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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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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