The claim
“To the millions of people who voted Conservative at the last election, the good news is that we will deliver our promises on the jobs tax, on a referendum lock on Europe, on a cap on immigration, on radical school reform, on welfare reform, and yes lots more beside. But the bad news is that some policies have been changed.”
David Cameron, prime minister, launching the coalition agreement, 20 May 2010
The background
The new Cameron and Clegg coalition launched the full version of their coalition agreement today. But another C word – compromise – looms large in the meshing of the two parties’ manifestos. Cameron wanted to be frank, he said today – some policies on both sides had made the final cut, but some had had to give. FactCheck looks in more detail at some of the “bad news” in the new joint document.
The analysis
Non-doms and inheritance tax
A key Tory commitment – to raise the inheritance tax threshold to £1mn in the next parliament – was last week put on hold. Instead priority went to the Lib Dems’ tax cut of choice – an increase in the income tax threshold. But what about the non-dom tax the Conservatives had planned to pay for their inheritance tax cut – a flat fee of £25,000 on all foreign-linked residents who didn’t want to pay full UK tax on their foreign income?
That specific is absent from today’s agreement – replaced instead with a promise to “review the taxation of non-domiciled individuals”. But might we see something tougher? The Lib Dems wanted the income of non-doms who have lived here for more than seven years to be fully taxable, rather than just letting them pay a flat fee.
Council tax and stamp duty cuts
Closer to many voters’ hearts, specific Tory promises on council tax and stamp duty also look less certain. The Tories had promised to freeze council tax for two years – the coalition agreement waters it down slightly to a one-year freeze which they “seek” to extend for a further year. And while the Tories promised to make Labour’s stamp duty holiday for first-time buyers permanent, the coalition now merely says it will “review the effectiveness of the raising of the stamp duty threshold for first-time buyers”. So we wait to see how long the stamp duty holiday will last.
Hunting
The Tory manifesto was quite clear – MPs would get the chance to overturn the ban on fox-hunting. The party promised “a free vote, with a government bill in government time” – meaning the ban would be repealed if enough MPs voted in favour. The coalition agreement is less certain – instead allowing the Commons only to vote to “express its view” on scrapping the Hunting Act.
Death tax
Remember those tombstone posters? The Tories campaigned hard against the possibility, floated by the last government, of a compulsory tax paid before or after death to fund the rising bill for the care of the elderly. The final coalition deal promises to set up a commission on long-term care (something the Lib Dems had backed previously), and unlike the Tory manifesto, doesn’t explicitly rule out the “death tax”. It will consider a “range of ideas including a voluntary insurance scheme to protect the assets of those who go into residential care, and a partnership scheme as proposed by Derek Wanless”.
High-speed rail
The third runway at Heathrow is still on ice, but the future of the high-speed rail the Conservatives wanted in its place is tempered with hard financial reality. The Conservative manifesto planned to “begin work immediately” on a high-speed rail line connecting London and the airport to Birmingham, Manchester and Leeds. Today, the coalition’s instead has the “vision” of a countrywide high-speed rail network. “Given financial constraints, we will have to achieve this in phases,” the document says.
Human Rights Act
The Tories pledged to scrap the Human Rights Act in favour of a UK Bill of Rights, while the Lib Dems were committed to protecting the original Act. The compromise? A commission to investigate the proposals.
Deficit reduction
The agreement promises to “significantly accelerate the reduction of the structural deficit over the course of a parliament,” – a slight change in wording from the Tories’ usual promise to get rid of the “bulk” of the structural deficit; but one that would seem to have the same effect. Perhaps more importantly, the final page of the agreement points out that cutting the amount the country is borrowing “takes precedence over any of the other measures in this agreement” – so all new spending commitments will have to be carefully weighed up against Britain’s strained purse strings.
Abstentions and Trident
Cameron mentioned the “bad news” for Tory voters – though there are some notable changes for Lib Dem voters, too. The Lib Dems will abstain in votes on several areas – new nuclear power stations, tuition fees, marriage tax breaks for married couples – where the Tory rather than the Lib Dem policy has got the upper hand in the coalition agreement. The parliamentary arithmetic means a Lib Dem abstention would let the bills go through – there aren’t enough opposition MPs to beat the Tories without Lib Dem (or rebel Tory) support. And the party was opposed to the renewal of Trident – now the renewal of the nuclear deterrent will instead “be scrutinised to ensure value for money”, while Lib Dems “continue to make the case for alternatives”.
