Tag Archives: Treasury

New history of the UK Treasury seems to be a comedy of errors

The Treasury in London: if the latest history of it is to be believed, it seems to have become a lunatic asylum, that has been taken over by the inmates.

How wrong can you be?

I think the expectation of most people in the UK is that the minds dominating the Treasury – the financial engine room of the country – must be the most level, intelligent, and careful in the nation.

But if the picture painted of Bankruptcies, Bubbles and Bailouts, the new history of the Treasury since 1976 by Aeron Davies, on Professor Simon Wren-Lewis’s Mainly Macro site is accurate, it seems more accurately described as a madhouse taken over by the inmates.

Perhaps it would more accurately have been titled Carry On Up The Treasury…

Consider this:

How to deal with the bonanza of North Sea Oil[:] It is today standard in the macroeconomics of resource rich countries that any temporary gain due to the discovery of a finite resource should be largely invested… The basic choice for the government of consumption (cutting taxes) or investment was discussed at reasonably senior levels while I was there. Norway made the right choice but the UK did not, although how much that was down to politicians at the time is difficult to tell.

The money wasn’t invested but was splurged on tax cuts, of course. And did anyone learn from that waste?

No:

This failure wasn’t just about North Sea Oil revenues, but was repeated with privatisation and council house sales. During the Thatcher period selling off public capital was treated as just another form of revenue, which is nonsense because unlike taxes it is not permanent.

It would be easy to say this wastage was due to the influence of politicians, but both Wren-Lewis and Davies seem to say that consensus within the Treasury (where it existed) could also cause huge blunders:

A good example, which Davis is right to discuss at length, is the pervasive doctrine within HMT that national firm ownership didn’t matter. A quote from an interview with John Grieve sums up the issue:

“On ownership, right from the ’80s, from Big Bang onwards, and indeed before, there’s been a running worry in government and in commentary about are we wise to let foreigners buy everything? … but in fact, there’s been a longstanding policy, successive governments have decided not to do anything about it … And, you know, of course most other countries think this is mad, and that ownership does matter.”

Ownership does indeed matter because at the time of writing, the UK’s railways and England’s water and power companies are primarily owned by foreign governments who are milking us for all they are worth. That money goes out of this country to subsidise others’ infrastructure for them.

But political influence is shown to have the upper hand most of the time – with the prominent example being austerity:

What Aeron Davis calls the ‘posh boys’ regarded economics as a political means to an end[:]

“For those leading the Coalition, economics was just another consideration in the wider matrix of Westminster party strategizing and news media lobby management.”

What Osborne and Cameron were interested in was media management, and they were experts at it. Unfortunately the advice they were getting proved no corrective to their macroeconomic ignorance. Here is a quote from Aeron reflecting on his interview with Rupert Harrison, Osborne’s economics advisor and now advising Jeremy Hunt.

“When I asked him directly about the broader inspirations of his economic thinking, Harrison responded that he had no interest in macroeconomic thought. His policy views were ‘shaped by more general reading’ and by being ‘a centre-right leaning person’.”

I’m afraid this was painfully obvious from Osborne’s speeches at the time. Austerity, by which I mean embarking on spending cuts in a liquidity trap recession, represented ignorance of everything Keynes talked about in the General Theory, as well as state of the art macroeconomics. The origin of the last twelve years of economic decline can be found in politicians who put party political interest above the health of the economy.

And then there’s Brexit, about which the author becomes positively festive:

Aeron Davis argues that the Leave vote was not only devastating to most Treasury officials (many were economists, after all) but also that it reflected past failures in Treasury management. To quote

“For one, I hold the Treasury (and successive governments) responsible for ushering in an economy that was so unbalanced and unequal. Years of trickle-down economics, and years of favouring finance over manufacturing, large foreign multinationals over home-grown companies, large asset-holders and rentiers over others, London over the regions, monetary rather than fiscal activism had had a cumulative impact. Austerity economics only exacerbated such trends, with several commentators linking that to the vote outcome.”

Of course any vote that close can have many things that help tip the balance. To the extent he is right, the Brexit vote represents a fitting ending for the book, as it represents many of the themes the author examines coming home to roost.

It isn’t the end of the book, because there’s a postscript which covers Boris Johnson and Partygate (but doesn’t get to Liz Truss’s “ill-fated” (as Wren-Lewis describes it) reign. The title says it all: “Reckless opportunists gain control.”

It’s a great review, and I’ll tell you why: it takes a subject that should be dry as a desert bone and makes me want to read the whole book.

Source: mainly macro: The UK Treasury since 1976

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Energy prices have quadrupled and Kwarteng is lying about the government response

Kwasi Kwarteng: you can’t trust a word he says.

This is refreshing! The BBC is actually doing its job and checking government ministers’ claims against the facts!

Here’s the evidence:

In fact, the rebuttal from the Treasury was far harsher than the BBC misled us to believe, if you take Sam Coates’s word for it (and I’m inclined to):

Still, let’s not look a gift horse in the mouth. The fact that the BBC has actually checked a minister’s claim is a huge step forward for the quality of journalism at the Corporation.

Maybe they have. This Writer went on the course before embarking on a career in professional journalism. But then, I’m not related to anybody at the BBC, which is allegedly how most of their staff are recruited these days.

It is entirely possible, though, that the BBC’s sudden zeal for facts is merely a bid to hide the extremity of the disaster that the Tories have created over the 40 years since Margaret Thatcher started privatising energy suppliers:

And Kwarteng? He’s not bothered. He went off to Sky (presumably avoiding Mr Coates) and had good fun chatting with Islamophobe Trevor Philips about how sick and old people can eliminate the choice between heating and eating by putting on a few extra layers of clothes…

… so they end up doing neither:

The whole situation is reminiscent of the early-1970s oil crisis that led to power cuts across the UK.

That was during a Conservative government, too – Edward Heath’s.

He introduced a three-day working week in order to conserve electricity – and it seems Boris Johnson’s government has brought us back to that.

This has been a long time coming – and some of us have been warning about it, every step of the way.

The Tories privatised the energy suppliers on the promise that prices would stay low and systems would improve, in order to stay competitive. Instead, prices quadrupled and control of the new companies was bought by foreign firms, many of them wholly-owned by the governments of EU nations.

And then the UK left the EU, annoying those governments.

And now we are facing the threat of being deprived of our power supply.

It would not be possible if the UK had retained control of its own energy supply. But that’s another truth you won’t hear from Kwasi Kwarteng.

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Dangerous ‘pub’ tweet drops UK Treasury in hot water

The Treasury has been accused of taking an irresponsible approach to the coronavirus epidemic after a backlash to its Twitter post, hailing Saturday’s scheduled reopening of England’s pubs.

“Grab a drink and raise a glass, pubs are reopening their doors from 4 July,” the tweet read, while a graphic carried the message: “Pubs are back”.

Many of those condemning the post… accused its celebratory tone of being in poor taste given that the virus has killed at least 43,000 people in the UK.

The tweet came as Leicester was put back under lockdown conditions amid a localised outbreak and fears were expressed about numbers of cases being seen in Greater Manchester.

Research conducted on behalf of the hospitality industry has suggested many people across the UK are concerned about the reopening.

The irresponsible tweet certainly attracted the wrath of the Twitterati, with Chancellor Rishi Sunak targeted for criticism:

According to the research, people are less likely to go to the pub as a result of the Covid-19 crisis. But that still leaves plenty of punters ready to risk infection:

And that’s why Sunak and the Treasury have been pilloried.

But Tories will never understand that there is more to life than their personal bank balances.

That’s why they tell us we must endanger ourselves with possible exposure to Covid-19, because it is important for the economy.

They don’t care that nearly 70,000 people in the UK have died so far – people whose lives were worth far more than the price of a pint.

Source: ‘Raise a glass’: UK Treasury faces backlash after hailing pubs reopening | Global | The Guardian

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Boris Johnson lied about his Brexit deal, leaked document reveals. Why would you vote for a liar?

How very awkward!

When your entire election campaign hinges on a promise to “get Brexit done”, the last thing you want is for embarrassing documents to turn up saying you were lying about it.

But that is what has happened to Boris Johnson and the Conservative Party today.

Labour leader Jeremy Corbyn has revealed details from a leaked Treasury document showing that Mr Johnson has misled the public.

Mr Johnson promised there would be no new customs checks between Great Britain and Northern Ireland but the Treasury paper says there will be.

Mr Johnson denied there would be customs declarations and regulatory checks on goods travelling between Great Britain and Northern Ireland but the Treasury paper says there will be.

Let’s have a quick reminder of Mr Johnson’s claims:  At the start of the election campaign, he was asked in person by Northern Ireland business leaders whether they would be subject to customs declarations.

“You will absolutely  not,” he replied. “If anyone asks you to do that tell them to ring up the prime minister and I’ll direct them to put that form in the bin.”

Challenged on the leak, Mr Johnson said voters should believe what he said.

Why should they?

This is an official Treasury document. The Treasury itself has refused to comment on it – but it doesn’t have to.

This is an official government document that states, very clearly and in no uncertain terms, that Boris Johnson is a liar who has deliberately misled the British people about at least one part of his Brexit deal.

It is entirely possible that he has lied about other details.

“Get Brexit done”? It’s more like “Fool Britain badly”! (and NI, and – indeed – Ireland)

The Independent quotes Mr Corbyn’s scathing remarks about Mr Johnson’s other claims, too.

He said: “There will be other secret reports like this one in every government department that reveal the disastrous impacts of his policies on the safety of the food you eat, on the rights you have at work, on the pollution of the air that we breathe and on the jobs and industries that people work in.

“These reports exist but the government is hiding them from you because in this election the Conservatives want you to vote blind.”

It’s worse than that; the Tories want you to vote for a pack of lies.

And then – as we know from the #page48 revelation – they’ll turn the UK into a dictatorship, so it won’t matter whether they tell you the truth or lies at all because you won’t be able to stop them doing anything they like.

Is that the future you want?

Is it?

To be literally nothing more than livestock for the Tories to do with as they please?

Because that’s what you’re saying if you vote for the Conservatives on December 12.

Source: Jeremy Corbyn releases leaked government documents that show Boris Johnson ‘lied about Brexit deal’ | The Independent

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Privatisation will cost us hundreds of millions if the Tories regain power

Meet the Tweedles: Tweedle-Dunce is sitting at the back looking disgruntled, while Tweedle-Daft just tweedles his thumbs.

Meet the Tweedles: Tweedle-Dunce is sitting at the back looking disgruntled, while Tweedle-Daft just tweedles his thumbs.

Tories will always find something else to privatise, it seems – at exorbitant cost to the national finances. And they’re supposed to be good with the economy?

Here’s an excerpt from a Sturdyblog article today, explaining just one reason why the Conservatives must be defeated:

The government is trying to sell our stake in Urenco. Urenco is a joint venture between the UK, Holland and Germany (effectively – E.On, RWE). Each partner holds a third each giving them collective control, but not individually. Urenco is a Uranium enrichment company. It turns hundreds of millions of profit every year and so, not only does it cost the UK nothing, but contributes to state coffers. It has four Uranium enrichment plants in Cheshire.

The monumental stupidity and shortsightedness of this, I cannot even begin to unpick. First, it is profitable. Second, it operates top secret centrifuge technology, which in the wrong hands could allow the nuclear arming of rogue and failed states the world over. Not to mention having four Uranium enrichment plants on home soil under private ownership. Putting it in private hands reads like the beginning of a bad Hollywood script for a formulaic disaster movie. It is as bad an idea as bad ideas get. (Cut to close-up of Cameron: “What could go wrong?”)

And this government is presented as the “safe”, the “fiscally responsible”, the “sensible” choice by the murder of crows who are the non-domicile, millionaires who run the majority of this country’s media.

This would have already happened, completely under the radar, but for the quite legitimate objections of the Dutch Parliament, which fears the security issues outweigh any short term profit.

Read the rest on Sturdyblog – if you need any more reason to reinforce your resolve to vote the Tories out of office – not just now, but always.

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A quick thought about the Conservative ‘tax lock’ silliness

Anyone who thinks David Cameron’s promise of a five-year ‘tax lock’ is a good idea must need psychiatric help.

Cameron promised to introduce a law banning income tax, VAT or national insurance increases in the next parliament if the Conservative Party is elected back into office, clearly in the belief that anybody on average wages or less is too stupid to know what this means.

We know better, don’t we?

We know that taxes are set according to each income group’s ability to pay. This means that people in the lowest taxable bracket pay the lowest amount, as they need most of the money they earn in order to pay their way. The amount of tax then increases by increments up to the highest earners – who take home considerably more than they need to survive, and who can therefore afford to contribute a much larger amount with no impact on their quality of life.

We also know that a five-year ‘tax lock’ will not affect the lowest-earning people at all. Nobody earning up to £10,600 pays any tax at the moment, so a freeze on nothing is still nothing.

What will it do to the people in the highest tax bracket? Well, it depends what they earn and how fast their pay increases, doesn’t it? Let’s have a look at the handy guide to average UK pay rises, created by fellow blogger Tom Pride last November:

141112average-uk-pay-risesTomPride

So the director of a FTSE 100 company, paid the average amount of a mere £2.4 million, would have contributed 45 per cent in tax, or £1.08 million in the 2014-15 tax year. Over a five-year period, if that person’s income continued to rise at 14 per cent, then by 2020 – at a 45 per cent tax rate – they would pay a total of £8,138,360 in tax over the years until 2020. That’s certainly a respectable figure.

But Labour has proposed an increase in the top rate of tax, back to 50 per cent. Under the same conditions, this would mean FTSE 100 directors earning £2.4 million in the tax year 2014-15 would pay £9,042,623.

That’s a difference of £904,263; nearly a million pounds each.

This writer doesn’t have current figures for banker salaries and cannot, therefore, work out how much tax they would pay – but you can see for yourself that the difference between the two scenarios is likely to come to several million pounds per top banker.

Those people don’t need that amount of money in order to survive. The cost of living in the UK is less than 1/50 of what the FTSE directors take home, let alone the bankers. But David Cameron wants them to keep that money.

Meanwhile the UK Treasury goes without millions of pounds that could be used to help balance the national deficit, pay off the national debt, and boost the economy.

We’re back to ‘Starve the Beast’ economics again. The nation’s finances can go to Hell, as far as Cameron is concerned. He wants to starve the Treasury with tax cuts for the rich – either actual cuts or de facto cuts like his ‘tax lock’ – and then claim that public services cost too much and will have to be scrapped or sold off to rich corporations in return for donations to the Conservative Party – as we have seen in the years of the Coalition Government (most obviously in the case of the NHS).

Unless you are a banker, an FTSE100 director, or a member of Parliament, you would be mad to support such a wasteful and selfish plan.

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Osborne rebuked over EU surcharge reduction claim

It’s official – George Osborne lied when he said he had halved the £1.7 billion EU budget surcharge, and his claim that he had achieved a “real result for Britain” was nonsense.

This is how George Osborne probably looked after the fire in his pants caused by his incessant lying about the EU’s £1.7bn bill burned away the rest of his suit. Note that his briefcase is still empty of policies and all he has to offer us is the carrot of false promises [Image: Kaya Mar www.kayamarart.com].

This is how George Osborne probably looked after the fire in his pants caused by his incessant lying about the EU’s £1.7bn bill burned away the rest of his suit. Note that his briefcase is still empty of policies and all he has to offer us is the carrot of false promises [Image: Kaya Mar www.kayamarart.com].

Even more stinging must be the fact that this rebuke comes from a fellow Conservative – Andrew Tyrie, chairman of the House of Commons Treasury Committee.

“The suggestion that the £1.7 billion bill demanded by the European Union was halved is not supported by published information,” he said in a report by the committee.

“The terms of the UK’s rebate calculation are set out in EU law. It should, therefore, have been clear that the rebate would apply.”

The Treasury Committee’s report confirms what Vox Political stated the day after Osborne made his ill-advised claim.

Its report did, however, recognise the government’s “achievement” in extending the payment period and avoiding interest charges – although this was managed in conjunction with every other EU member state that found itself facing the prospect of extra payments, and was not an achievement of the UK government alone.

What does Her Majesty’s Loyal Opposition have to say about this? At the time, Shadow Chancellor Ed Balls told us, “David Cameron and George Osborne are trying to take the British people for fools.”

Has Labour’s attitude softened? No.

“This damning cross-party report exposes George Osborne’s claim to have halved the EU budget surcharge to be totally untrue,” said Chris Leslie, Labour’s Shadow Chief Secretary to the Treasury.

“He must now apologise to taxpayers for making this completely false claim.

“Too many times this Chancellor has desperately tried to use smoke and mirrors to fool the British people. He has been caught out again and his credibility is further undermined.

“People will now treat the false claims he makes in the coming weeks with the contempt they deserve.”

And that is the problem for our part-time Chancellor.

He has undermined his own credibility and that of his party.

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Chancellor of the Exchequer says tax is ‘not my job’

Doesn't he look shifty?

Doesn’t he look shifty?

Slippery as an eel, the submarine Chancellor has surfaced from whatever hiding-place he has been using for the last week or so, insisted that the pursuit of people who evaded tax on advice from the HSBC Bank is nothing to do with him, and re-submerged before anybody could point out that this isn’t entirely true.

As Chancellor of the Exchequer, George Osborne doesn’t have a hand in individual prosecutions – but he does set the conditions under which such investigations are undertaken.

Alex Little is therefore correct in pointing out that Osborne is notably not saying that HMRC will have all the resources it needs to carry out a full and exhaustive investigation into the HSBC scandal, and that he needs to appoint financial regulators who actually want to stamp out abuses, rather than those who live in sublime ignorance (such as the gentleman mentioned in Mr Little’s article).

None of the government’s actions have satisfied Labour. Chris Leslie, shadow chief secretary to the Treasury, said: “George Osborne has finally emerged, but he still hasn’t answered any of the key questions over the HSBC scandal. He cannot continue to duck responsibility for HMRC’s failure to act or the decision to make Lord Green a Conservative Minister.

“Why has there only been one prosecution out of 1,100 names? Why did George Osborne and David Cameron appoint Lord Green as a Minister months after the government received these files? Did they discuss tax evasion at HSBC with Lord Green, or did they turn a blind eye?

“And why did the Treasury sign a deal with the Swiss authorities in 2012 which prevents the UK from actively obtaining similar information in the future?”

According to The Guardian, a YouGov survey for the Times Red Box found 62% of people want the chancellor to answer these questions.

The longer he leaves it, the less electable his Conservative Party becomes…

… and the more like a gang of crooks covering their friends’ backs.

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Why do politicians forget the human cost of missed government targets?

Stephanie Bottrill has become a symbol of Coalition Government failure. She was wrongly charged Bedroom Tax (a cost-cutting measure introduced by the Coalition Government). No longer able to pay for food and heating, she committed suicide - and the government still failed to reach its fiscal targets.

Stephanie Bottrill has become a symbol of Coalition Government failure. Wrongly charged Bedroom Tax (a Coalition cost-cutting measure) and unable to pay for food and heating, she committed suicide – and the government still failed to reach its fiscal targets.

Professor Simon Wren-Lewis is a terrific source of wisdom when it comes to macroeconomics, but sometimes it seems he loses track of why we mess around with money.

His latest Mainly Macro blog article begins with a claim that it is odd to criticise the policy of fiscal austerity, and at the same time complain that the government has failed to meet its own 2010 fiscal target. “It would be more logical to praise the government for abandoning its 2010 target,” he writes. “But politicians cannot resist criticising a missed target.”

What about the human cost, Professor?

People with mental illnesses have been forced off Employment and Support Allowance and onto Jobseekers’ Allowance, then sanctioned off of that benefit to meet government-imposed targets. We know of one such person who froze to death in the street – and the government still missed its 2010 fiscal target.

Another person – also with mental health problems – committed suicide after being sanctioned and was found, hanged, at the top of his stairs – and the government still missed its 2010 fiscal target.

What about the grandmother who committed suicide by walking in front of a lorry on the motorway, because she couldn’t afford the cost of living after the Bedroom Tax had been introduced? We later discovered that the charge had been wrongly imposed on her. The government had kept the money but still missed its 2010 fiscal target!

Here’s a list including 70 other people whose deaths were related to government cutbacks – the vast majority of which took place during the current Parliament. They died for the government to reach its fiscal target – and it didn’t.

Perhaps Professor Wren-Lewis has made a good point by accident.

He is right to suggest that politicians are wrong to criticise the government for failing to meet its fiscal target – but only because they are doing so for the wrong reasons.

Maybe we should remind our MPs that, every time they attack the Coalition Government’s fiscal failures, they need to mention the many deaths that have been caused – deaths which Conservative ministers at the Treasury and the Department for Work and Pensions seem to regard as collateral damage or an occupational hazard.

Perhaps we should invite Professor Wren-Lewis to ensure he mentions these deaths in his own communications with the government – if and when he ever does so.

Please also share this with any politicians you believe would benefit from the information.

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HSBC – the tax-dodging bank with a Tory chairman

Another Tory crook?

Another Tory crook?

What can we say about the HSBC bank’s activities, in advance of the BBC’s Panorama documentary this evening (BBC One, 8.30pm GMT)?

One: HSBC Bank has been helping thousands of wealthy clients to evade hundreds of millions of pounds worth of tax. A nice dodge for the clients – and a nice earner for the bank!

Two: This is old news. HM Revenue and Customs was made aware of HSBC’s tax-avoiding practices in 2010 but from more than 7,000 British clients, the UK government has prosecuted just one person, despite having identified 1,100 tax avoiders. Didn’t George Osborne say there would be “no safe haven” for these people?

Three: HSBC did not just turn a blind eye to tax evaders – in some cases it broke the law by actively helping its clients. The example on the BBC News website is of a wealthy family who were given a foreign credit card in order to withdraw their undeclared cash overseas. The bank that likes to say “Oui”?

Four: The man in charge of HSBC at the time was Stephen Green. He gave up being chairman of the bank in December 2010, in order to become a Conservative peer and minister of state for trade and investment in January 2011. Who says crime doesn’t pay?

Four: Lord Green told Panorama: “As a matter of principle I will not comment on the business of HSBC past or present.” Honour amongst thieves?

Five: Add it all together and we can see that the Coalition government has not only allowed rich HSBC clients to steal money from the UK economy, but has actually colluded in it and rewarded the man in charge of the operation with a peerage and a cushy government job! All in it together, eh?

How unfortunate for the Tories that this has come out just 12 weeks before a general election!

Of course the Labour Party is all over this like a rash. Shadow Financial Secretary to the Treasury Cathy Jamieson said: “Tax avoidance and evasion harms every taxpayer in Britain, and undermines public services like the NHS.”

She said George Osborne needs to explain why just one person out of more than 1,000 has been prosecuted in five years, and how the then-chairman of HSBC, Stephen Green, could have been appointed a Conservative peer and a Minister by David Cameron just eight months after the Government was made aware of these activities taking place on his watch at HSBC.

“Once again the Tories have been exposed as unable and unwilling to take real action on tax avoidance – little wonder that under them the tax gap has risen, year on year,” was her judgement.

Richard Brooks, author of The Great Tax Robbery (Oneworld, 2013), knows a thing or two about tax avoidance and evasion. He summed up the Coalition government’s collusion on BBC Radio 4’s Today programme, referring to an agreement between the UK and Swiss governments, signed in 2007, to bring in “billions of pounds” in unpaid tax.

He said: “David Gauke, Tax Minister, and David Hartnett the senior tax official, started negotiating it straight after they’d received this data from the French authorities, so they knew that there was a mass of evidence of tax evasion at the heart of HSBC.

“They set about negotiating agreement with the Swiss Government which says… that ‘it is highly unlikely to be in the public interest of the United Kingdom that professional advisors, Swiss paying agents and their employees – in other words bankers – will be subject to a criminal investigation by HMRC.’

“So, knowing they’re sitting on all this evidence, they’ve simply washed their hands of it and said ‘we’re not going to prosecute’. And that’s why no-one has come before the courts in five years.”

And yet the Conservative Party is still considered best-able to run the economy.

Admittedly, with only 33 per cent support, more than two-thirds of the country don’t consider the Tories able to run anything at all, but it’s still more support than the other parties are getting.

Why?

They are letting rich people walk off with money that belongs in the Treasury and should be spent on public services.

It all goes to show that you should never – never – allow the Conservative Party to handle public money.

Follow me on Twitter: @MidWalesMike

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