That Liberal Democrat budget

It was an immensely moving moment for all Liberal Democrats when Vince Cable rose to deliver the first Lib Dem budget in almost a century. Calmly scanning the Labour/Conservative MPs arrayed in front of him, he announced:

'In this year, the centenary of the great People's Budget of 1909, the Liberal Democrat government promises another round of radical, progressive tax reform.

'We will restrict tax relief for pension saving to the basic rate.

'We will align Capital Gains Tax rates with income tax rates to prevent the rich cutting their tax bill by paying themselves in share options rather than wages.

'We will make National Insurance payable on payments in kind.

'We will introduce new measures to reduce avoidance of Stamp Duty Land Tax and Corporation Tax.

'We will use the funds raised by these measures to raise the personal income tax allowance to £10,000.

'Taken together, these measures will provide those on low and middle incomes with a cut in tax of about £700, shifting the burden of tax further onto the shoulders of the wealthy who are most able to bear it.'

As the applause grew in the seats behind him, the Labour benches sat in confused silence. How could they object to any of this?

Gaining in confidence, Vince came to the tricky part of the speech.

'Unfortunately the gaping whole in the public finances means that we will have to take measures to reduce public spending. To this end, I am announcing a major review of the nation's military expenditure to see if we cannot make significant cuts. Its about time we got over the mentality of Empire and accepted a diminished military role for ourselves in the world. We must seek our security through better collaboration with our European partners rather than trying to go it alone.'

The Conservative MPs, who had been grumbling ever more loudly during Vince's announcement of the new tax measures, suddenly break into shouts of apoplectic fury, waving their papers in the air, screaming that the Liberals have betrayed the nation. The Lib Dem MPs cheer. It really is like 1909 all over again.

Labour MPs continue to sit in confused silence. Would they have dared to do this?

As the Speaker restores a modicum of order, Vince presses on.

'In the meantime, further, painful cuts will be necessary. It is, I am afraid, a time for hard choices, and this Liberal Democrat government will not flinch from making these choices.

'To restore the public finances we will, therefore, review the current tax credits system. At present, far too many people up the income scale benefit from tax credits. We will reform the tax credits system to focus help more squarely - and, I dare say, fairly - on those most in need.'

There is a ripple of activity on the Labour benches. Yvette Cooper shouts out: 'More means-testing!'

Undeterred, Vince continues:

'And we will scrap the Child Trust Fund. As some of my colleagues have said, many times in the past, this was always something of a gimmick of a Labour policy. We have no hesitation in finding better uses for the resources.'

The Labour benches cry: 'Shame on you! Shame on you!'

As Vince completes his speech, the Leader of the Labour party - it was hard to see just who it was (one of the Milibands? James Purnell? Jon Cruddas? Yvette Cooper?) - rises to give the Labour response.

'The Labour party finds much we can agree with in this budget. But there is also much we disagree with.

'Only a few months ago, Mr Clegg informed us that his party is committed to improving social mobility. We in the Labour party share this worthy aim. But we do not see how the cuts announced in this budget are consistent with it.

'Increased means-testing of tax credits? What effect will that have? It will increase the effective marginal tax rate on those on low-to-middle incomes. It will, therefore, act as a major disincentive to low-paid workers to invest in new skills and raise their earning power. It will, therefore, act as a brake on social mobility.

'Scrapping the Child Trust Fund? Far from being the 'gimmick' which some in the Chancellor's party claim, the Child Trust Fund is the first policy in our nation's history to make real the old Liberal slogan - yes, Liberal slogan - of 'Ownership for All'. Under this policy, every child - whether born into a rich or poor family - has the promise that she or he will start their adult life with some capital to call their own. What a platform for ambition! What a source of opportunity! And not just for those with the academic ability to go into Higher Education, but for every young person of this country. By abolishing the Child Trust Fund, the Liberal Democrats are pulling that platform of opportunity out from under future generations. It is, indeed, a cause for shame.

'And will the Liberals stop there? Will they also abolish the Saving Gateway which gives generous subsidies to the saving of low-income households? I find the Chancellor's silence on this issue most perplexing. And worrying.

'Much of the burden of these two cuts will fall on the least advantaged in our society. It is they who will suffer from reduced incentives to invest in skills thanks to the greater means-testing of tax credits. It is the children of poor families who will most likely end up with no capital at 18 because the Child Trust Fund has been scrapped.

'So what the Liberal Chancellor gives to the poor with one hand - tax cuts - he takes back with the other.

'Well, it was a Labour politician who once said that 'socialism is the language of priorities.' We in the Labour party know what our priorities are. And now the country can see plainly where those of the Liberal party lie. And they do not include social mobility.'

Labour cheers....

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