive case for a Conservative majority government and I think we’re on the way to building it.

THE HOUSE: But it helps, that people can’t see Ed Miliband as a future PM?

PM: I think the point is that... the test that Labour failed is everybody knows that the country faces difficult choices at a difficult time and people see that Labour just aren’t facing up to those choices  and in the end that I think is what it’s all about. You know, the public, I always say this but it’s totally true, I sense it as I go round the country and bump into people and have all sorts of snatched conversations in all sorts of places, the British public are intensely reasonable, they know that it’s a difficult situation, they know tough choices have to be made, they’re not going to support everything you do, there will be some things you do that they don’t like, but there’s a general sense that if you are getting on with it, if you’re making the decisions, if you’re trying to get the country on the right track, you know, we’ll let you do that and we’ll judge you at the end of five years, but if they a see a party that is not making those choices , that is not making  those decisions, that won’t take any responsibility for what happened in the past, I don’t think the British public will in the end trust that.

THE HOUSE: A question on Europe. Should Ukip take part in the TV debates?

PM: I think that the TV debates… Obviously we have to decide on this nearer the time, but the TV debates should be about, you know, the parties that are going to form the Government, in my view.

THE HOUSE: Will you look at the rules on whether to restrict benefits to EU migrants?

PM: Look, it’s worth looking at the current rules and regulations, what other countries do, what could we do. You know, we should just be generally impatient and enthusiastic for getting the relationship right, and there may be some things you can under existing rules that that other countries do that we could have a proper good look at. The same applies with this issue of deport first and appeal later - other countries do operate systems like this. I’m very keen that we should be really kicking the tyres to see what more we can do.

THE HOUSE: Have you renewed your drive to attract black and ethnic minority candidates?

PM: It’s never ending drive, I think, look we’ve made some good progress at the last election and some very talented MPs and can see you know people like Sam Gymiah, Priti Patel and Sajid Javid, they’re not there because they’re ethnic minorities they’re there because they are extremely talented people, but the Conservative Party needed to reach out as I’ve put it in the past people were opening a door and seeing all white faces and didn’t find that very welcoming, we need to go out and attract very talented people from ethnic minority communities to join the Conservatives, stands as a Conservatives, stand for local government, stand for Parliament, so there’s no let up in that, we’ll go on encouraging that.

THE HOUSE: Does the way the Republican Party suffered a demographic squeeze in the US worry you?

PM: I think that… look, does the Conservative Party need to do better amongst black and ethnic minority communities? Yes. Do we need to do better in urban areas and in our cities? Yes. Do we need to go even further in improving our position in the north which was transformed at the last election? Yes. Are we still not nearly as strong as I’d like us to be in Scotland and Wales? Yes. But, you know, all of these things, I would say if you go back over the seven years that I’ve been doing this job we have made some… you know, the Welsh situation is transformed from when I became party leader. Obviously we’re a lot stronger in the North West and West Yorkshire, we’ve still got quite a lot of extra work to do in the North East, and Scotland is a work in progress….

THE HOUSE: In the reshuffle you promoted a lot of women, some rising stars. Will that make it easier whenever the next reshuffle is to get people into the Cabinet?

PM: Absolutely. Why the reshuffle was so important - and why it was important to let go a number of colleagues who had done an extremely good job - was because the party had changed so much from having only 10 years ago 170 MPs to suddenly having 305 new MPs, a vast new intake at the last election we needed to promote some of the new talent. You can’t just catapult people into the Cabinet. You need to give people the chance to shine in junior ministerial jobs so that’s what I’ve done. There’s a lot of new talent on the frontbench and I think it’s performing very well. If you look at Sajid Javid [in the uprating bill debate], I think he did a fantastic job. We have got a Planning Minister [Nick Boles] who’s really leading the debate on getting more homes built in our country, we have an Apprenticeship Minister who’s getting behind the idea of pre-apprenticeship training and making sure that apprenticeships are of quality. You’ve just seen this week we’ve got a team of justice ministers [Jeremy Wright, Helen Grant], junior ministers who do a brilliant job in terms of revolutionising the way we deliver probation and rehabilitation of prisoners. I’ve put Liz Truss at the Department of Education doing childcare, something she has a passion for. I feel not only have I promoted new talent, I’ve put round pegs into round holes. I think people can see it was a very talented intake in 2010. It’s definitely making its presence felt in Parliament, it’s making its presence felt in Government. These reshuffles are important because you can’t just fix it in one go. You need to get the talent moving through the ranks.

THE HOUSE: Will you have another reshuffle this year?

PM: You asked me last year and I gave you a very elliptical answer….There’s nothing planned.

THE HOUSE:  Will you stick to your pledge in Opposition [to get a third of ministers as women]?

PM: Obviously I can’t apply my pledge to the Lib Dems and obviously they need to improve their diversity and I’ll be having a word with the Deputy Prime Minister about that. I remain committed to what I said. I want to deliver a more diverse party and I want to encourage more women and more ethnic minorities, more people from different parts of the country, from different backgrounds, into the party at all levels. And the good thing about the Parliamentary party in 2013 is that the talent is in there, the spread of people is there but it needs to be promoted.

THE HOUSE: Nancy has her 9th birthday [coming up]…

PM: The list of the transitional demands is building up…

THE HOUSE:  Are you happy that London schools are now good enough for you to send her to a state secondary?

PM: In London there’s a real improvement taking place. There‘s a revolution taking place in all schools actually. And it’s very exciting. So a small example of it is, I took all the secondary heads of West Oxfordshire and brought them here, sat them round the Cabinet table with the head teacher from Burlington Danes. And pointed out that at Burlington Danes, 50% ethnic minority, I think 30% free school meals, many children with multiple disadvantages, but you know incredibly good results at GCSE, better than some of the schools in my own constituency in leafy West Oxfordshire. And they then all went for a tour round Burlington Danes and we had a lively debate. Since then actually a number of them have said to me ‘You know, I wasn’t dead keen on the idea but we’ve picked up some fascinating ideas about how to raise aspiration, how to raise attainment and I think when you look across the education system, whether it is action to deal with failing primary schools, whether it is the academy movement, whether it’s free schools, I think the whole debate now is about quality, about rigour, about not dumbing down, I feel the great supertanker was heading in one direction and the wrong direction and it really is turning. There’s a big culture change in our schools and that’s taking place in London. So I remain committed to what I’ve said in the past. I’m very pleased with St Mary Abbott’s. I did Nancy’s spelling test on the way to school, I was very proud of the fact that she got neighbourhood and library right. You probably have to sub people on words like that..”

THE HOUSE: What did you make of the proposal in London to close police stations and set up in post offices, supermarkets?

PM: First of all I would praise the police for coping with quite steep spending reductions while a) cutting crime  and b) increasing the proportion of officers on the front line. I don’t think it’s for politicians to say you’ve got to have this police station or that police station. What matters is are the police visible, are they on the beat are they out in our communities? Is it easier to report a crime, what is the response time like? Policing is not about bricks and mortar, it’s about boots on the ground. Of course there are parts of the estate, ‘where are the prison cells?’ ‘how quickly can you arrest someone and process them?’ that are important, but it shouldn’t be politicians that say ‘you’ve got to have this exact laydown’. What matters is are you there, are you responding, are you cutting crime and can you process prisoners? And they need to make sure they can do that.

THE HOUSE: On Leveson, Oliver Letwin has come up with the solution of a Royal Charter. But editors say it could create extra problems with statutory involvement and is so complex they need more time. What do you think of the Charter idea?

PM: It is a simple idea. We are trying to solve an age old problem which is ‘who appoints the guardians?’  In Leveson, you have the press producing a self regulatory body consistent with a set of Leveson principles , that needs to happen. And then the Government needs to find a way to create a body that adjudicates whether the press regulator is doing its job properly. And that’s the tricky bit. Because if you straight legislate for it, my concern is you cross the Rubicon of writing press legislation into law. But you need to do it in a way which is authoritative and yet doesn’t have direct appointments by politicians and it seems to me the Royal Charter does that. Of course any system requires some legislation because you want to set up the damages exemption which is at the heart of Leveson, which the press support. I think we have come up with a good answer. I’m very keen for this to be agreed on an all party basis which is what we are working on, so there’s a series of talks. This can’t be allowed to go on for ever because we’ve got to get on and deal with this. But I’m absolutely committed to implementing Leveson, implementing it by the self-regulatory body and implementing it without the direct legislative statutory underpinning but in this way it seems to me a very clever way of providing an adjudicating body which would be absolutely consistent with what Leveson was recommending.”

THE HOUSE: Will you give the industry a few more months. Isn’t it better to get it right than rush it?

PM: I don’t want to rush it, but of course this will all take time. Even when you’ve worked out how to establish the adjudicating body, the adjudicating body then has to be established and it then has to adjudicate whether the self-regulating body is doing the job properly, so there’s time built in. Even if we could agree this among the political parties tomorrow, there’s still quite a lot of time built in for the adjudicating body to be set up and for the self-regulatory system to be put in place. But I’m confident this all can be done. Leveson has opened a really worthwhile and interesting door which we can all walk through. The press can walk through with a much improved regulatory system that the country can be proud of, politicians have got a route down which to go to deliver a regulatory system that we can be proud of and say to the victims we’ve done the work that’s necessary and I’m very keen that we can all walk through the door.”

THE HOUSE: The Chilcot report is due out this year.  Are you geared up, within Whitehall, for responding quickly to that or is it going to take a long time?

PM: That is a very good question. It’s taken such a long time that it’s a very good question. I need to, we need to go away and think about what we expect to come out of it and how we respond, I don’t have a straight simple answer to that. It’s obviously a very important report. We spent a lot of time in Opposition saying this must be set up, it must be set up properly, we must learn the lessons, and so I suspect it’s going to be a very big and serious piece of work and it will take some time to digest. We don’t have a day yet do we? It mustn’t slip too far.

THE HOUSE: Was Sam delighted by suggestion could be here in this building [in No10]  to 2020 -  or did she throw a handbag at you?

PM: She’s fully supportive of my work. She is doing amazing job, she’s supporting lots of charities, she’s still working two days a week. She’s fantastically supportive of me, she’s brilliant with the children, I’m full of admiration for her.

THE HOUSE: Have you had a Date Night lately?

PM: Last night, we went out for supper, dinner, quite early actually, I was tucked up in bed nice and early last night. But we try and get out of the cage on a regular basis. It’s lovely living here, it’s a wonderful flat that she’s created, the children are very happy. And she’s very happy and family life is good. Christmas was lovely because we got away, we spent a decent amount of time in our home in the constituency, which does feel like home. Of course, there’s the police officers wandering round the garden, but you really do have yourself to yourself. But no she’s on good form.”

THE HOUSE: Last year you told us you were reading a history of the Tory party. Which book are you reading now?

PM: I’m reading Simon Jenkins’ history of England. I did that thing when you go Christmas shopping and I bought one or two things that I just thought I’d be interested in reading.  I’m on Vikings at the moment. I’m reading about Vikings while watching the Killing. The Killing and Vikings, Jutland has been looming large.

THE HOUSE: Are you into Borgen?

PM: No! God, no. It’s just whether Morgen Shmorgen is Health Minister or is Education Minister..it’s too much like work.

THE HOUSE: You call this a Ronseal Government. When did you last attempt DIY?

PM: Very good question. Last Christmas I assembled some IKEA furniture in Dean [the village where his constituency home is] which was very successful. I’m sure I did do some important DIY…yes I did… I partially reconstructed a shed, it was mostly destruction than reconstruction…”

THE HOUSE: What was your favourite Christmas present from Sam?

PM: She did give me the Killing III, that was our luxury at Christmas. So that’s it, we’ve done it. We had a decent time at home. We did a bit of back-to-back [viewing of episodes]. We cheated, she gave it to me before Christmas, so we opened it  early.

THE HOUSE: And Elwen?

PM: He’s obsessed by Lego. They construct then demand more and more. That’s the other DIY I did, I constructed a Lego police station! I took Elwen to see Chelsea too.” [When they beat Aston Villa 8-0 at Christmas] “I said ‘you’ll never see another game like this’. The home fans chanted ‘Cameron, Cameron, give us a song’.

The End

Whining Christians

"Whining Christians: if they were serious about commemorating their Saviour's method of judicial murder, they would carry round full size crosses and endure lifelong unemployability as a testament to their faith. Wimps."

Martin Rowson, Twitter

Re : British Airways Christian employee Nadia Eweida wins case - http://bbc.in/UMRwr8

David Cameron thanks Olympic shirkers

"You've not just helped make London 2012 happen, you've put a smile on the nation's face."

“At the end of the most unbelievably successful Olympics and Paralympics, I just want to say what a golden summer of British sport and what a golden summer it’s been for our country. I think it’s given the country a tremendous lift, I think it’s brought the country together, and I think it’s given us memories that we will be talking about for years and generations to come. I think that 2012 will be like 1966, something we’ll talk about with our children and grandchildren, something that will continue to delight us long after this time has passed.

Of course, there are lots of people to thank: the athletes and the Paralympians who have delighted us and amazed us; the army and the police who've done a fantastic job with the security services in terms of keeping us safe; the shirkers, some of whom are standing behind me. Yes, the shirkers that got out of their pits, opened the curtains for once and then put this incredible smiling face on the Games and delighted the world - all for nothing. Who'd have thought it, eh? And of course all those who were responsible for delivering a safe, secure and, frankly, brilliant, best ever – in my view – Olympics and Paralympics. Yes, even more shirkers, who took a few weeks' employment with that shabby outfit G4S just so that they could say they'd been part of the Olympics.

But I think there’s something else as well that we can take from this extraordinary period, and that is that for countries to succeed in this competitive and difficult world, you need to have confidence; you need to have confidence that you can do big things and get them right; you need to have confidence that you can take on the best, be the best, beat the best; and I think the Olympics and the Paralympics, we've absolutely done that as a country. It’s brought the country together; it’s given us this incredible lift. And it's all down to the shirkers.

Of course, once the parade is over, once all the thank-yous have been said, once the celebration has ended, some of that spirit inevitably will fade as everyone knuckles down and gets back to shirking after this magical summer, but I think we’ll always have that knowledge, that spirit of what we can be as a country. I think this summer brought out the best in Britain for the world to see, and that spirit we must cling to for all of the months and the years ahead. As long as it doesn't mean any more handouts for the shirkers, obviously. I mean, well done and all that but don't take the piss, yeah?”

Starbucks hit by UK Uncut protests as tax row boils over

Activists stage a series of sit-ins amid concerns that the firm's decision to pay the Treasury £20m over two years misses the point

Anti-tax avoidance protesters have targeted UK branches of Starbucks, attempting to turn them into women's refuges and crèches, saying that the company's unilateral decision to pay £20m to the Treasury over two years is missing the point. The coffee chain faced a backlash from customers when it emerged last month they had received 3bn in sales over 14 years yet claimed to have made a loss in Britain each year, vastly reducing its corporation tax bill.

The campaign group UK Uncut has organised 45 protests to pressurise the government to clamp down on tax avoidance and roll back cuts to public services. A UK Uncut spokesperson, Anna Walker, said that 1,000 people attended 45 sit-ins across the country.

At Starbucks' flagship store on Conduit Street in central London about 40 activists and six children were threatened by police with arrest for aggravated trespass and – after a brief discussion – the protesters agreed to leave. At Vigo Street in London's Mayfair, about 60 protesters gathered among customers sipping lattes and herbal tea, chanting: "If you don't pay your taxes we'll shut you down."

The protests are taking the form of sit-ins, designed to highlight the impact on women's services by transforming Starbucks branches into spaces that reflect those being lost due to the government's deficit-reduction measures.

Anna Walker stressed it was not targeting Starbucks staff, but highlighting the impact of the government's austerity measures on the most vulnerable. "This is not just about Starbucks and tax avoidance," she said. "That's just the tip of the iceberg. The government is not only refusing to tackle tax avoidance, but it's dismantling public services because it loses £25bn a year to it. People are incredibly angry when they see multinational companies getting off scot-free when they are the ones feeling the pinch."
 
On Thursday, Starbucks UK managing director, Kris Engskov unilaterally announced that the coffee company would pay £10m a year over the next two years. Starbucks came under fire earlier this year when it was revealed that it had paid only £8.6m in tax since it opened its first store in the UK 14 years ago. In that time, the coffee chain has made £3bn in sales yet has claimed it has made a loss in Britain every year. In October, HMRC said a total of £32bn had been lost to tax avoidance in the past year, an increase of £1bn on 2010-11.

Words: The Guardian
Pictures: Getty Images

Social enterprises and charities can't thrive in toxic public sector markets

The Shadow State
Peter Holbrook writes about the findings and ambitions
of Social Enterprise UK's new report

Decades of outsourcing by successive governments now means that £82bn, a third of spending on public sector commissioning and procurement, is spent with independent providers. Accelerated by recent policies, the health and social care act, the work programme and welfare reform act, this is predicted to rise to £140bn by 2014. But with the majority of contracts going to large firms and their shareholders, we're witnessing money moving out of the public realm and being turned into private wealth. The consequences of this are serious for both society and the wider economy.

The Shadow State provides evidence that, in the drive to maximise shareholder profit, sub-standard public services are being delivered by private firms in areas where it really matters – in care for children, the elderly and the disabled. As these companies seek to cut costs wherever they can, we're seeing staff wages being driven down and councils having to pick up the bill, whether in housing benefit or, in the longer term, great swathes of people who can't save for their retirement. In effect, taxpayers are subsiding multinational firms who are simply not paying their way.

At the same time, there is mounting evidence that some social enterprises and charities are being squeezed out of public service markets. Civil society organisations with a social mission in their DNA, which put people and communities first, and that reinvest their profits to improve the quality and number of services, are not faring well. Social enterprises and charities can't thrive in markets that have become toxic. The result is a lack of competition, leaving commissioners with little choice of provider.

Yet we have a once-in-a-generation opportunity to change the direction of travel. The public services (social value) act is throwing commissioners a lifeline to contract for community wealth, not private wealth. The culture of commissioning is such that councils are too often expected to make decisions based on lowest cost rather than 'whole community' prosperity. They're understandably following the lead of their peers – across the country, councils are opting to commission from private firms which vow to provide services at low prices. The danger is that when social enterprises and charities disappear, large private firms will put their prices up, and commissioners, service users and taxpayers will be held to ransom.

We are calling on government to strengthen the social value act. It's due to become law in January, it had the backing of the social enterprise sector and cross-party political support, and it has the potential to create more open markets. The legislation should help create a more level playing field for social enterprises and charities to bid alongside private sector providers by making sure that the additional 'social value' (social and economic well-being) they create is taken into account when contracts are drawn up.

Multinationals and other big businesses can't be blamed for gravitating towards the UK's public service markets – despite all the cuts, there is still a lot of money changing hands. Some services are perhaps best provided by expert providers in the private sector. But many of the services at stake are dealing primarily in human relationships, and economies of scale and shareholder value are often at odds with what is really needed in these markets. Currently, firms are being allowed to operate in a way that is harmful, and without full and proper transparency. All providers of public services should be open to scrutiny to allow the public to hold them to account. That's why we are calling on government to intervene. We're recommending open-book accounting on public sector contracts, and a range of other measures to help prevent excessive profiteering and increase transparency. These recommendations do not solely aim to improve the environment for social enterprises and charities. They seek to improve public sector commissioning and markets for all, but as a result we believe social sector organisations will flourish.

It's dangerous for the national debate on our public services to rumble on and focus only on state vs independent and whether marketisation should continue or be halted.

There's a huge market out there already and it could be dramatically improved with a huge impact on national well-being. The question now has to be: what kind of businesses do commissioners in government departments and in councils need to deliver services for citizens? How do we want these business to behave? At the moment too many are serving a wealthy minority, when they should be looking after the 99%.

Polling reveals little public support for shareholders making profits from public services

Polling for the Shadow State has identified public dissatisfaction about shareholders making profits from the delivery of public services. Two thirds of UK adults believe it is unacceptable for shareholders to profit from running hospitals and health services (66%), children's homes (66%), police services (66%), and care homes for elderly and disabled people (63%).

The poll suggests a lack of awareness about who is running some public services funded by the taxpayer. Almost half of UK adults (43%) believe the government runs the majority of children's care homes in Britain, whereas in reality the private sector now runs 65% of residential homes for children. Only 11% are run by charities.

Peter Holbrook is chief executive of Social Enterprise UK. The Shadow State is available to download here.

The Guardian

Councils angry at £1bn of stealth cuts

Council leaders have accused the government of imposing some £1bn of cuts by stealth, leaving town halls dealing with an even bigger reduction in income than they had been braced for. The spending settlement of 2010, which covers most of this parliament, saw local government take a steep cut of 28 per cent to their main grant over a four-year period.

The latest phase of these reductions will be announced in mid-December by the Treasury, just days after George Osborne’s Autumn Statement. However, the Local Government Association says it has identified nearly £1bn of additional cuts or delays to grants in recent months, further adding to their woes. In some authorities these cuts could amount to “more than 10 per cent of core funding from government”, the LGA warned in a briefing note to council leaders seen by the Financial Times.

Local government had hoped that 2013-14 would be a year when overall government funding would be “reasonably stable” after two years of steep cuts, according to the group. Under those proposals, set out in the comprehensive spending review, there should have only been a 0.8 per cent cut to this year’s core funding – after 9 per cent cuts in both 2011/12 and 2012/13. However, “what we are now seeing is the prospect of potential funding reductions that . . . amount to a total funding reduction of up to a further £1bn or more,” the document says. 

The £1bn figure for cuts and deferred grants includes £345m of delayed business rate payments and £200m of education support funding switched to academies. The figure also includes a £150m reduction in the early intervention grant and £100m of “under-funding” from changes in council tax benefit. The final component is an estimated £200m stemming from a pay freeze in local government which the Treasury clawed back from councils.

One Whitehall official said that some of the LGA’s calculations had been “disingenuous”. A spokesman for the communities department said that the full details of next year’s spending would not be clear until the local government finance settlement in December. “Councils account for a quarter of all public spending – this year English councils will spend £114bn – so it is vital they continue to play their part tackling the inherited budget deficit,” he said.

But Sir Merrick Cockell, chair of the LGA, said he was in talks with senior ministers to try to “sort out” the issue. “This has significant implications for all local services. In particular it threatens to severely limit councils’ ability to promote growth at a local level, which would be hugely counterproductive,” he said.

The group has previously warned that the last spending review, combined with the rising cost of social care, will mean that money for non-statutory services such as libraries and leisure centres will have been slashed by 90 per cent in cash terms by 2020.

Financial Times

THE LEVESON INQUIRY

"It has been over a year in the making, cost £5m, and runs to almost 2,000 pages. Yet, within hours of the publication of the Leveson report into the ethics of the press, David Cameron rejected its key finding." The Independent

"There have been too many times when, chasing the story, parts of the press have acted as if its own code, which it wrote, simply did not exist. This has caused real hardship and, on occasion, wreaked havoc with the lives of innocent people whose rights and liberties have been disdained." Lord Justice Leveson

Among Lord Leveson’s main findings in his mammoth 1987 page report were:

• Unethical practices by the press extended far beyond the News of the World and went on for many years. Editors at a number of newspapers “talked and joked” about phone hacking but did nothing to stop it while unwanted intrusion and surveillance of celebrities was common place.

• Newspaper “recklessly” prioritised sensational stories, irrespective of the harm that they could cause to those affected and “heedless” of the public interest.

• Meanwhile proprietors and in particular Rupert Murdoch paid scant attention to regulating the activities of their newspapers that often “intimidated” or took “retribution against complainants or critics”.

The report was, surprisingly, much kinder to politicians who courted the press, concluding that there was no evidence they were unduly influenced by need to gain press support. In particular Leveson cleared the Government of being unduly influenced by News International in its decision over the BSkyB takeover - a finding criticised by political opponents.

Leveson said there was “no credible evidence of actual bias” on the part of the former Culture Secretary Jeremy Hunt in deciding on the takeover, but criticised the role given to his special advisor Adam Smith, which he said gave rise to a “perception of bias”.

Leveson report: Volume One

Leveson report: Volume Two

Leveson report: Volume Three

Leveson report: Volume Four

Leveson report: Executive summary 

Leveson inquiry: The essential guide

Green Deal in tatters as no-one registers

The Green Deal encourages homeowners to take out a loan to make their house more energy-efficient. The project goes live in 10 weeks but households have had since October 1 to have their home assessed for the scheme prior to its launch.

However Greg Barker, the climate change minister, has admitted that “no assessments have yet been lodged” on the Government’s official register by homeowners. The Coalition had hoped that owners of up to 14 million draughty homes will sign up to the scheme.

Luciana Berger, the shadow climate change minister, described the Green Deal as a “shambles” and said its launch is “lying in tatters”. 

Telegraph http://bit.ly/S09RCM

The Police & Crime Commissioner elections

‎'David Cameron suffered a humiliating blow on Friday when his plans to democratise the police were met by overwhelming voter indifference, with the lowest ever turnout in a national poll threatening to undermine the new elected commissioners' legitimacy.'

Guardian http://bit.ly/RHY8r5

Martin Rowson, Guardian

Secret trials and non-disclosure of evidence

"Secret trials and non-disclosure of evidence are potential characteristics of repressive regimes and undemocratic societies."

• That's what the Law Society and the Bar Council think of part two of Ken Clarke's justice bill. 

• They write that the proposals "undermine the principle that public justice should be dispensed in public and will weaken fair trial guarantees and the principle of equality of arms." 

• Opponents fear the powers will enable ministers, rather than judges, to manipulate the way evidence is withheld or presented, depriving litigants of a fair trial.

Guardian http://bit.ly/WgFdbr

Iain Duncan Smith redefines poverty

Child poverty is to be measured by how long children have two birth parents looking after them, the length of worklessness in households and school achievement under controversial new plans announced today. Iain Duncan Smith, the work and pensions secretary, will downgrade Labour's system of measuring poverty relative to the rest of the population, which he believes can provide a skewed picture of household finances.

A new range of indicators will be introduced including family stability, worklessness and educational achievement. Duncan Smith, in a joint move with the schools minister, David Laws, claimed the new measures better reflect the reality of poverty in the UK today.  Guardian

 
Appearing on BBC Breakfast this morning, Duncan Smith said:

“What we’re saying to everyone out there is ‘look, we could go on playing this game saying we’re going to put more money in'. The truth is the last government spent £171bn on tax credits, they raised expenditure on welfare by over 60% during a time the economy grew, and they still failed to meet their poverty targets for children. By 2010 they quite dramatically failed.”

You can read the government’s consultation here or a summary of the consultation here. Both are pdf documents. There is also a response form (Word document) for plebs to air their opinions.

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