Big Business Bosses Being Used - Says Cable

Vince Cable speaking in today's Guardian says that businessmen on inflated salaries lecturing the rest of Britain on how to run the country are "utterly nauseating" and "being used" by the Conservative party. This is of course in response to 80 of them signing the Conservative co-ordinated letter on the single issue of National Insurance contributions. As Vince says:

"I just find it utterly nauseating all these chairmen and chief executives of FTSE companies being paid 100 times the pay of their average employees lecturing us on how we should run the country. I find it barefaced cheek."

As is pointed out the fact that Cameron is also asking that senior managers in the public sector should not get paid more that 20 times that of the lowest paid in their organisation would mean that vast majority, if not all, of those 80 signatories would have to take a pay cut to meet such a cap*. Aiden Harvey of Tullow Oil would be top of the heap having to cut his pay by £27m.

Of course there is no mention of the private sector having to following the same restraints as the public sector, how else would Dave get them onside. But as Vince points out this is a dangerous game for a politician who would be Prime Minister to play: We've been there before and being at the behest of business and the city got us into the mess we are in now:

"Brown, having kowtowed to the City for the best part of a decade, and having tried to co-opt captains of industry into the big tent, is in a very weak position."

Vince Cable also says that in the first week of the campaign the Labservatives have not answered the important question of how they will cut the structural deficit the country faces. In other words they are still avoiding that question asked on the Chancellor's debate that only Vince answered with what and how, rather than the when of Darling Osborne. As he points out for six months before the election the Tories were saying the deficit was the number one concern.:

"[They said] we are going to have a collapse of sterling, lack of confidence, bond markets evaporating, but then in the first week of the election, instead of focusing on the deficit, they say waste and efficiency are going to be dealing with the deficit, so completely evading the main issue.

"I am all in favour of getting rid of waste and inefficiency, but what is now being shown by people looking at critically is that it is not an easy route. It is in fact cuts by any other name".

He has pointed out that the Lib Dems have highlighted £10bn above the Government plans that will halve the deficit by 2013-14. That is dealing with the macro-economics of the situation rather than Osborne fiddling about with the micro-economics to suit his parties suitors, as well as the Osborne and Cameron estates.

* The 10 FTSE 100 bosses who signed definitely all fail the public sector cap test.

Beware of Tories Bearing Gifts

Unlike the Lib Dems who announced a full tax package [PDF link] at the same time covering who would gain and where this was being paid for, the Tories have announced a cut without the consequences. There was great fanfare last night that seven out of ten would benefit from them halving the Labour increase in National Insurance conributions (NIC) planned for April 2011. But there is no announcement as to where or when they will make up the £5bn shortfall.

There are two possible alternatives that George Osborne may, or more likely not, reveal in the Chancellors debate at 8pm this evening.

• Fund it by spending cuts
• Fund it my increasing VAT and removing VAT exemptions

If it is former cuts into what? Will these cuts impinge on the poorest? The very people that the Tories are trying to tell us they are helping.

If it is the latter, while your money would have more value at point of payment, it would lose it at the shops. If the 20% VAT that has been brandied about does come in, the poorest won't be net gainers but net losers. As well as the only 0.5% hike in NIC they will also be suffering from the VAT shift.

The Tory excuse is that NIC is a tax on business as David Cameron said on yesterday's Politics show:

"Remember it's a tax not just on people's incomes but it's also a tax on every business who employs anybody or thinks of employing anyone new."

Only the Lib Dems are offering a clearly fair taxation on the lowest paid. The increase in the personal tax allowance to £10,000 lifts 4 million out of income tax altogether. There is incentive for people to get back to work as the money is theirs rather than returning to the exchequer.

Labour have effectively frozen the personal allowance to get more tax out of us, the Conservatives are only going half the increase and possibly introduce more indirect taxation to hit the poor elsewhere, possibly more severely.

Deeper Cuts of the PBR

I'd thought that local SNP candidate Tam Smith would have learnt his lesson and stopped taking attributed quotes to other SNP spokespeople as his own. Sadly I see I've been proved wrong this time he is Michael Matheson MSP on the health committee.

However, the point that Tam raised about how the National Insurance hike will affect the NHS is valid one. As I blogged during and after last week's pre-budget report the pre-budget was full of regressive rather than progressive tax measures. Both the return of VAT to 17.5% and the increase of National insurance are leading to a high proportion of our poorer people paying a considerable amount in tax.

Obviously the rise in National Insurance will have an impact on all employers as their increase is payments is more than that which comes directly out of the employees pay. Those that are public employees obviously are taxing Peter to pay Paul. The SNP are saying that Darling National Insurance proposals equate to £44m out of the NHS Scotland budget. I'm not going to dispute that. Tam breaks that down to £5.99 million and £2.33 million in NHS Lothian and NHS Forth Valley respectively.

That is a considerable part out of the budget of services that Labour say they will be protecting as front line services in England. But of course in the devolved powers that is budgeting that is done by the devolved powers. There are less other departments from which they can draw on resources, because not all areas have a devolved equivalent.

Darling can put a freeze on the top earners in public services to help with that deficit, but elsewhere a cut in top salaries is the step beyond that. Indeed that is the point that Tavish Scott has been making in order to protect our key front line services.

Labour are clearly not thinking of all the implications of their taxing proposals. They are trying to avoid the headline tax issue of doing something with direct taxation, i.e. Income Tax because they are still trying to win the General Election but not hitting that too hard. But their stealth is starting to hit people hard. 32% of taxable income is now paid in income tax and national insurance by us all. If you were to spend all that you have left on VATable items you would actually pay 42% in tax (and that is only if you do not drive, drink or smoke). Labour are already taxing us heavily and doing it stealthily. As the SNP point out they are also taxing devolved powers in other ways as the sectors that are devolved have a high proportion of wages that have to come out of the budget.

Osbourne Dipping Toe in Unemployment Ocean

David Cameron has said that with 2.5 million people unemployed in this country that we are facing a "jobs crisis". So what is the big scheme to deal with this?

Well George Osbourne has announced a plan to cut the employers National Insurance contributions for the first 10 employees of a start up company. The net effect? Well even Osbourne says this will only create 60,000 new jobs in the first period of a Conservative government.

So the net effect that this plan is going to have on 2,500,000 unemployed is reduce it to 2,440,000. Wow! That looks impressive. How many jobs without such a tax break will be lost in the same period? Even in good years 60,000 jobs are lost through natural evolution of businesses, in good years these tend to be picked up elsewhere.

David Cameron said yesterday:

"This is such an important week for us. This time we have a real chance of making a difference … Sixty million hopes resting on our shoulders. We must not let Britain down.

"Let this be the week we talk to the country about our plans, our vision."

Well so far in the job market 0.01% of that sixty million have had their hopes realised. We await with baited breathe the next big small idea.

Of course it is not the first tinkering the Tories have announced regarding National Insurance at the weekend they announced the rich people's top up scheme to ensure free medical care.