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News, gossip and insight from PoliticsHome Editor Paul Waugh

Yellow on blue tax attax

Within half an hour of the Chancellor sitting down, it looked like he was being shot by his own side over tax changes in the Autumn Statement.

Lib Dem HQ sent out an upbeat press release which trumpted their achievements, but also included this killer section:

"Conservatives tax cuts for the richest

The only tax cuts the Conservatives support are ones for the very rich. At the General Election, their priority was to cut inheritance tax for millionaires. In the Coalition, Liberal Democrats have blocked these plans and instead we are cutting taxes for millions"

Er, shome mishttake shurely?

Well, yes, as it turns out. A Lib Dem spokesman has just told us in the post-statement huddle that "that was sent out in error by HQ...it was based on an old briefing".

Oops. No wonder a Tory spokesman was forced to hit back, saying of Osborne that "the personal allowance and fuel were a big part of his priorities".

But that blunder aside, the Lib-Con calculus around this Autumn Statement has been fascinating. The Libs won their longed for tenfold increase in capital allowances and blocked regional pay deals. The Tories got the fuel duty cuts as well as the 1% benefits cap. The Libs' hopes of more cash for childcare and tighter procurement rules were blocked this time.

Given the importance of welfare cuts to the overall numbers, what is notable is that they could have been even deeper. George Osborne factored into the Autumn Statement last year an 'illustrative number' of £10bn of extra spending cuts (which were strongly hinted as coming from welfare) for 2015/16. As recently as party conference speech, that £10bn figure was pushed hard again.

Here's the previous assumptions: £6bn welfare cuts in 2015/16 and £10bn for 2016/17.

But today, a quick look at the figures shows instead £3.6bn welfare cuts for 2015/16 and £4.2bn cuts in 2016/17.

A senior Lib Dem source tells me: "We regard this Autumn statement as having made the big material decisions on welfare for this Parliament. Nick is not expecting to come back to this welfare issue. Any further significant announcements on welfare is now a matter for manifestos." It seems the Chancellor's starting point was a freeze in benefits, not even a 1% rise.

Indeed, when pressed today, even Tory Treasury sources said that they were not expecting to get more from welfare.

The yellows are keen to point out that the £3.6bn welfare cuts are also nearly matched by more than £3bn in tax hikes on the better off today (made up of £1.2bn on tax avoidance, £1bn on pension hikes and roughly £1bn from higher rate thresholds). But neither party wants to jack up taxes any further between now and the 2015 election.

Yet capping the welfare cuts means that the focus will now switch to departmental spending more than ever before. And with NHS, schools and aid all protected, that means a big squeeze on other departments.

And this is where Danny Alexander comes in. The Chief Secretary* has been looking right across Whitehall and found underspends that suggest some departments can keep on delivering savings. To make the figures work, unprotected departments (perhaps the non-police bits of Home Office and certainly MoD backoffice) face big cuts.

One minister tells me that spending control and tight Whitehall budgetary discipline is "the dog that hasn't barked" so far this Parliament. When Danny A announced he was top-slicing budgets at Cabinet yesterday, there were several Tory ministers who looked pretty grumpy.

That grumpiness could be even greater when the reality of those cuts hits home. As ever, the real divide in this Coalition is not between Libs and Tories: it's between the Treasury and the rest.

 

*FOOTNOTE: The Chief Secretary may expand on all of this when he holds his first PolHome 'Tel the Minister' event with us tomorrow. Do sign up HERE.


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