Friday 16 May 2014

Miliband is a sitting duck.

As CU noted earlier in the week the good news just keeps coming. Increases in the growth rate. decreases in unemployment. Its not great news. Not war winning 'H-Bomb delivery' news. But the word from the troops is Labour forces are being pushed back on all fronts and are going to have to dig and defend what they have won, instead of continuing the offensive.

 Ed Miliband has made a big mistake. A huge mistake! A '10p tax scrap ' mistake.
Its potentially going to cost him the election.

By developing single theme policies and expounding ideas only feeding the meme Ed has left himself very vulnerable to a surprise attack. Very vulnerable.

Labour felt quite safe with their most recent, and most successful, strategy the Cost-of-Living.
Ever since Ed Miliband stumbled upon the cost of energy bills as a focus for the public anger at their shrunken take home pay, he has been pointing out anything he can find that might have gone up in price, and adding it to his Cost-of-Things list. At any opportunity the 'cost-of-something crisis' is used to describe coalition failures.  The Costa-Crisis will be the foundation on which Labour's election is built.
Labour can't forget their storm trooper  years and easy blitzkriegs of the late 90's. 
 Education, Education Education... Whiter than White... and Things Can Only Get Better. New Labour's marching songs.  

These days though, the old tactics mean labour tread a very predictable path. They seem unable to inspire the rank and file without a simple catchphrase to hang their ideals. {Even though the day and night sloganeering of the Brown years did nothing for them in the 2010 war. A future fair for all? Who remembers that? }

Already newer slogans, like ONENASHIONLABOUR have retreated. Older ones like Triple-dip, they just don't get it, and Too Far, Too Fast, have been overrun. Hardworkingfamilies, used unconvincingly on the poster below, is so obsolete it generates groans when deployed.

But the Costa-Crisis is so treasured that it has been given an extra plate of armour with the return of the old Lib Dem VAT BOMB posters for the Euro election. 
These posters avoided any mention of Europe at all. Instead there was an attack aimed at the Liberals and at prices. A key poster claiming a bogus £450 extra VAT on a shopping.

And this is the mistake.

Because if George Osborne were to announce a V.A.T cut in the last budget before the election, Labour's entire strategy would be defeated. All the prepared leaflets and strategies on the Cost-Of-Stuff  would blown to smithereens.
 The coalition retort to any Labour MPs mumblings about prices and fairness is instantly.."But we have CUT Vat? We Have REDUCED the shopping basket by £450."

Osborne's armour piercing VAT bomb goes through the weak Miliband deck and explodes in the magazine. Coming late in the campaign, Labour would be in chaos. They have no real fall back positions to retreat upon. 

They would have to fight on a sinking cost-of -living crisis platform, hit by the Vat bomb from above and torpedoed from below by the previously raised personal taxation thresholds.  They would flail around with ineffective 'fairness' and 'equality' issues while their burning election wreck capsises and sinks into the mud of the shallow policy waters they they thought sufficient anchorage for a 35% strategy win.

And that isn't even the end of the torment. Its possible the chancellor might even cut VAT below the 17.5% level that he inherited. Maybe to 17%. Maybe to 15% ?

That would be cruel. Akin to machine gunning the oil coated, drowning labour MPs as they scrabble for the few life rafts that aren't actually on fire.

Osborne has form. He's done similar before.
Dive Bomber Osborne may yet win a spectacular victory.


*Would he /could he really do it?

Well. Why not? Its such an effective attack. 
The VAT increase was expected to raise £3.5 Bn a year. So its a huge sum to find. Not impossible, but not easy. He'd have to increase a tax elsewhere. Banker bonuses ? Google/Amazon tax? Or, going forward, end child benefit over 2 kids. Plenty of options. Some that would even gain him even more support. Like taking the money from the Foreign aid budget or HS2. An easy sell.."I have decided to restrict aid to only the deserving and to use the saving to reduce our own burdens here at home."

Or, he could just claim the cut will encourage sales, so increasing VAT and paying for itself.  

Whatever... It will signal the end of Labour's {!} recession and a return to proper economics, tax cuts and wealth generation. 
Its a tax cut. An overdue Tory core vote winner to help return the lost UKIP voter.

15% is the minimum that the EU VAT harmonisation rules allow. Which is why 14.5% might be an ever bolder move. Add taking back VAT control from the EU to the list of topics for the 2017 EU renegotiation. Helps cement the Labour/Libs don't want to help you, UKIP can't help you theme.  
 He doesn't have to do it straight away. Just announce it. In fact, far better the cut comes after the election. In the next parliament. Labour will have to commit to it, so scuttling their own cost-of -living battleship, or reject it, so exposing themselves to merciless Vat bomb attacks .. Its a win- win - win.

And what do the Tories have to lose? They are still 8%+ points of polling away from a majority. 
Even if half the lost UKippers come back and most of the lemons stay lemon, Miliband will be PM in a liberal coalition. Something radical needs to happen.

As Gordon Brown discovered, when you are facing defeat, out of control spending is the answer. At the very least it allows the post 2015 Tories to use the 2010 Labour trick of claiming "We had the economy growing at 'x'{unsustainable} percent before your cutbacks ruined it."

And, as Hitler noted before the 1933 election when Goebbels and Goering told him the money had run out and borrowing was already way beyond any ability of the Nazi party to repay it ..

"Keep spending. Because if we win, we win Germany and then it won't matter.. And if we lose .... then it won't matter."


Ed Miliband said...

You sunk my Battleship!

dearieme said...

How much could you raise by cutting Inheritance Tax to 10%, lowering the threshold to £30k, and stopping up most of the ways of avoiding it?

Nick Drew said...

at first blush the VAT thing could work and as you say, George is just the man to try it (whether or not it is a good idea economically)

recent stories that Clegg is in meltdown are interesting - could be an awkward and long-running distraction

Blue Eyes said...

Good post and I pretty much agree, although I doubt it will be VAT and I doubt it will be a flashbang.

Here's how I think it will go:

- UKIP will do well next week. The media will be full of excitement about this. It is pretty much ONLY a media story because although the EU parliament has more powers than ever, nobody in the UK really watches what the EU parliament is doing until it comes up with some bonkers law like the one on herbal remedies and then when people are upset they blame the EU overall not the elected representatives who don't turn up except to star in Youtube videos.

For a while there will be loads of media speculation over whether the Cameron government can survive even up to the general election.

For a while there will be talk of Tory revolt, potential replacement leaders such as David Davis or some other as-yet-unknown person.

Then, once the silly season is out of the way, Osborne will present an incredibly tough spending plan for the next parliament. It will promise to be running a surplus by 2020. It will promise to increase capital investment in roads and railways. It will promise to cut welfare and departmental spending to the bone.

There will be outrage in the media and from Miliband. Miliband will start squawking about how the Tories basically want to destroy the country unnecessarily - he will claim that such drastic cuts are not needed.

Behind all the noise from the media and Miliband, polls will start to show that Osborne's plans give some voters confidence the he has the balls to run the budget sensibly.

Labour will be asked if they still promise to match the Tory spending plan. They will dither, and eventually admit that yes they will but they will implement it more fairly, without giving a shred of a suggestion as to what they would do differently.

Ed Balls will refuse to answer any questions at all, saying that he wants to keep his election strategy until the campaign.

He will continue to say this until far too late, and when he finally does tell us what his budget priorities are everyone will have forgotten to listen.

The markets love the tough talk by Osborne and economists fall over themselves to tell us that, with such a tough fiscal policy stretching into 2020 and beyond, interest rates will not have to go up much and not any time soon.

Unemployment will continue to fall and confidence will start to turn into wage growth and house prices rising outside London.

By the late winter, the Tories are just about scraping together enough of a poll lead for people to talk about a small Tory majority, if the votes fall in the right place.

The budget is scheduled for as late as possible. Osborne presents a generally steady-as-she goes budget, with a small but enterprise-friendly reduction in employers' national insurance. The bold moves are set out for the next parliament - under the Tories the income tax and NI system will be overhauled to make it simpler and fairer; under the Tories work will pay and welfare will not; under the Tories the economy will be robust; etc etc.

Ed Miliband leaves the House in tears.

TheNameIUseForBigIdeas said...

I would forget reducing inheritance tax - that'll never happen. The key strategy here is to get money into an otherwise bankrupt economy. The (very smart) approach so far employed has been to goose the pensions pot. Tell the Tory heartland that they can have their 'hard earned' money early and enjoy their golden years. The corollary of this is that inheritance tax must go UP, not down. They want the money spent, not saved.

This, rather fortuitously, can be dressed up as tackling inequality and preventing 'unfairness' or somesuch. Its all rather 'in' at the moment.
Its actual effect will be for pensioners to withdraw and spend what they can. It may even shake up the housing market if they realise its better to sell and downsize, so perhaps some incentive there too?
All in all, the economy is still in deep doo-doo. There are huge overhangs of debt still unresolved and huge pools of money sitting dormant in pension funds.

I agree with BQ that something radical needs to be done and I agree that it needs to be in the tax base. Unfortunately for regular CU readers its clearly a Land Tax. Thats the beginning, the middle and the end of it. A stable, predictable basis for taxation, unremovable, unhideable etc..etc..
Cut income taxes to the bone and tax assets - thats what youre all struggling to come to terms with. If nothing else, like pensions, it'll stop wealth stagnating and get it moving to more productive areas.

Electro-Kevin said...

Great to see Ed Balls proven wrong.

Of Blue's comment about the EU Parliament elections (not picking on you Blue)

That people don't watch the EU Parliament in session says a lot about what little influence we have there. That's to anyone who thinks that the EU can be worked at from within.

If the EU Parliament were truly democratic and controllable then UKIP gaining seats would be a far more serious issue than it is.

Anonymous said...

For the avoidance of doubt, the EU parliament is a sham/charade/fig-leaf etc. Power lies entirely with the Commission.

Bill Quango MP said...

ED: well, if it didn't sink it it would give it one hell of a list.

Dearieme: Unfortunately Inheritance is a big tax raiser.Like VAT. Its a great one for vote winning but maybe not in the current housing bubble climate. Might be better to leave it for the late 2nd term.

ND: Back in the day GO looked like the real deal. But his fortunes waned and then collapsed altogether. Only rescued himself from Pastygate this year.
But he is daring enough to try it.

Whether he wants to risk his hard won reputation for economic competence on what would be an almighty and possibly disastrous economic gamble is unknown.

BE: A well thought out response BE. But I fear you miss the simplicity of this attack.

It boosts the fortunes of the blue team by almost immediately sparking a whole high street of sales and special offers.
It also sinks the flagships of the Red Ed Banner Fleet.

The attack, out of the blue skies and in the home port of Ed Harbour
would stun labour into inaction.
How could they credibly claim any 'cost-a-living' crisis when prices have been slashed?

Its a knockout blow timed to arrive late in the day and completely flatten the socialists.

And that is also where they are weakest. On the economics. remember Miliband's hopeless budget response?
Imagine him trying, once again, to oppose Tory tax cuts. he can't do it.

It doesn't have to be VAT. But VAT would be the most easily understood, easiest to report simply in the press, most effective AND fastest delivery for the reasons outlined in the piece.

It would be a Midway Island blow.
Ed losing the election in four minutes.

And If I can see Ed's fleet carriers lined up, I'm sure Osborne can.

Blue Eyes said...

I just don't think that a VAT cut would suddenly make people go WOW. I think people might say "nice little extra" but make them feel genuinely better off or grateful? I don't see it.

Then add in that VAT is a useful broad-based tax and probably shouldn't be fiddled with. If we are going to have firework tax cuts they should be at least aligned with the longer term strategy.

CityUnslicker said...

BE....Labour are still going to win. one or two polls does not an ellection make. If ukip poll over 10%, then labour can get a majority with just over 32%!

K said...

If he would dare for <15% VAT than why not attempt to plug the tax hole that Amazon, Google, etc employ?

It ticks the "fairness" box, seems to be a recurring media event, and it's fundamentally a huge challenge to the EU (well, the four freedoms of the single market) far beyond some silly crap about immigration caps.

Who would oppose that? Is some Europhile Labour MP really going to come out in support of the current situation or yell "racism"? Osborne could please the left and the right at the same time.

It would also be a good foot in the door for EU "renegotiation".

Re VAT cuts - does the consumer ever see them? We never adjusted our prices when it went down and up because the prices for our products are set by our competitors. If they don't adjust prices then neither will we. On more premium products we're also often bound by RRPs that if we frequently undercut may lose us our supplier.

In practice this means that VAT is basically a tax straight off our profits, and so a 5% drop in VAT is a 20% rise in profits. This would be very welcome since we've recently started manufacturing our own products which we have to pay for up front.

So are VAT cuts a vote winner beyond business owners? Is a couple weeks of sales really going to shift opinions? Nicolas Maduro certainly thinks so.

Steven_L said...

It's genius, I like the simplicity of cutting VAT to 17.5% too. Perhaps 5% to 2.5% on domestic fuel bills at the same time?

You can still get 13/5 at William Hill on a tory majority too.

Blue Eyes said...

CU: by May UKIP will have reverted back to their 5% residual grumpy core. Even the libertarian idealists will have abandoned them by then.

I think you actually *want* Ed Miliband to win a majority!

Bill Quango MP said...

K: i agree totally. Hitting that google , amazon tax theft would be very popular. {short term- until we notice their prices rising to pay for it}.
We are like you. We didn't move the prices when it went down and then back up. But we also operate a 2.x+% multiplier, so since 2010 goods have gone up. And they would slowly come back down. But we would definitely also use the opportunity for a sale. Clear out some stuff.

It really effects the big ticket / low profit guys the most.White/black goods Blu-ray players, TVs and washing machines..and that's what people like to buy the most so it would have an impact.

Steven_L - Even better. Why not. He only has to announce it as part of the 2017 renegotiations.
All helps get the blue vote out in 2015.

BE: Sadly, Ed Miliband is still likely to be PM. All the advantages are with him.
Despite his best efforts to ruin it for himself he should still be PM.