George osborne

No government likes to u-turn, and particularly not on a Budget measure. So, tonight’s changes to the VAT regime proposed by the Budget for Cornish pasties and static caravans are embarrassing for the coalition. It is also worth noting that they have come after they have taken most of the political heat they were likely to take for the changes, including in the House of Commons where there were decent-sized rebellions on both issues. One of the lessons that I suspect that politicians, and particularly the coalition, will learn from this episode is: don’t try and deal with the anomalies in the VAT system. Voters, for obvious and understandable reasons, react particularly badly to taxes hitting products that were not taxed before.

What do Ed Balls and Mitt Romney have in common? They both want you to think that Barack Obama is spending government money like never before. For Mitt Romney, it’s an attack: he wants to make Obama a Big Government bogeyman who’s failing to tackle America’s deficit. ‘I will lead us out of this debt and spending inferno,’ the Republican nominee promises. For Ed Balls, it’s an example for Britain to follow: ‘I will lead us into this debt and spending inferno’, the shadow chancellor promises. Well, essentially. But the Obama camp is pushing back hard against such claims, highlighting a Wall Street Journal article yesterday titled ‘Obama spending binge never happened’.

As if Lords reform, communications surveillance powers and same-sex marriage weren’t enough, it looks like there’s another issue that’ll cause a good deal of friction between Liberal Democrat and Conservative MPs: plans for regional public sector pay bargaining. It’s something George Osborne is understandably keen on — James laid out the political and economic reasons behind it just before the Budget — but now the Lib Dems are making clear that they don’t share the Chancellor’s enthusiasm. In the Q&A after his pupil premium speech on Monday, Nick Clegg said: ‘Nothing has been decided.

Today’s PMQs will be remembered for one thing, Cameron saying that the eurozone had to ‘make up or it is looking at a potential break-up’. This is a distinct hardening of the government’s line on the single currency. Cameron’s comment was particularly striking coming just days after George Osborne said that ‘open speculation’ about whether or not Greece would leave the euro was ‘doing real damage across the whole European economy’. However those close to Cameron are not resiling from the remark. Instead, I understand that we can expect more from the Prime Minister on this subject when he makes a speech on the economy tomorrow. The break-up of the euro would be extremely painful in the short-term.

Greece is the centre of European attention, but as George Osborne met with other EU finance ministers today there was another issue bubbling in the background — Basel III. This had been brewing for a while and is yet one of those matters that threatened to isolate Britain from the rest of the EU (though some would argue this is a good place to be). The Chancellor this morning appears to have agreed to the Basel III accord, which stipulates the amount and quality of capital that banks are required to keep. But this was after much haggling — and an Osborne outburst where he said signing on to the original banking capital rules would make him look ‘like an idiot’ — saw amendments being added.

Have our politicos looked at last week’s turnout numbers, and thought ‘y’know, we might be a bit cut-off after all’? Reason I ask is because they’re all tripping over themselves today to downplay the significance of Lords reform, and focus the conversation on The Issues That Actually Matter. This, as James said earlier, is what George Osborne has been up to throughout the day. Ed Balls did likewise during an appearance on the Sunday Politics with Andrew Neil. And, most significantly, even Vince Cable echoed their sentiments in his interview on Sky’s Murnaghan Show.

It has been a busy day for Commons committees, and I don’t just mean the education and media select committees either. The John Bercow-chaired House of Commons Commission has released a briefing note outlining some of its recent decisions relating to the running of the House. It covers three areas: ‘Mobile devices for members’ (aka, iPads for MPs); ‘Trees in Portcullis House’ (let’s keep ‘em, so long as we can make ‘em cheaper); and ‘Alcohol policy’ (more on which below). It’s the last of these that will probably get the most attention, not least because of Eric Joyce’s recent misadventures. So what does Team Bercow recommend?

During the last election campaign, David Cameron repeatedly promised to protect pensioner benefits. In one of the most heated moments in the Prime Ministerial debates, Cameron accused Labour of telling ‘lies’ when they said the Tories would cut things like the winter fuel allowance, the free TV license for the elderly and the like. For this reason, these benefits have, basically, been protected in government despite all the other cuts. But both the Liberal Democrats and Iain Duncan Smith have been arguing behind the scenes that these benefits shouldn’t be protected, that they are not an efficient use of money. It is in this context, that Iain Duncan Smith’s intervention should be seen.

As Pete says, Liam Fox’s piece this morning calling for more supply-side reform is broadly helpful to the Chancellor and has been written with his approval. Strikingly, the former defence secretary — who still has a constituency on the right of the party — goes out of his way to back one of the most contentious Osborne decisions, increasing the British contribution to the IMF. But there is one line in the article that carries with it not the air of helpful advice but menace: ‘It must be understood that further reductions in budgets for security, leaving overseas aid untouched, would be met with fury by most Conservatives.’ This is going to be one of the big battle lines for the next spending review, what happens to the defence budget?