Osborne had a strong relationship with Senator Danny Alexander, who often acted as a go-between for Osborne and Cable
“The bombshell rise in VAT will lead to 235,000 job losses and put a permanent dent in the living standards of every family in the country, economists warn. Vince Cable’s decision to hike VAT from 17.5% to 20% from January will raise £12bn a year in extra taxes. The biggest revenue-raising measure in this week's Budget. But experts say it will have serious consequences for both the economy and the living standards of millions of families. They warn those on low and middle incomes will suffer the most. There was also growing anger over the decision to press ahead with the move only weeks after the coalition assured voters they would not raise VAT. Signs are growing that disaffected Lib Dem MPs could even stage a Commons rebellion over the issue. A group of independent economists, said the move would increase unemployment by 240,000 over the next decade and reduce GDP by 1.4% over the same period. Professor David Smith said his Budget modelling suggested that the decision on VAT was ' a mistake'.” - VAT rises will cost 240,000 jobs, Jason Groves, The Daily Mail (2009)
It was budget day in the Commonwealth, after weeks of negotiations between Cable, Howard and Osborne, dubbed the “three horsemen of austerity” by the left wing press, the national budget was now ready to present to the public. The headlines included the introduction of a new online “portal” where members of the public could see the salaries of any public sector worker earning over £150,000 and could see a detailed breakdown of all Government spending over £25,000. Howard hailed this as a “new age of transparency.” Howard based the plan on the Missouri Accountability Portal. A US website set up in the state of Missouri that provided citizens with a single point of reference to review how money was being spent. Howard was proud of the site. "It will show you why transparency is such a powerful tool in controlling public spending. It can have an especially powerful effect when it comes to salaries."
Another headline was a personal pet peeve of Osborne’s reducing Brown’s 50p tax rate for higher earners to 45p, rumours said that Howard had been keen to abolish the tax altogether but that this had been overruled by Cable. This was paid by a massive increase in Value Added Tax, by 2.5%, raising it 20%. This raised £12bn for the Government. However VAT was widely known as a heavily regressive tax, hitting the poorest the worst. This was protested by Labour and many back-bench Lib Dem MPs, as well as being incredibly unpopular with the public at large.
Islington Mayor Jeremy Corbyn was one of those who condemned the increase in income tax, saying it would hit communities like his the worst
Cable in his budget emphasised the managing and reduction of interest rates, referring to interest control as “radical monetary activism.” Cable stated that controlling interest rates and the national debt was the best way to repair Britain’s monetary strength. The budget also cut corporation taxes and “simplified” income tax into just four different tax bands. Most continuously the budget announced cuts to the Department of Work and Pensions in the name of “welfare reform.” The DWP, under the leadership of right-wing Michael Gove, announced 7bn of “efficiency savings” by cracking down on “fraudulent benefit claimants” and “top civil servant pay.” With the target being a cut of £17bn by 2014.
Gove announced a new form of benefits named "Universal Credit." To be detailed in a White Paper to be published in early 2010. Gove pledged Universal Credit would. Cut the complexity of the benefit system, reduce the risks for people making the transition into and out of work. Alongside this it would create a simpler system that would be cheaper to run and minimise the opportunities for fraud and error. Gove emphasised the importance that work be made the simpler and more attractive option. He pledged to "root out welfare dependency." Claiming welfare reforms would "reduce the inter-generational poverty that blights communities." Universal Credit was controversial to say the least, Labour Senator Liam Byrne condemned it as cutting “too much too quickly.” Presidential Candidate Gordon Brown said whilst Labour accepted the need for cuts, coalition cuts were going too far and falling on the most vulnerable. Green MP Romayne Phoenix went a step further and called for a Universal Basic Income of £70 a week.
Despite the controversy the budget passed through with only six Lib Dem MPs and three Senators rebelling against the Government. Britain’s first austerity budget, and Osborne’s first major challenge had passed.
“I'd like to focus on another part of Cable's speech - his comments about borrowing. In yesterday's blog I said: "debt cannot rise without raising doubts about the ability to repay. In effect, the British coalition thinks that the UK reached that point some time ago. This is why they decided against a mass-stimulus package. One of Osborne's advisers has pointed out that this was not quite the Conservatives' view. They thought that Britain was in danger of reaching that point quite soon, so the stimulus was not a risk worth taking. That may sound like a distinction without a difference (and, I should say, this adviser wasn't demanding a retraction.). But in fact it does matter, and it shows up a key challenge for the coalition as we wrap up the budget. To see why, you only need to look at Cable's speech. He devoted the bulk of his remarks on how to build a safer financial system for the future. But he can't resist a brief victory lap on the right and wrongs of fiscal stimulus.” - A Conservative Budget, Stephanie Flanders, BBC (2009)
The tense budget negotiations were described in Cable's 2016 book "After the Storm"
However the Commonwealth’s problems did not end there, in the Department of Health, Britain’s first case of swine flu was confirmed in Scotland, with a handful of cases popping up in Redditch, Dorset and London. Swine Flu was the first flu pandemic in 40 years - the last in 1968 killed about one million people. But, the pandemic started moderately and caused mild illness in most people. Most cases occurred in young working age adults and a third to a half of complications were presenting in otherwise healthy people. The flu had killed nearly 200 people in Mexico and was quickly spreading to Europe.
The Commonwealth’s response was led by Health Secretary David Howarth/ Howarth announced the government planned to use its stockpile of antiviral drugs to treat patients. Howarth drew the line at the wearing of face masks. "We are aware that facemasks are being given out to the public in Mexico. The available scientific evidence does not support the general wearing of face masks by those who are not ill." Howarth was also confident Britain would be able to combat the virus. "We have established a stockpile of enough antivirals to treat more than 30m people, that is to say nearly half of the UK population." A few days after the Howarth’s announcements over 100 cases of Swine Flu had been reported in the Commonwealth.
“Mortality in this pandemic compares favourably with 20th century influenza pandemics. A lower population impact than previous pandemics, but, is not a justification for public health inaction. Our data support the priority vaccination of high risk groups. We observed delayed antiviral use in most fatal cases. This suggests an opportunity to reduce deaths by making timely antiviral treatment available. The lack of a control group limits the ability to extrapolate from this observation. A large minority of deaths occur before healthy people. There is a case for extending the vaccination programme.” - Mortality from pandemic A/H1N1 2009 influenza in England, Public Health England (2009)
Swine Flu would hit hardest poor areas of London like Tower Hamlets
As if the budget and a virus wasn’t enough, in May 2009, two months before the Presidential Election, The Daily Telegraph obtained a full copy of all Parliamentary expenses claims. The Telegraph began publishing, in instalments from May 2009, certain MPs' expenses. The information originated from the parliamentary fees office. The whistleblower offered it to other newspaper organisations for more than £150,000. The assistant editor of the Telegraph, revealed that the newspaper had paid £110,000 for the information. He described it as ‘money well spent in the public interest’. The Times and The Sun had turned down an offer to buy the leaked expenses file. The report from the Telegraph that whilst in Government Labour Ministers had abused the expensive system for their own gain. Whilst Labour was the most affected in the scandal, Conservative Liberal and UKIP MPs had been caught abusing the system, in fact nearly every party had members abusing the expenses system.
The most eye-catching claims included ones for clearing a moat, maintaining swimming pools, and a £1,600 "duck island. One Senator claimed for a house that was neither in London, nor her constituency. One MP continued to claim for mortgage interest payments, after they paid off the mortgages - they blamed that on accounting errors. The press also ridiculed small claims - including a trouser press, a bath plug and some HobNob biscuits. And there was annoyance at large food bills - some charged even when Parliament was in recess. Whilst some argued that the scandal was proof of the Commonwealth’s corruption, many pointed to the outdated expenses system under the old system, especially for the former House of Lords, warning the scandal would have been much worse in the old Kingdom
Possibly worst of all for trust in Parliament, Commons Speaker Michael Martin and Senate Presiding Officer Alan Hazelhurst were both caught up in the scandal. Martin announced he would resign from his posts after the Presidential Election. Hazelhurst said he would look to stay in place but call a vote of confidence in his chairmanship. With trust in the main parties at an all time low, a financial crisis and a pandemic it felt like anything could happen.
“Senator Alan Haselhurst today announced a Vote of Confidence in himself as Senate Presiding Officer. The Senator for East Anglia told the East Anglian Daily Times: "I continue on in the role if my colleagues wanted me to." Haselhurst told BBC East Anglia he would be taking two weeks to "let the dust settle, but if I have enough support from my colleagues I will be remaining." He expressed scepticism that a different Presiding Officer could reform MPs' expenses. "The Officer is only here as a guiding hand," he said. "He can't force MPs to make decisions." He added that, if he held his job, he would improve understanding among the public of what MPs' jobs consisted of. But Haselhurt cautioned it was important not to jeopardise "routine matters". On the question of his own expenses claims, he said the public failed to understand why such expenses were necessary. "For example, people have said to me that I could commute rather than have a flat in London," he said. "But saying: 'Oh, sorry, chaps, I was stuck on a railway line' when the seat was empty wouldn't cut it." - Haselhust announces vote of no confidence in himself, Lucy Ward, The Guardian (2009)
Haselhurst had served as the Senate's Presiding Officer since its founding in 1999
“Swine Flu impacted the Presidential election more than the expenses scandal”, discuss (30 Marks)” - A Level History Exam (2019)