David Cameron leaves 10 Downing Street before PMQs earlier today. Photograph: Getty Images.
Show Hide image

PMQs review: Cameron's surprise pledge not to raise VAT floors Miliband

The Labour leader was caught unawares by the PM's promise not to increase the tax. 

Ed Miliband arrived at the final PMQs before the election with a line he seemingly thought could not fail: will David Cameron rule out another VAT rise? Ever since Labour began this attack the Tories have merely said that they have "no plans" to increase the tax (the same formulation they used before raising it in 2010). At his Treasury select committee appearance yesterday, George Osborne failed five times to rule out a hike. 

Miliband's question was well-scripted: "On Monday, the PM announced his retirement plans and he said it was because he believed in giving straight answers to straight questions. After five years of PMQs, that was music to my ears... Will he now rule out a rise in VAT?" But against the Labour leader's expectations, Cameron replied: "In 43 days time I plan to arrange his retirement, but he’s right, straight answers deserve straight questions and the answer is Yes." From that point, a visibly surprised Miliband never recovered. It transpires that Osborne's evasiveness yesterday was a ploy to throw Labour off the scent. The question that the party's MPs will be asking is why Miliband entirely failed to anticipate this move. 

Scenting blood, Cameron went on the offensive, demanding three times that Miliband rule out a rise in National Insurance; he failed to do so. Labour will now have to quickly consider whether to close down this attack with Tory-style ruthlessness. Today's exchanges gave Cameron one of his clearest victories for months. Watching from the public gallery, Samantha Cameron and two of her children, Nancy and Elwen, relished the victory. The only consolation for Labour is that the Tories' pledge not to raise VAT has raised the bar for other issues (Cameron notably failed to refuse out another cut in the top rate of income tax). 

The PM had no shortage of material for the reminder of the session. When Labour's Simon Danczuk asked a question, Cameron naturally responded by quoting at length from his New Statesman interview: "This is what he says: 'Any Labour politician that says to you the knock on a door and Ed Miliband Is popular, they’re telling lies". He similarly exploited Alex Salmond's pledge, in another NS interview, to bring down a Conservative minority government, warning of "the ransom" Labour would have to pay to secure the SNP's support and referring to Miliband as Salmond's "poodle". He ended with a Richard III joke previously deployed by Osborne: "It is worth remembering this is the last time somebody did in one of their relatives to get the top job and the country ended in chaos."

Whether Cameron will return as PM remains very much an open question. But after the Tories' worst week of this year, he dramatically raised his MPs' spirits today, gifting his party that most precious commodity in politics: momentum. 

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump