Summary

  • Occasional updates and analysis from the Newsnight team

  1. What does it all add up to?published at 18:08 British Summer Time 8 July 2015

    The effects of all these Budget changes

    Chris Cook
    Newsnight Policy Editor

    The Resolution Foundation, an apolitical think tank, has been poring over the Budget fine print - the rising minimum wage, income tax cuts and cuts to benefits - and calculated its estimates for the overall effect of the package on different sorts of families in 2020. 

    Here's how they explain their maths:

    • "A low earning single parent with one child, working 20 hours a week at £9.35 an hour, will be £1,000 a year worse off. That is, the gain associated with the increase in the personal tax allowance is more than offset by reductions in benefit entitlement. To offset this fall in disposable income would require an increase of £3,400 in earnings – equivalent to a one off 44% rise in earnings, 18 years of steady 2% pay rises, or increasing their hours by 7 hours a week."
    • "A low earning dual-earner couple with two children both earning £9.35 an hour will be £850 a year worse off. They would need a one-off rise in earnings of 15 per cent to recover these losses, equivalent to 7 years of steady 2% pay rises or a 5 hour increase in the second earner’s weekly working time."
    • "A middle earning dual-earner couple without children where both earn £15 an hour will be £350 better off as a result of increases in personal tax allowance."

    For a bit more detail:

    Resolution Foundation estimatesImage source, Resolution Foundation
  2. The bookies are always the first to know...*published at 17:46 British Summer Time 8 July 2015

    Lewis Goodall
    Newsnight producer

    *(Often not in fact true)

  3. Osborne and the leadershippublished at 16:44

    James Clayton, Newsnight Political producer

    Much has been made of this budget being a “one nation” or “blue collar” budget. But Osborne’s flagship policy on the living wage is more than just a Conservative offer to lower income voters.

    Many believe that come 2018 there will be a straight fight for who will become Conservative leader and de facto Prime Minister - between George Osborne and Boris Johnson. Bo Jo has gone hard on the London living wage. He could see the benefits of introducing the wage, but also how it would soften his own image as an Etonian toff – defending the wages of the low paid.

    One Tory MP tells me that the surprise living wage announcement has helped Osborne neuter one of Boris’ key USPs. Osborne’s relentless targeting of the “Northern powerhouse” and now “working people” is starting to gain traction – and he will use this as a totemic policy in his own leadership run.

    George OsborneImage source, Reuters
  4. Chancellor changes mind over living wagepublished at 16:40

    Allegra Stratton
    Newsnight Political Editor

    Number 10 is cock-a-hoop with its living wage announcement and sources say this was something the Chancellor has been looking at for a couple of years but felt he couldn't go for without big cuts to the welfare bill, and those were blocked within the last parliament by the Lib Dems. Free of those shackles, he was able to go for the two step - cuts to welfare, and an increase in the living wage.

    Except over the years I have covered these issues, some would suggest to me that they would push the living wage idea in meetings and he was always a bit reluctant. On Newsnight we broke the story in August 2013 that George Osborne would be recommending an increase in the minimum wage - a story because the Tory party has traditionally been opposed to increases in the minimum wage. To be fair to Osborne he went for that in a big way. But then it was a source of great surprise and irritation to many Tories that once he had announced this, he then proceeded to rarely mention it. Why not shout it from the rooftops, they would ask?

    One Tory MP told me today that it is fair to say the Chancellor "needed some persuading" on this policy. However they also said that they went in to Number 11 over a year ago to discuss a hike in the minimum wage to nearer a living wage. That he had been considering it as long back as that and certainly not just in recent weeks. They said that it is only in the last few years that the evidence has built up that it could be done without damaging businesses too badly. 

    Credit must go to the renewal group of MPs - Sajid Javid, Rob Halfon and Guy Opperman. Director of the Renewal group - pushing for more Tory policies designed to appeal to blue collar workers, David Skelton too. Minister of State for Skills, Matt Hancock too should get a lot of kudos for persuading the Chancellor of this move.  

    George OsborneImage source, Press Association
  5. Marking universitiespublished at 16:29

    Are no two of them alike?

    Chris Cook
    Newsnight Policy Editor

    Students celebratingImage source, Getty Images

    The Budget has a lot to digest within it, but one morsel worth chewing over is the section on universities. The government has, asLaura Kuenssberg suggested it might, replaced grants with maintenance loans. 

    But the document may also mark an important intellectual shift in the way that we run our higher education system, as it will introduce a rather radical idea: different universities deserve very different treatment.

    The government says that will allow institutions "offering high teaching quality to increase their tuition fees in line with inflation from 2017-18". That, itself, is a big thing. 

    Lots of universities will be surprised that ministers accepted their argument that they need higher fees so readily. But the notion of attaching fee rises to teaching quality is also a big idea.

    I’d written before about how, even if there were no money attached,teaching assessment could change universities. Adding the right to higher fees would make it transformational.

    But, this process will be hotly contested. It requires the sector to agree on what good teaching is and how we can spot it. There are difficult practical questions: how to judge universities that take in students with weaker academic results against those with better grades. 

    And what about universities with specialisms in, say, teaching or nursing? Unlike most schools, universities are specialist bodies and are supposed to offer different services. 

    If this is done properly, this process should lead to some results that are politically awkward. We know that courses at lots of less-glamorous institutions deliver excellent teaching: it’s their main business. 

    Meanwhile, some grand old institutionsshouldfind that they are barred from fee rises because they do not prioritise teaching. Some of the reports I hear from students about contact time and attention are mortifying.

    Will this process be institution-wide? Will Warwick’s maths faculty be assessed separately to its historians? If so, there is alotof work to do before fees can be assessed in 2017-18. 

    The incentives for academics to improve their courses might be weakened if they all think there is no point since they think the academics in other faculties are duff.

    Finally, this process opens up a Pandora’s Box: “differentiation”. If universities can be split into groups for fee levels, can they be split for immigration, say? With “top” institutions able to import a bigger quota of foreign students than weaker ones? 

    That is an idea that the Home Office has sought to press on several occasions. It is one that universities have fought off. Ministers, however, may be flanking them.

  6. George's lesson in Budget communicationpublished at 16:18

    Why deficit details can be ditched

    Ed Brown
    Newsnight producer

    As a prelude to reading this post have a look at two potential political pictures and slogans. I've put the slogans in as captions.

    NHS pictureImage source, SPL
    Image caption,

    £8bn more to fund our NHS!

    Complicated graph
    Image caption,

    A more frontloaded path to budget surplus!

    Which do you think is more memorable? And which is easier to understand?

    In the election period, the politically focussed media likes details. Lots and lots of details. Details on spending plans, details on taxation plans, details on little tiny things that are almost impossible to predict like what our forecast revenues are going to be in 2020.

    We feast on them. Withdrawal rates, DEL/AME splits, Newsnight and journos like us obsess over these things. And sometimes we get some of them - and we use them as a measuring stick in elections for the credibility of a party's plans. In a sense, rightfully so - details make a big difference to people's lives. The problem is, as that second picture shows, they're rather difficult to communicate to people.

    Today George Osborne changed perhaps the biggest detail of all - the shape of the Government's fiscal envelope. In non jargon terms, how much the government spends and when. Having spent the whole of the election tearing strips off Labour's spending plans, they've adjusted their own to look a bit more like them. He has ended the "rollercoaster" highlighted by the IFS and others.

    But what he didn't change was the promised NHS £8bn. Or the tax cuts. Why do you think that was? I suggest that it's something to do with the answer to the question I posed at the beginning. Promises on the NHS are big, tangible - they make a direct emotional connection to something that the electorate can understand easily. They have nice pictures. Promises on the shape of spending cuts are abstract, technical, and difficult to remember. They are illustrated with charts like this:

    Complicated graph
    Image caption,

    George's changing priorities

    That's why George Osborne keeps his promises on the NHS. And why he was so happy to give the media such a detailed statement in March about his fiscal intentions that I suspect he never intended to stick to - and didn't. 

  7. Living Wage Foundation weighs inpublished at 15:33

    Lewis Goodall
    Newsnight producer

    Apropos of my post earlier asking whether this is a real living wage the Living Wage Commission has waded in with a press release in the last few minutes:

    “Is this really a Living Wage? The Living Wage is calculated according to the cost of living whereas the Low Pay Commission calculates a rate according to what the market can bear. Without a change of remit for the Low Pay Commission this is effectively a higher National Minimum Wage and not a Living Wage."

    From the horse's mouth...

  8. Newsnight experts rate the Budgetpublished at 15:25

    Here's the instant Newsnight take on the Budget from our experts.  Political Editor, Allegra Stratton, presenter Evan Davis, Economics Correspondent, Duncan Weldon and Policy Editor, Chris Cook give us their view below:   

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  9. Cutting the deficitpublished at 14:52 British Summer Time 8 July 2015

  10. A living wage?published at 14:48

    Not if you're under 25

    Lewis Goodall
    Newsnight producer

    During the election campaign Ed Miliband made a big announcement on the National Minimum Wage (NMW). He pledged that under Labour it would rise to more than £8 an hour by 2019. The Conservatives decried it- now George Osborne has gone one better and announced an increase to £9 an hour by 2019.

    But what would the difference be if the Chancellor had not left it to the people who set it at the moment? The Low Pay Commission (who every year make a recommendation as to what rate the minimum wage should be) have had a consistent record of recommending increases since it was established back in the late 1990s.

    Indeed, over the past decade the average rate of increase has been 2.9% a year. Before 2008 it was over 5% a year.

    So if we already take as a given the twenty pence increase pencilled in for October this year which the government has already approved, if the minimum wage increased at that average every year, what would it end up as?

    Current rate (for adults): £6.50

    2016: £6.70

    2017: £6.89

    2018: £7.09

    2019: £7.30

    So we would probably expect the minimum wage to reach £7.30 at least. If the rate increased at pre-2008 levels (which the Chancellor has indicated he wants) then it would reach nearly £8. The extra £1 will be most welcome but we should remember that's what we're talking about.

    Also let's not forget that what the Chancellor announced is NOT the living wage as prescribed by the Living Wage Commission. In London the living wage is already at £9.15 an hour in London and is £7.85 outside of London so will doubtless be higher than £9 by 2019. The Chancellor has announced an increase in the National Minimum Wage coated in language pinched from the Living Wage campaign. 

    And there's another sting in the tail. Presently the living wage is set precisely by talking into account of benefits like tax credits. If you reduce in-work benefits, you must increase the living wage.

    Indeed according to calculations, external by the Mayor of London's economic advisers:  "If means-tested benefits were not taken into account (that is, tax credits, housing benefits and council tax benefits) the [London] Living Wage would be approximately £11.65 per hour." Given that the £7.20 next year or even the £9 by 2019 looks a little small beer.

    Also for under 25s the current rate will remain, potentially opening yet another chasm between the young and their older counterparts. 

  11. Politics behind the living wagepublished at 14:39

    Emily Maitlis
    Newsnight Presenter

    Just before the General Election, a Conservative voter said to me “I wouldn’t mind a tax hike from the Conservatives. But I wouldn’t take it from Labour. If the Conservatives get in, they can basically introduce Labour policies and no one would bat an eyelid.”

    Today, that just happened. The minimum wage – introduced by Labour under Tony Blair has just been rebranded and rebooted. George Osborne has effectively left the independent Low Pay Commission behind, and gone solo on this one, announcing a hike to nine pounds an hour in the living wage – by 2020 – that’s a pound more than Labour promised at the last election.

    The phrase living wage was introduced to explain that for many parts of the country, a minimum wage still didn’t guarantee you the ability to be able to afford the city you lived in, even modestly. Its become a rather cuddly phrase – one that suggests there’s more to life than existence, there is "living" – even though we’re not exactly talking la dolce vita on these sums. And ( compassionate) Conservatives will be delighted to hear that phrase tripping off the Chancellor’s lips just moments after he just used up cuddly capital over welfare cuts to larger families.

    The fact that a Conservative Chancellor can essentially nick a Labour idea, improve on it – (for workers) – and still manage to sell it to business, is the thing that really leaves Labour in a hole. If Labour had suggested such a rise, you would have heard screams of anguish from employers up and down the country. The fact that it’s George Osborne – the man business has come to see as pretty much on their side – means you can expect any backlash to be relatively subdued.

    The bigger question is whether this is really a rise as such. Some will argue he’s taking the living wage down in London this year – by around 60 pence an hour. And some will tell you that by 2020,  nine pounds will be far from a living wage. The economics of this policy will take more than a day to digest. But politically, it’s a very sharp move.

    George Osborne
  12. Will 'loosen' spending squeezepublished at 14:03 British Summer Time 8 July 2015

  13. Defence gets 2% of GDPpublished at 14:00 British Summer Time 8 July 2015

  14. Personal Tax Allowancepublished at 13:50

    Not as progressive as you think

    Lewis Goodall
    Newsnight producer

    Everyone is still in a bit of a state of shock after the Chancellor's announcement on his new "Living Wage". But let's take a look at the other big measure designed to improve the lot of worse off workers.

    The personal tax allowance has increased by around £5,000 since 2010. The problem it is it yields diminishing returns in terms of helping the poor.

    As the graph from the IPPR thinktank below shows, in fact under the projected increases, the poorer you are the less you benefit. Worth bearing in mind.

    IPPRImage source, IPPR
  15. Living wage policypublished at 13:49 British Summer Time 8 July 2015

  16. Non-doms: now and thenpublished at 13:07 British Summer Time 8 July 2015

    Lewis Goodall
    Newsnight producer

    George Osborne has just announced a change to rules on non-doms. It's a bit different to Labour's plan they unveiled in the election campaign but it's very much in a similar vein. 

    At the time the Chancellor said Labour was "tinkering around the edges" and that "Labour's non-dom plan is a total shambles." Maybe it was Ed Miliband's only legacy, after all.

  17. Winners and losers under housing benefit cappublished at 10:45

    Ed Brown
    Newsnight producer

    George Osborne is expected to announce a lower benefits cap for areas outside of London today – of £20,000 as opposed to £23,000. 

    Why discriminate? To illustrate why, I’ve ordered local authority data on the housing benefit cap by number of households that have had their housing benefits cap since the benefit caps introduction. 

    So, the first 100 authorities or so - the ones least affected - are here:

    Housing benefit cap chart

    Doesn’t look so bad does it?

    How about the second hundred authorities?

    Housing benefit cap chart

    Still doesn’t look too bad does it? George Osborne’s own constituency local authority is nestled in this group with a relatively low 111. But here’s the last hundred. See if you can spot London (I have even given you a subtle hint):

    Housing benefit cap chart

    Not surprising to anyone that’s compared the prices of bedsits in Bermondsey and Barnsley recently. But if Osborne does protect London from a lower benefits cap, these charts tell you why.  

  18. NEWSNIGHT LIVEpublished at 10:25

    Wednesday 8th July

    It's Budget day. We'll be getting political and economic reaction to the measures the Chancellor announces today.

  19. The island of Malta could be the big winner from the budget…published at 22:02 British Summer Time 7 July 2015

    James Clayton, Political Producer

    BBC
    Image caption,

    Valletta, Malta

    One of the more idiosyncratic policies that will be announced in the budget tomorrow is a £10,000 annuity ‘thank you’ for anyone who has won a Victoria Cross or George Cross.

    This is up from the current figure of £2,129 and will be paid for with penalties levied by the Financial Conduct Authority.

    This is a pretty big deal for those 28 people who have earned the award - and are alive. It’s particularly good news for the younger winners, who could now have a pretty large annuity for life. Lance Sergeant Johnson Beharry for example is only 36. If you won the award posthumously, well, you get nothing.

    And then we come to loophole in this policy. The Island of Malta. The country has a George Cross for their manful defiance during the siege of Malta in the Second World War. Bizarrely the Government may now pay the country the £10,000 annuity, forever..

  20. Looking backpublished at 21:17 British Summer Time 7 July 2015

    Economics Correspondent Duncan Weldon is in no way saying "I told you so," but...