Balls heightens the pressure on Osborne to cut taxes

Labour's new line: any tax cuts are better than no tax cuts.

With the Budget now just a month away, both Labour and the Lib Dems are finalising their wish lists for George Osborne. By far the most interesting intervention in today's papers is that of Ed Balls, who uses a column in the Sunday Times to put the case for tax cuts to stimulate the economy.

You'll be familiar with Balls's call for a temporary cut in VAT and a National Insurance tax break for small firms (both part of Labour's ubiquitous five point plan for jobs) but should these demands fall on deaf ears, the shadow chancellor has a plan B. If Osborne "can't bring himself to reverse his VAT mistake", he writes, he has other options. For the same amount of money, he could "cut the basic rate of income tax by 3p for a year. Or raise the income tax personal allowance to over £10,000. Or increase tax credits for almost 6 million working people by around £2,000." With the economy on the brink of a double-dip recession and unemployment heading towards three million, Balls rightly argues that some tax cuts are better than no tax cuts:

It would be better to cut VAT now - it's fairer and quicker and would help pensioners and others who don't pay income tax. But any substantial tax cuts to help households and stimulate the economy would be better than doing nothing.

By lending his weight to the Lib Dems' key demand - an accelerated increase in the personal allowance - Labour's Keynesian rottweiler heightens the pressure on Osborne to offer some relief. From his time as shadow chancellor onwards, Osborne has always opposed what he calls "unfunded tax cuts". But many Tory MPs, sharing Arthur Laffer's belief that tax cuts are self-financing, would like him to do nothing more than reduce the burden. And with the Chancellor likely to undershoot the OBR's deficit forecast of £127bn by around £3bn, he will find it harder to argue that any giveaway would be fiscally irresponsible. The Institute for Fiscal Studies, for instance, has said that Osborne could cut taxes by £10bn without triggering a bond market revolt and a rise in interest rates.

As Tory MP David Ruffley said of a temporary VAT cut:

Even if we can't find the money for tax cuts from public spending savings, we could add it to the deficit and it is not going to send the markets into a tizzy, I don't think anyone really believes that. The markets will not go haywire if there was a modest loosening in borrowing in the short run if it was for the right reason.

The Chancellor, an inveterate political schemer, will no doubt have something up his sleeve but with Labour, the Lib Dems and his own MPs all urging him to slash taxes it had better be something special.

George Eaton is political editor of the New Statesman.

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Michel Barnier is Britain's best friend, but the Brexiteers are too shallow to notice

The right's obsession with humilating a man who should be a great British asset is part of why negotiations are in a mess. 

Sam Coates of the Times has the inside track on what Theresa May is planning to say in her big speech in Florence tomorrow: a direct appeal to the leaders of the European Union’s member states over the head of Michel Barnier, the European Commission’s chief negotiator.

I explained some of the problems with this approach in my morning briefing earlier today, but just to reiterate: the major difficulty is that Barnier’s mandate as a negotiator hasn’t emerged fully formed from the mind of some scheming bureaucrat in the European Commissio, but after discussion and agreement by the heads of member states. There are problems with the EU approach to sequencing talks, but the chances of changing it by appealing to the people who set it in the first place seems unlikely, to put it mildly.  

Barnier seems to occupy a strange position in the demonology of right-wing Brexiteers, I suspect largely due to ignorance about how the EU works, and in some cases Francophobia. The reality is that Barnier is the single politician outside of the United Kingdom with the most to lose from a bad Brexit deal.

If the Brexit talks end badly, then that will be the first line of Barnier’s obituary. Back in his native France, the centre-right is in opposition and none of the candidates vying to lead the Republicans are are going to give him a big domestic job to save his reputation.

His dream of parlaying a successful turn as the EU27’s chief negotiator into running the Commission relies not only on the talks succeeding, but him cultivating a good relationship with the heads of government across the EU27. In other words: for Barnier to get what he wants, he needs both to secure a good deal and to keep to the objectives set for him by the heads of member states. A good deal for all sides is a great deal for Barnier. 

As a result, the Brexit elite ought to see Barnier as what he really is: their best friend on the other side of the table. Instead, they are indulging in fantasies about tricking Barnier, undermining Barnier, and overcoming Barnier. In short, once again, they are bungling Brexit because they don’t want to think about it or approach it seriously. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.