The VAT rise and freezing child benefit across the board will be the headlines tomorrow morning. It’s a painful budget but a million people out of income tax is pretty “progressive”. The Corporation Tax cut will probably bring in more money than the current rate does now, something Harman clearly could not grasp. While VAT is irritating, booze and fags are protected, not that they could have gone up much more. A council tax freeze was long overdue. However the hike in Capital Gains Taxation to 28% is Cable’s fiscal spanner in the works, unlikely to reap more revenue and hits the prudent.

Hearing CGT up, Corporation Tax down. No news yet on VAT.

UPDATE: Clearly the no smiles memo was circulated:

Government spending is approaching 50% of GDP, taxation is almost 40% of GDP and the consequent budget deficit is unsustainable. The choice is either taxes rise to finance government spending or government spending is reduced to balance the budget in line with tax revenues.

The British economy can not support a level of taxation above 40% of GDP, investment and enterprise would be driven away. To pay down the government’s debts we need a growing economy, creating wealth and tax revenues. We are already over-taxed, the productive sector of the economy is intolerably burdened by taxation to pay for the unproductive. If we want to grow the economy and balance the budget we can’t risk further increasing the overall tax burden.

Increasing VAT will reduce consumption, punish the High Street and burden the poor more than the rich. Before the election the Coalition’s leading political figures were asked time and time again: would they raise VAT? Time and time again they said they had no such plans. Trust in politicians is at a low, if George Osborne raises VAT or widens the scope of the tax he will be doing so without a mandate and it will betray what little trust was placed in his oft repeated claim that he did not plan to raise VAT.

Worst of all, it will take money out of the economy which could undermine the recovery. The City is not asking for tax hikes, the gilt market only wants spending control and the polls say the public favour spending cuts. George, the choice is clear, bring the economy into balance by controlling spending, reducing the tax burden and going for economic growth…

It’s a strange day when the TaxPayers’ Alliance and the TUC are singing from the same hymn street. It’s even stranger when Guido and Ed Balls find themselves in agreement. The TPA have finally engaged in the battle this morning with a video attacking a prospective VAT rise. Guido can’t understand the morality of instigating a regressive tax rise that will mean more, not less, state dependency, leaving those who already suffer the most being even more broke. A hike in VAT to 20% would cost someone on average earnings £150 a year, that may not be much to millionaires like Dave, George or Nick, but those on lower incomes will definitely feel the pain.

The Coalition simply has no mandate to raise VAT, they were all asked repeatedly during the election campaign and replied they had “no intention” of raising VAT. Clegg actually campaigned against a VAT hike.

A 2.5% rise in VAT to continental levels is not worth the hassle, not when there are far more effective ways of saving money rather than further taxation. Why not start with the disastrous outsourcing of I.T. contracts? A study of government I.T. contracts made over the past 5 years shows that the taxpayer has ended up paying 40% or more above the market rates for outsourced services.  This means the public sector could save up to £6 billion on its annual I.T. spend of around £14 billion without affecting front line services. Overspending on government I.T. contracts alone is equal to 1% of GDP…

UPDATE: The TPA’s video:

If ever there was a true “heir to Blair” it would be David Miliband. Mentored and politically raised by Tony and Cherie, his old boss is staying out of the race publicly, though he has apparently loaned David some of the Blair Foundation’s staffers for the duration of the campaign. Of all the candidates running David Miliband is meant to be the furthest to the right, but his piece in this morning’s Guardian is quite the eye-opener. Finally a leadership candidate is talking about the economy and the deficit. It doesn’t make for good reading though:

“If the Tories stick to their proposed formula of £4 of cuts for every £1 of tax rises this will see departmental spending slashed by a third outside of the NHS and international development. The balance should be 2:1.”

He goes on to call for an end to the charitable status for independent schools, extending the City bonus tax rather than raising VAT, a mansion tax and with faux naiveté he backs the “Robin Hood Tax“. Anyone would think Miliband was a little worried about his brother’s gaining popularity and is steering quite hard to the left. All good mood music to his party, but is an unconvincing shift in the direction of whacking up taxes really going to give him the keys to No. 10?

The businessmen-funded Policy Diffusion group is drawing their battle lines over the proposed rise in Capital Gains Tax. This followed Cable around yesterday:

“This LibDem policy fails on every conceivable account. It discriminates against elderly savers, reduces economic growth, prevents the build-up of capital, discourages entrepreneurs and will even reduce government revenue rather than increase it, widening the deficit.” Policy Diffusion fought viciously against a hung parliament in April and despite the resulting coalition, they are back. And this time they have trucks…

We are told that the Treasury is going to release a document later today designed to produce a “fundamental re-evaluation of the role of government”.

It will ask people to discuss whether the government needs to provide certain public services at all and whether someone else such as councils, voluntary organisations or companies, could do so more cheaply.

There are a lot of things the government does, supposedly on public health grounds, that are massively unpopular:- raising booze taxes such that a pint costs £5 of taxed income and the brewer is lucky to see a pound.  Guido thinks adults should make their own health choices. My guess is that they will ignore the the sound of the crowd, nevertheless, shall we give it a try?

If you have nothing better to do this sunny Friday why not take a look through the hundred odd gigabytes of tax and spending data just released from the Treasury. 24 million different transactions are a good start in opening up government. It doesn’t make for a fun read though.

Talking of taxpayers money, there is still no sign of the official SpAd list, and vitally their pay levels. Guido FOIed the Cabinet Office on May 7th for Coulson and co’s salaries. Nothing yet…

The Taxpayers’ Alliance have released this depressing little video highlighting the fact that from 9am to 1.21pm you are working for the taxman and from 1.21pm to 5pm you finally get to earn some money. Seems the plush new TPA office takes a starring role too:

If people realised just how much they are taxed at every opportunity throughout the day, Guido is convinced there would be more outrage about the daily mugging by the Treasury. A break down of cost and taxes on every receipt would be a very good start. Guido isn’t sure what the timing is in Ireland, but given it’s about eleven now, he hopes you all enjoy the next couple of hours feeding the state…

Even the Guardian made Cameron the winner of the TV debate and inside Steve Hilton something will have died. Last night the CCHQ team in the back room cheered heartily when their champion came off stage. Why?

There were no mentions of worthy ‘Big Society’ concepts, no vacuous ‘vote blue, go green’ slogans. Time worn, winning Tory messages were pitched; tougher immigration rules, tackling welfare dependency, lower business taxes, sound money and smaller government.   Result? Clear win for the Tory leader.

Labour were pinning their last hope on Gordon triumphing on the economy with his ‘substance’. He actually bombed on the substance of the economy – why Labour strategists thought the man who promised he had abolished ‘boom and bust’ could win on the economy baffles Guido.  Tractor stats don’t win votes.

At the time it was being spun the Hilton-Fink modernising agenda helped detoxify the Tory brand in the broadsheets and at the BBC, it appealed to the metropolitan media, the commentariat and most of those who shape the public discourse.  It succeeded in gaining the Tories a hearing they didn’t have for over a decade. It  played well to essentially the elite Newsnight watching class. On the doorstep it gets no real cut through.  The time worn, vote winning Tory message was once again on offer last night.

The attack on Brown for confusing the economy with the state was unanswerable, why hasn’t that line been pushed harder in the never ending public spending debate? Clegg was noticeably at his best last night when he stole Tory themes, like cutting personal taxes. The new old message and the revitalised perfomance of Dave himself may have been broadcast just in time to hold off the LibDem surge. We’ll find out this time next week…