Brother Jones and Fraser and Pete have already given you some of the useful charts from today’s budget. But the truth of this budget can be summarised quite simply: Everyone Pays More. Here’s the proof, culled from the Red Book:
Conservative Home say this shoots Ed Miliband’s fox, proving that the rich will pay more as a consequence of this budget. Up to a point. In pure cash terms, the total impact of the budget may be greater on the wealthiest 10%; in proportional terms it seems to hit those on lower incomes rather harder. Again, however, note this: George Osborne appears to have delivered a tax-raising budget. If Britain is going to “earn its way”, Britons are also going to pay their way. Such are the strictures of these astringent times.
For a Chancellor who talked about simplyfying the tax code, Osborne seemed happy to purchase sweeties for any number of special interests and industry lobby groups. Tax consistency is almost as useful as tax simplification; this budget confirmed that Osborne is just as keen on tinkering as Gordon Brown ever was.
Much attention – at least on Twitter – appears to be concentrated upon the so-called “Granny Tax”. But why should pensioners receive more generous allowances than non-pensioners? Perhaps there is a case for them doing so; if so it would be swell to hear it.
Tobacco, of course, is always a favoured target. Nevertheless, it is a regressive tax and it bears pointing out that not only do smokers save the Treasury money but that the tax levied on a 20-a-day habit is greater (by some distance) than per capita expenditure on healthcare. Cigarette smugglers are among today’s “winners”.
As the chart above demonstrates, however, all this tinkering is merely a means of disguising that the headline cuts in income tax are more than offset by tax increases elsewhere. The average person or family is, cumulatively, going to be worse off no matter which income decile they are in.
Perhaps this is unavoidable. The Era of No Money will endure well into the next parliament and this does not seem, at first blush, a reckless budget. Nor, though, is it one that will do very much to stimulate economic growth or, as best I can tell, really simplify the tax code. I may be mistaken, however.
What George gave with one hand (increases in the personal allowance) he clawed back with the other (lowering the threshold above which the 40% rate of tax is paid). This was not, whatever anyone tries to sell you, a budget targetted at the Tory core vote. In that respect Ed Miliband’s charge that the Chancellor has abandoned his mantra of “We’re all in it together” is inaccurate.
Nevertheless, the Budget Spin Battle will be over the reduction in the 50p rate. Osborne made a semi-decent case for lowering it to 45p (though he might have added that even Labour once said it was but a temporary measure) but it is hard to avoid the suspicion that most people, to the extent they remember any budget, will recall this one as the year the Tories offered a large tax cut to the wealthiest Britons. That carries a political risk even if Osborne believes it is better to swallow this poison pill now, rather than closer to the next election. Nevertheless, since income tax is the tax the public understands best, the “optics” of this move are not great for the Chancellor. Here Ed Miliband had an open goal for his response and, to give him his due, the Labour leader managed to find the net. Small praise, I know, but there you have it.
As for the partial u-turn on child credit: well, that was as close an admission as you’ll ever get from the Treasury that they’ve blundered. The symbolism of this, allied with income tax cuts for the very rich and cuts in tax credits for those on average or moderate earnings, will not be lost on anyone. Again, it doesn’t look good even if the numbers can be crunched to make them appear to add up.
Overall, then, this was another budget tasked with making the best of a bad job. As the old Irish saw* goes, if you were wanting to know the way to Limerick you wouldn’t start from here. Britain remains a high-debt, low-growth country and there seems little this or any other Chancellor could or chooses to do about that.
*In terms of the press reaction,mind you, another ancient Irish crack comes to mind: You have been acquitted by a Limerick jury and leave this court with no other stain upon your character.
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