David Blackburn

George Osborne, balancing the budget on the backs of the rich

George Osborne has a dilemma to answer in his autumn statement (which must be finalised by 28 November, when it will be submitted to the Office of Budget Responsibility). He has promised to offset politically welfare cuts worth £10bn with tax increases on the wealthy. There is an added complication in that Osborne cannot afford (literally) to choke recovery by imposing levies on sources of wealth creation. This leads him, logically, to pensions and property. The FT reports that the chancellor is considering reducing the maximum level of tax relief on annual pension contributions from £50,000 to either £40,000 or £30,000. It is estimated that these changes would net the Treasury an extra £600 million or £1.8bn a year respectively.

It is fashionable to see this as a political trade-off with the Lib Dems. There is doubtless a fair portion of truth in that analysis; yet Osborne knows that the Tories have a perception problem. They are seen, rightly or wrongly, as the party of the rich; a perception reinforced by the recent cut in the top rate of income tax.

Osborne, therefore, is looking after Number One. Indeed, if the priority was to seduce the Lib Dems, Osborne might have adopted their policies on property taxes (the mansion tax and new council tax bands, for instance). But these were rejected outright by the Tory High Command, partially on grounds that they would constitute a clear assault on some very ordinary folk who live in the south-east; in other words, the party’s people. The Tory leadership may aggravate its base by striking controversial poses on social issues; but it won’t take the risk on serious issues like trashing people’s homes and life’s work. The Tories might emphasise that they are on the side of the aspirational classes more often than they do.

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