Tuesday, 27 December 2011

Clegg and the shafting of Middle England

Listening to Liberal Democrats talking about economic policy, the challenge is to work out whether they're motivated by mendacity or stupidity.  Both appear to be at work when they claim to be reducing the tax burden on low and middle-income families, as a report in today's Independent demonstrates.

Clegg has made much of how Liberal Democrats want to raise tax thresholds and have claimed that the increases in those thresholds announced so far by George Osborne demonstrate their influence in Government.  But the Independent's research - based on a report by the Resolution Foundation - shows those modest changes will be more than offset by significant reductions in tax credits - some families will lose more than £6000 per year, or nearly a sixth of their income.  In other words, those on low or middle incomes who receive tax credits will lose out significantly; those on higher incomes who do not receive tax credits will of course gain from the increase in the tax thresholds.

Quite obviously, then, the changes taken together will achieve precisely the opposite of what Clegg claims he has achieved.  If he is being honest - and I suppose, even on the basis of his record in Government so far, one should not dismiss the claim immediately out of hand - it suggests a certain lack of intellectual grip.

The killer sentence in the Independent report comes towards the end of the piece - the fact that the families who are hit hardest are precisely those who spend all their income, so the cuts in income will drive down demand and depress the economy further.  It's both a deeply regressive measure and one that will compound the economic disaster being visited on our society by Osborneomics.

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