History has been made, and today we witness the start of the coalition between the Conservative party and the Liberal Democrats, to form a strong and stable government for the country. The reason for this coalition, if anyone needed reminding, is the fact that no single party obtained the required majority in the House of Commons, to form a government. The share of the seats are:
Conservatives: 306
Labour: 258
Liberal Democrats: 57
Others: 27
As one commentator said, “the people have spoken, but we are not sure what they’ve said”!!
It was apparent that a coalition deal with Labour would not sit well with the electorate, for obvious reasons. Working with the Conservatives was, on the face of it, the only way forward.
The Coalition Agreement has now been released, and having read through it, I can outline here what I find to be the highlights. More details on the agreement can be found on this Liberal Democrat website.
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Deficit Reduction
The parties agree that deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain. We have therefore agreed that there will need to be:
- a significantly accelerated reduction in the structural deficit over the course of a Parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes;
- arrangements that will protect those on low incomes from the effect of public sector pay constraint and other spending constraints; and
- protection of jobs by stopping Labour’s proposed jobs tax.
The parties agree that a plan for deficit reduction should be set out in an emergency budget within 50 days of the signing of any agreement.
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Spending Review – NHS, Schools and a Fairer society
The parties agree that funding for the NHS should increase in real terms in each year of the Parliament, while recognising the impact this decision would have on other departments. The target of spending 0.7% of GNI on overseas aid will also remain in place.
We will fund a significant premium for disadvantaged pupils from outside the schools budget by reductions in spending elsewhere.
The Government will be committed to the maintenance of Britain’s nuclear deterrent, and have agreed that the renewal of Trident should be scrutinised to ensure value for money.
We will restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats.
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Tax Measures
The parties agree that the personal allowance for income tax should be increased in order to help lower and middle income earners. We agree to announce in the first Budget a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes. This will be funded with the money that would have been used to pay for the increase in Employee National Insurance thresholds proposed by the Conservatives, as well as revenues from increases in Capital Gains Tax rates for non-business assets as described below.
The increase in Employer National Insurance thresholds proposed by the Conservatives will go ahead in order to stop Labour’s jobs tax. We also agree to a longer term policy objective of further increasing the personal allowance to £10,000, making further real terms steps each year towards this objective.
The parties agree that a switch should be made to a per-plane, rather than per-passenger duty.
We further agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.
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Banking Reform
The parties agree that reform to the banking system is essential to avoid a repeat of Labour’s financial crisis, to promote a competitive economy, to sustain the recovery and to protect and sustain jobs.
We agree that a banking levy will be introduced. We will seek a detailed agreement on implementation.
We agree that ensuring the flow of credit to viable SMEs is essential for supporting growth and should be a core priority for a new government, and we will work together to develop effective proposals to do so.
The parties wish to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognising that this would take time to get right, the commission will be given an initial time frame of one year to report.
The parties also agree to rule out joining the European Single Currency during the duration of this agreement.
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Immigration
We have agreed that there should be an annual limit on the number of non-EU economic migrants admitted into the UK to live and work. We will consider jointly the mechanism for implementing the limit. We will end the detention of children for immigration purposes.
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Political Reform
The parties agree to the establishment of five year fixed-term parliaments. A Conservative-Liberal Democrat coalition government will put a binding motion before the House of Commons in the first days following this agreement stating that the next general election will be held on the first Thursday of May 2015. Following this motion, legislation will be brought forward to make provision for fixed term parliaments of five years. This legislation will also provide for dissolution if 55% or more of the House votes in favour.
The parties will bring forward a Referendum Bill on electoral reform, which includes provision for the introduction of the Alternative Vote in the event of a positive result in the referendum, as well as for the creation of fewer and more equal sized constituencies.
The parties will bring forward early legislation to introduce a power of recall, allowing voters to force a by-election where an MP was found to have engaged in serious wrongdoing and having had a petition calling for a by-election signed by 10% of his or her constituents.
We agree to establish a committee to bring forward proposals for a wholly or mainly elected upper chamber on the basis of proportional representation.
The parties will promote the radical devolution of power and greater financial autonomy to local government and community groups. This will include a full review of local government finance.
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Pensions and Welfare
The parties agree to phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66. We agree to end the rules requiring compulsory annuitisation at 75.
The parties agree to end all existing welfare to work programmes and to create a single welfare to work programme to help all unemployed people get back into work.
We agree that Jobseeker’s Allowance claimants facing the most significant barriers to work should be referred to the aforementioned newly created welfare to work programme immediately, not after 12 months as is currently the case. We agree that Jobseeker’s Allowance claimants aged under 25 should be referred to the programme after a maximum of six months.
We agree that receipt of benefits for those able to work should be conditional on the willingness to work.
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Education
We agree to promote the reform of schools in order to ensure:
- that new providers can enter the state school system in response to parental demand;
- that all schools have greater freedom over curriculum; and,
- that all schools are held properly accountable.
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Relations with the EU
We agree that there should be no further transfer of sovereignty or powers over the course of the next Parliament. We will examine the balance of the EU’s existing competences and will, in particular, work to limit the application of the Working Time Directive in the United Kingdom.
We will examine the case for a United Kingdom Sovereignty Bill to make it clear that ultimate authority remains with Parliament.
We agree that Britain will not join or prepare to join the Euro in this Parliament.
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Civil Liberties
The parties agree to implement a full programme of measures to reverse the substantial erosion of civil liberties under the Labour Government and roll back state intrusion.
This will include:
- The scrapping of ID card scheme, the National Identity register, the next generation of biometric passports and the Contact Point Database.
- Outlawing the finger-printing of children at school without parental permission.
- The extension of the scope of the Freedom of Information Act to provide greater transparency.
- The protection of historic freedoms through the defence of trial by jury.
- Safeguards against the misuse of anti-terrorism legislation.
- A new mechanism to prevent the proliferation of unnecessary new criminal offences.
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Environment
The parties agree to implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including:
- The establishment of a smart grid and the roll-out of smart meters.
- The creation of a green investment bank.
- The provision of home energy improvement paid for by the savings from lower energy bills.
- Retention of energy performance certificates while scrapping HIPs.
- The establishment of a high-speed rail network.
- The cancellation of the third runway at Heathrow.
- The refusal of additional runways at Gatwick and Stansted.
- The replacement of the Air Passenger Duty with a per flight duty.
Full details will be released shortly in a final Coalition Agreement, covering the full range of policy and including foreign, defence and domestic policy issues not covered in this document.
Once again, more detailed information can be obtained by reading the agreement document here.