Mr Brightside: It’s So Cold In This House 

 

“It’s so cold in this house 

Open mouth swallowing us 

The children sent home from school 

Will not stop crying” 

 

Domestically, this week is really all about the removal of the winter fuel allowance from all but the poorest pensioners in England and Wales

 
The commons debate, which became somewhat heated, saw the Conservative motion to strike down the proposal was defeated by 348 votes to 228. Just one Labour MP, Jon Trickett, voted for the opposition motion but 52 abstained – at the higher end of predictions. 

Trickett now risks losing the Labour whip. Also among the rebels were four of the seven Labour MPs who lost the whip for six months after rebelling over the two-child benefit cap in July. 

Whilst there was never any likelihood of the government losing the vote on the issue, it can be said that they lost the argument because ministers seem incapable of making a coherent case for their policy. 

Castigating what she called the “faux outrage” of Conservative MPs, Liz Kendall, the work and pensions secretary, said increases to the basic state pension under the triple lock system would mean pensioners gaining more than the one-off annual heating allowance, which is £200 or £300 depending on a recipient’s age. 

Chancellor Reeves also pointed to the triple lock which could see an extra £900 of pension compared to a year ago. She also said that “…..We are protecting the triple lock, not just for this year, but for the duration of this Parliament.” 

Reeves said there would be “more difficult decisions to come”, and that if people were looking to apportion blame, “it lies with the Conservatives and the reckless decisions that they made.” 

For the Tories, Mel Stride, the shadow pensions secretary, called on Labour MPs to “look to your conscience” and vote to scrap a plan he said would bring “untold hardship for millions of elderly and vulnerable people”. 
 

“look to your conscience” and vote to scrap a plan he said would bring “untold hardship for millions of elderly and vulnerable people”

 
Saying that the plan was not in Labour’s manifesto, Stride said: “What happened to integrity? What happened to transparency? It went out of the window.” 

John McDonnell, a former shadow chancellor, who was among the seven MPs to lose the Labour whip in July and who rebelled again on Tuesday, said the move would raise the risk of ill-health or death for vulnerable people and “flies against everything I believe in as a Labour MP”. 

Historically, winter fuel payments for all pensioners were put in-place by the last Labour government, and were something that Gordon Brown thought of as one of the greatest achievements, and it was part of  New Labour’s policies that lifted millions of pensioners out of relative poverty. 

The Starmer/Reeves plan does away with the “untargeted” payments, which are worth up to £300 to 10 million pensioners. The new targeted payments mean that when energy bills rise by 10% it saves the Treasury £1.4bn.  

From a broad perspective this means tested benefit moves away from tradition labour thinking which argues that universalism matters for poverty prevention because it generates public support for welfare spending.  
 

‘What is clear is that you can’t cure the consequences of deprivation by increasing deprivation’

 
What is clear is that you can’t cure the consequences of deprivation by increasing deprivation. Eligibility for the payment will be linked to pension credit, but experts say that this will see 1.6 million pensioners who are below the poverty line lose vital financial support during the coldest months.  

As I wrote earlier ministers seemed incapable of making a coherent case for their policy. Claims that there would be a “run on the pound” if there were not spending cuts was dismissed in the City. Ministers then said that they want to increase pension credit uptake – currently 880,000 eligible people do not claim it – but many are put off by the 243 questions that need to be answered in the application form. Whilst, mathematically the government’s argument that the losses would be offset by rises in the state pension, few pensioners will see it that way, rather they will view it as Labour discarding its social care commitments. 

The who sorry saga reflects poorly on the both the chancellor and PM. Yes, they have inherited a £22m blackhole, but that is little different to when Gordon Brown entered office claiming that the Tories underestimated Britain’s borrowing requirements by £20bn. He spent his first two years reducing, as a percentage of national income, government spending. He also cut benefits for lone parents, with MPs rebelling just months after being elected. He made up for the loss through tax credits. Mr Brown, however, promised “prudence with a purpose”, justifying his early parsimony with a pledge to invest later in public services.  
 

‘Starmer would do well to learn from this, to date all he is offering is pain’

 
Starmer would do well to learn from this, to date all he is offering is pain. 

We know that a commitment to budgetary discipline was the fulcrum around which Labour turned its electoral fortunes in opposition, and was central in the campaign to win back public confidence. What has happened as a result of this is that chancellor Reeves is the gatekeeper of that manifesto pledges with her  Treasury team calling all the shots. 

As Starmer is not an economist he is right to delegate the number crunching, however as party leader and PM he  is still the author of Labour’s political strategy.  

Unfortunately, the means testing of the winter fuel allowance has all the hallmarks of the Treasury;  identifying cost savings that look ingenious on a spreadsheet but turn out stupid in the real world. The Treasury looks for proposals promise immediate cash for the exchequer, equally the dislike any proposal that incurs cost upfront, justified with hypothetical revenues somewhere down the line. 
 

‘identifying cost savings that look ingenious on a spreadsheet but turn out stupid in the real world’

 
This reticence to fund long-term investment and spending on unquantifiable public goods, can lead to opportunities being missed, such as preventive healthcare, or prisoner rehabilitation, which could lead to long-term savings by reducing the bill for social decay. Clearly, the Treasury will have the whip hand for the foreseeable futured, as a result we can expect more economic orthodoxy, with a focus on plugging holes in the public finances and, hopefully, repairing public services. 

Labour are hamstrung by the legacy of Tory mismanagement but also by their Labour’s pre-election tax and spending commitments. To an extent chancellor Reeves  has fallen into the trap set by the Tories, who expected to lose an election and knew the impossible task of implementation would be someone else’s problem. 

The chancellor could look to the Gilt markets, as I wrote in “Heaven Know’s I’m Miserable Now” last weeks auction shows there is considerable untapped investor appetite, however there is little flexibility in the small print of the fiscal rules she has drafted for herself.  

Then there is taxes, where the government consistently tells us they will place the greatest burden on those “with the broadest shoulders”. Again, the chancellor is hamstrung by her own promises to leave the biggest revenue providers, national insurance, income tax, VAT, and corporation tax rates alone 

Despite these self-imposed constraints the Resolution Foundation has put forward suggestions for changes to capital gains tax, inheritance tax and national insurance. 

Adam Corlett, a principal economist at the Resolution Foundation, said: “The chancellor’s self-imposed constraints on not raising income tax, VAT, national insurance or corporation tax don’t leave her much room for manoeuvre if she doesn’t want to break manifesto commitments. But there are still several areas of tax she should focus on. 

“Long overdue reforms to IHT, CGT and pension contribution reliefs would fit the bill and could raise over £20bn if needed, while also making the tax system fairer and more consistent between different taxpayers.” 

The thinktank said up to £12bn a year could be raised from a CGT regime that was “ripe for reform” because rates of the tax were “unjustifiably” lower than for other forms of income. 

It proposed aligning CGT rates for shares with dividend tax rates, taxing property capital gains like wages, introducing CGT exit charges when moving country, and applying it at death. Dividend and rental income tax rates should also be reformed. 
 

‘aligning CGT rates for shares with dividend tax rates, taxing property capital gains like wages, introducing CGT exit charges when moving country, and applying it at death’

 
To soften the blow, changes should be balanced with the reintroduction of inflation-indexing so as to create a tax-free rate of return designed to encourage long-term investments. 

The foundation said Reeves could raise a further £9bn by levying employer NI on employers’ pension contributions. Simultaneously abolishing NI on employees’ pension contributions would leave a typical worker saving via auto-enrolment better off, it said. 

The chancellor should also close loopholes in IHT that “allow the very wealthy to avoid paying their fair share, and undermine public trust in the tax”, the thinktank said. Ending business and agricultural reliefs and bringing pension pots into IHT would raise £2bn a year. 

Prior to the budget this is all idle speculation. It would be good to see a Labour government acting as Labour rather than a Tory tribute act, but I suspect that is what we will get, along with much finger-pointing at Tory mismanagement. 
 

‘It would be good to see a Labour government acting as Labour rather than a Tory tribute act’

 
I cant help but wonder why Andy Burnham, the Greater Manchester mayor, hasn’t graced the national stage, he seems far more enlightened than many of his colleagues. 

This week, Burnam has looked to Finland in order to address the rough sleeping in the city. 

Burnham is committed to making the region “the first in the UK to adopt a ‘housing first’ philosophy like Finland”. A scheme launched there in 2008 that gives people homes when they need them, without conditions attached, has brought down homelessness by 70% and eradicated poverty-based homelessness completely. 

Now, after a successful pilot of a similar housing first scheme in Greater Manchester, which has supported 430 people with complex experiences of homelessness, Burnham is bidding for government funding to extend it beyond the current deadline of March 2025. 
 

‘I fear the funding won’t be forthcoming; forward thinking investment isn’t what we do!‘

 
When he first became mayor, Burnham said: “I kept hearing people talking about Finland and housing first, so I just thought, well, I better get over there and have a look. So I went, and it was sort of life-changing, actually.” 

Burnham is calling for the UK to take a similar approach to Finland. He said the release of the Grenfell report last week should be a “watershed moment” in housing policy for the UK. By providing people with homes, Burnham said, money can be saved in public service budgets elsewhere. 

He said; “It actually saves public money to do this. It’s not as if we’re just asking for something, and it’s another pressure. The bigger you do housing first, the more you’ll save.” 

Unfortunately, this is one of those cash upfront with backend benefits so disliked by the Treasury. As much as this is a project that deserves to be taken forward I fear the funding won’t be forthcoming; forward thinking investment isn’t what we do! 
 

“Faith has been broken 

Tears must be cried” 

 

‘This week’s headlines have been dominated by two things.

In the US we had the televised debate between presidential hopefuls Trump and Harris. From what I read and saw, Harris was the clear winner. She showed Trump up for what he is, a dangerous fascist, with little to offer other than bullying and racism.

In the UK it was all about the pensioners heating allowance, or rather the lack of it. I can’t help thinking that this is, at best, politically naïve.

I don’t usually follow the National Television Awards, anything where nonentities such as Ant or Dec are viewed as celebrities fills me with horror. However, I was delighted to see Mr Bates .v. The Post Office collected several awards. I was, however, dismayed but not surprised by former postmaster Jo  Hamilton’s acceptance speech, in which she was disappointed by a lack of progress with payouts since Labour came to power.

“What I’d like you to know is I went to Westminster a couple of weeks back and saw the new minister. And trust me, nothing has changed.”

Quelle surprise!

Lyrically, we start with Bloc Party and “Like Eating Glass” taken from their 2005 album, one of the high points of noughties indie music. We finish with simply a classic, “Wild Horses”

by the Stones, which featured on their 1971 album, “Sticky Fingers”. What is often overlooked is that the song was written by the Flying Burrito Brothers in 1970.

Enjoy!

Philip.’

 

@coldwarsteve
 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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