Conservatives – We must put any immediate prospect of dumping the UUP out of our minds

The Conservative Party has held a presence in Northern Ireland politics since the mid 1980s.  It has had very little electoral success.  One of the reasons for that was a failure by Conservative Leadership to direct resources to enable its Northern Ireland branch to build a political power base.  Perhaps it was correct to avoid doing that before the Good Friday Agreement. 

In December 2005, David Cameron became the leader of the Conservative Party.  Soon after that, he made public his vision for politics in Northern Ireland.  Speaking to the Institute of Directors in October 2006, he said this:

“I want politics in Northern Ireland to be about the real things – schools, hospitals, tax…not about timetables, deadlines and institutional arrangements.  And I want the Conservative Party to be a part of that new politics. We’re moving in a new direction.  Leading the debate.  Pulling ahead of a tired Government.  Developing policies for the future. In doing so, one thing is certain. My Party’s commitment to Northern Ireland, and to all its people, will be whole hearted and unshakeable.”

David Cameron’s speech epitomised what Northern Ireland Conservatives have always wanted – normal politics in Northern Ireland.  One of the steps necessary to achieving that objective is to move Northern Ireland away from its semi-detached status by giving its people a say in who will form the next National Government. 

Very soon, we will have a General Election and the first part of David Cameron’s objective will have been achieved.  I say “first part” not just because the Labour Party are not yet here but because Mr. Cameron was not just talking about tax.  In a clear reference to devolved powers and the Northern Ireland Assembly, he also mentioned schools and hospitals.  Furthermore, his reference to “real things” and “not about timetables, deadlines and institutional arrangements” was a clear indication of his desire for an end to sectarian politics.

Not all Northern Conservatives agree that being in partnership with the UUP was the right way to pursue David Cameron’s vision. 

Some in our party have argued, not without considerable force, that the UUP is not a party which is capable of moving away from sectarian politics.  It has also been argued, again not without considerable force, that the Conservatives are not capable of winning Parliamentary seats or building up a significant power base in Northern Ireland without a partnership with one of the leading Unionist parties.  If you agree with both of those viewpoints, then you will have reached a conclusion that there was never anything the Conservatives could have done to bring about normal politics in Northern Ireland.  I am one of those that dont agree with either argument. 

To borrow an old cliché, there is no such thing as a free lunch in the jungle.  Whichever path the Conservative party chose to work for normal politics in Northern Ireland, there was always going to be a lot of hard work with many hazards and very little electoral reward in the short term.    

The path chosen by the Conservatives was the link-up with the UUP.  After much thought and agonising on this subject, I eventually concluded that it was the right route to take even though there is no certainty that the pact will survive after the General Election.

The UUP have considerable obstacles to overcome in moving away from sectarian politics.  Within the last couple of months, the UUP has been lampooned for its equivocation in relation to making deals with the DUP to promote unionist “unity” candidates.  From an electoral tactical point of view, this equivocation has been rightly described as a missed opportunity to gain the ascendancy over the DUP during its weakest moment during the Christmas period.  The positive aspect to this struggle is that, in the end, the UUP came down firmly and unequivocally in favour of the pact with the Conservatives.  For those of us who have charted the progress of the UUP, this is the sort of struggle which goes with the territory, whenever a party is evolving.  There will be further struggles ahead.

Yesterday, the UUP voted against the transfer of powers for Police and Justice.  In my opinion, this was an error of judgment which will have much more of an impact on their political fortunes than their decision to hold talks with the DUP over unionist unity.  Within the Unionist community, there is a majority who would have supported the transfer of P & J from at least a pragmatic point of view.  Peter Robinson and his party will not have taken lightly their decision to support the transfer of powers.  Unfortunately for the UUP, the DUP have “read the tealeaves” correctly and the UUP have not. 

Even more damaging to the UUP is the prospect that Unionist voters will no longer consider them to be the moderate voice of Unionism as compared with that of the DUP.  That makes it much more difficult for the UUP to distinguish itself from the DUP as the party of civic unionism.

It will also make it much more difficult for the Conservatives to justify a future partnership with the UUP after the General Election.  Pressure will undoubtedly grow within the Conservative Party not to enter into any further pact. 

I am one of those who would not wish to rule out further pacts or even a merger between the Conservatives and the UUP.  For one thing, the latter has many moderate civic unionists within it who could yet rise to the top.  If failure in the next Assembly Elections is the price that brings that about, it could very well be a price worth paying.  

Meanwhile, we in the Conservative Party should be patient.  We must allow time and space for the UUP to continue their evolution.  We should commit ourselves to working in partnership with the UUP at least until beyond the next Assembly Elections.  Above all, we need to remind ourselves that one of our aims is to influence the Unionist community towards our way of thinking.  We are much more likely to do that in a partnership with the UUP than outside it.  We must put any immediate prospect of dumping the UUP out of our minds.

Marriage and justice – Has Mr. Cameron got it right?

The Conservative spokesman on Justice, Henry Bellingham, has been rebuked by David Cameron for supporting the recommendation of the Law Commission, the Government’s legal body, to give cohabiting couples with children – who have lived together for two years – automatic entitlement to at least half of their partner’s estate if they die without leaving a will.

The present Law relating to Inheritance by an unmarried partner

The Intestacy Laws

Who inherits what when somebody dies without making a will is governed by the Intestacy Rules.  The intestacy rules are similar across the whole of the United Kingdom but there are some differences.  For example, it is possible for a second cousin to inherit in a Northern Ireland estate, whereas in England and Wales such kinship is too remote and barred from the right to inherit. 

In all jurisdictions across the United Kingdom, a partner of an unmarried couple has no right to inherit under the Intestacy rules.  A spouse, on the other hand, has prime rights.

The Inheritance Act Statutes

An unmarried partner has the right to make a claim against the estate under a set of statutes (which I call the “Inheritance Act Statutes”) (for Northern Ireland version see here).  An unmarried partner is one of a restricted class of persons (which include spouses, former spouses and children), that are entitled to make a claim under the Inheritance Act Statutes.  A court will make an award to the claimant if it decides that the distribution of the deceased’s estate – whether under the terms of his will or the Intestacy rules – does not make adequate financial provision for the claimant.  A wife or former wife of the deceased who makes a claim gets special treatment.  In deciding whether or not the financial provision is adequate, the Court considers the position as it would be on a divorce.  An unmarried partner does not get similar treatment.

Some would argue that the Inheritance Act Statutes are adequate protection for unmarried couples.  Others would argue that they are unjust.  I will give a practical example here.

Example of a possible injustice

A deceased during his lifetime marries.  A year later, he and his wife separate.  They never live together again.  The deceased then lives with a woman who becomes his lifelong partner.  The deceased then dies without making a will.

The Intestacy rules apply and already favour the long estranged spouse as his next of kin.   The unmarried partner is able to make a claim under the Inheritance Acts.  However, she is up against the provisions which favour a spouse.  It may be that the unmarried partner would be able to argue that the Court should make her a more favourable award because of Article 8 of the Convention on Human Rights (see below).  Still, even if that were to tip the scales (and there is no guarantee of that), it is an expensive and messy way for a partner to obtain justice.

Article 8 ECHR

The recommendations of the Law Commission are very much in line with the provisions of Article 8 ECHR which says

“Everyone has the right to respect for his private and family life, his home and his correspondence.”

Failure to reform the law in this direction will almost certainly mean that there will be more inheritance cases in the Courts which engage Article 8.

Conservative Policy on the Family

So far, the Conservatives have promised to elevate the status of Marriage within the tax system

On the page of their website dealing with policy on the family, the Conservatives say:

“Money worries can put a huge strain on relationships – so we will end the couple penalty in the benefits system and recognise marriage in the tax and benefits system”

However, Mr. Cameron has emphasised clearly, from earlier speeches and articles the priority with which he regards the status of marriage.  In his Article posted July 11^th 2007 entitled “Time to give marriage a priority” Mr. Cameron says this”

“And what is the institution that, in so many cases, holds families together? Most of all, it is marriage. After a child is born, half of all unmarried parents split up within five years. For married parents, it’s just one in 12.

Of course, there is a ‘selection effect’ here – couples who are naturally strong are also the couples most likely to get married. But even once you analyse the evidence to take out the selection effect, it’s clear that marriage itself has a powerful impact on the way a couple regard their relationship.

It’s obvious why. Marriage represents a formal commitment. Those vows, whether spoken in church, a register office or anywhere else, are made before friends and family. They symbolise the highest aspiration of each of us – to form a committed, life-long union with another person.

Most people want to get married and stay married. Married families are most likely to survive the birth and upbringing of a child. So why, given this, is Labour so hostile to marriage?”

Mr. Cameron’s new stance on inheritance is totally consistent with what he has previously said.  However, he is likely to encounter criticism.  Some would argue that by intervening on reform of inheritance laws, he is placing his own ideals on the status of marriage before justice.  On the other hand, the ideal of elevating the status of marriage in our laws is inextricably linked to a central Conseravtive policy theme  - ”fiximg our broken society“.   The Conservatives will not wish to do anything which is seen to be undermining that theme.

Commission on Scottish Devolution presents its final report

Yesterday, the commission on Scottish Devolution published its final report. 

The report has in it recommendations which undoubtedly will have ripple effects in relation to the future of Northern Ireland. 

At the centre of the debate, to which the report alludes, is ‘how much and what fiscal autonomy should be given to devolved government?”

In an article written about the report the Times highlights the flaw that exists in the present system. 

“Successive administrations had been more celebrated for the way they spent taxpayers’ money than for the efficiency with which they managed their budgets. Having the power to invest an annual block grant of £32 billion, without the responsibility for raising the tax, was always a one-sided bargain”

In other words, there is no democratic accountability.  Unless an administration has the responsibility to raise all the money it spends, it can always blame central government for not providing enough revenue if services fall short.  It can also hide behind central government if there is a problem with the economy generally since it is not responsible for fiscal or monetary policy of any kind.

The report recommends that Scotland should have more power to raise and reduce taxes but subject to some control mechanisms retained by central government.  The Times summarises the recommendation as follows:

“A Scottish government would be free to follow the spending pattern laid down by the Chancellor of the Exchequer but if it chose to cut taxes, it would be forced to reduce public spending. If it raised taxes, it would have to explain why”

Does the proposal give away too much or too little power?   Is this a stepping stone towards the breakup of the Union or will it create greater harmony in the Union?   (Alan Cochrane writing in  the Telegraph  suggests the report goes in the right direction for the Nationalists).   What are the implications of the proposals for Northern Ireland’s future?  Should Northern Ireland be denied the power to raise taxes until sectarian politics is out of the system?  Those are questions for a future post.

Budget 2009: Conservatives tactically right to be quiet (for now) about their economic policy differences with Labour

Following the budget, Matthew Paris of the Times has challenged the Conservatives to be more forthright about their differences with Labour on economic policy than they are at the moment. 

Paris’s discussion is partially about tactics and partially about policy.  He has framed the tactical-political issue as follows:

“It is said of Mr. Brown that his aim is to establish a clear dividing line with the Tories, and I think that is true. From this it is argued that the Tories should not be so foolish as to play his game. I reject that. There are times when, if a gauntlet is thrown down, one should pick it up and draw swords.”   

Like most Tories, Paris does not have any conception that the Conservatives are going to lose the next election.  He is concerned about mandate (and by implication the election which follows).  He said, 

“To break cover with such talk [about what they would actually do in office] only after winning an election would not only be dishonest, but rob them of the mandate that they will need” 

I am not as concerned about this as Paris.  The Conservatives are being careful not to show their hand.  I would be concerned if, by the time the election manifesto was written, the Conservatives did not have anything new to “wheel out”.  All the indications are that there is plenty of new thinking, which is still under wraps.  In October 2007 speculation about a snap election was at fever pitch and Gordon Brown was riding high in the opinion polls.  We saw then that George Osborne announced the new Conservative Policy on Inheritance Tax.  

The Conservatives will certainly need to make spending cuts during their administration.  So also would Labour, if they won another term.  However, there is no need to emphasise the requirement for spending cuts, let alone say exactly where they will fall.  Making a judgment about that can wait until the Conservatives achieve office.  

On the question of taxation, I responded to the increase in the top rate of tax in my previous post.  The Conservatives do not have to promise when to bring back the 40% top rate.  I am slightly disappointed that Mr. Osborne said, in relation to the 50% rise, that he “could not promise to reverse it.”  I would have preferred a different emphasis.  As well as election considerations, the Conservatives ought to consider those that are making decisions about whether to continue to work or be based in Britain.  All that said, Mr. Osborne’s words are still consistent with bringing the top rate back down at some point in the future. 

Overall, the Conservatives have got their tactics right.  They may just need to make some minor modifications.

Budget 2009 – Top rate of income tax raised to 50%

In the budget today, the Chancellor of the Exchequer, Alastair Darling, announced that the top rate of income tax is to be raised to to 50%

It was not my intention to comment on the budget today.   Instead, I was going take about a week for reflection and research and write posts after that time.  That is still my intention.  However, this particular budget item has “jumped out of the page”. 

Before the budget, it had already been announced that the top rate of tax was to rise to 45% .   As Government finances deteriorated further and because Gordon Brown concluded they would not be unduly damaged he decided to put that up to 50%.  Going back in history, that is how the top rate of tax crept up.  It was incremental – an increase here and an increase there.  It was never going to hurt the Labour Party’s popularity, yet it was very debilitating to the economy. 

The Phenomenon known as the “brain drain” had been identified by the Conservatives long before Wilson/Callaghan Labour administration came to an end in 1979.  

Before Mrs. Thatcher came to power, the top rate of tax was a staggering 83%.  If your income was unearned income, you were liable to pay a further 15% investment income surcharge.  In other words, an investor who had no other income whose income was in the top band, had to pay 98% of the top slice of income to the Government.  The need to do something for the top rate earners had become pressing.  

In his first budget, Sir Geoffrey Howe, Mrs. Thatcher’s first Chancellor of the Exchequer, reduced the top rate of tax to 60%.  The revenue for that measure had to be found elsewhere.  Howe did it by increasing VAT (then 8%).  It marked a trend away from direct to indirect taxation.  

There were further reductions of income tax in later budgets.  The final reduction in the top rate to 40% was made in 1988, under Chancellor Nigel Lawson.  

Part of the success of the top tax rate reduction was that it was accepted by the Labour Government when it came to power in 1997.  In all likelihood, this rate hike would probably not have happened if the public finances had not been as bad as they are now.  A renewal of the exodus of the brightest and best will not occur during a period of renewal of the public finances, so long as it is understood that this is temporary.  However, if it is perceived that this is the beginning of a long term trend towards more taxation of the higher earners, the brain drain will return and it will damage the economy.  

The Conservatives have an opportunity to put “clear blue water” between themselves and the Labour Party on taxation principles.  Whilst it would not be prudent to promise a particular time when the 40% rate can be re-introduced, it is right and politically important that they should promise to restore it at the earliest opportunity.

Update 24th April

David Cameron in an interview on the today programme said that he opposed Labour’s 50p tax rate but repeal would have to join the queue of the demands on the public purse.  He reiterated George Osborne’s pledge that repealing the increase in National Insurance on those earning £21,000 or more will be a higher priority. 

Northern Ireland economy set to become an oasis of growth within a devastated UK economy

By the time most people have read this post, it will have been announced that unemployment in the UK has passed the two million mark for the first time in 12 years.  

Gordon Brown will, of course, pass this off as a global recession.  What will mark our country out from others will be the rate at which we can recover and grow our economy when the recession ends.  

We have already had some indication about that.  According to an IMF forecast reported in The Times, Britain’s economy is set to shrink by a further 0.2% during 2010 whilst all other leading economies in the World are expected to enjoy very small growth.  

In that case, unemployment will probably rise to 3.5 million in the UK.  

The Northern Ireland economy may be in a different situation to the rest of the UK.  In Northern Ireland, the public sector represents 77% of GDP.  Having a top-heavy public sector will mean that in the short and medium term, the recession will not be as crippling for the Northern Ireland economy as it will be in England.  Meanwhile, Northern Ireland is already benefiting from a low pound against the euro, particularly in the retail sector as shoppers from the Irish Republic go North to buy their goods.   

The Conservatives have already promised that Northern Ireland will be granted special tax exemption status as part of a drive to re-balance its economy.  I sense that in the years to come, Northern Ireland could become a beacon of investment opportunity for businesses.  Let us hope so.  At the very least, it seems set to become an oasis of growth within a devastated UK economy.