As I See It: The Budget
George’s sweetener has ambition written all over it
Let’s face it, the Budget is as much a piece of political theatre as it is about the economy. Complete with a booing, hissing audience and a script that often bears little comparison with reality, the Chancellor’s annual statement is nonetheless one of the great set-piece occasions and certainly packs ’em in.
This year’s hour-long assessment of our prospects and plans for change amounts to the usual hidden plots and innuendoes that lead the listener into something resembling a twilight world. Nothing is ever really as it seems.
The economic forecasts are always presented most seriously, yet deserve the least respect. After all, we were given estimates on growth by the Office for Budget Responsibility only last November. The OBR clearly didn’t notice that the Chinese economy wasn’t about to slow down (despite the opportunity to be briefed by the Chinese Premier during his visit to Britain in October).
George Osborne tore up both the forecasts for GDP growth and borrowing targets and with the deftness of a stage magician he managed to turn a £72 billion deficit this year into a £10.4bn surplus by 2020. Just in time for the next election. Genius.
Yet this was not a bad Budget. Who can really complain about raising income tax thresholds? Oil and gas industry tax cuts? Corporation tax cuts? Wiping out business rates (in England)? Abolition of class two National Insurance contributions for the self-employed? Even the surprise sugar tax, which was the first serious use of taxation to tackle obesity?
Well, Jeremy Corbyn wasn’t too impressed, using his response in the Commons to list a catalogue of failure. One wondered if he had listened to the Chancellor’s speech, it seemed so detached from what everyone else had just heard and gave the impression that he would have stuck to his vitriol even if Mr Osborne had declared he was crossing the floor to join the Opposition. Even some of Mr Corbyn’s backbenchers thought their leader had gone too far.
As for the SNP, it was never likely that it would offer much support, but it will now face the challenge of applying the powers it has gained in a way that do not seem merely spiteful and party political.
The Scottish Government is due to announce its tax plans ahead of the May election and said ministers did not consider it to be the “right time” for higher earners to receive a tax cut.
There are about 372,000 higher rate taxpayers in Scotland who stand to gain from the change if Holyrood adopts the new thresholds. Of these, around 53,000 earn between £42,385 and £45,000 and would revert to the basic rate.
Denying higher rate tax payers the new thresholds applicable south of the border will be a dangerous move. Some are already deterred from moving to Scotland, with one businessman recently warning Deputy First Minister John Swinney that his recruitment targets preferred to remain in England where the tax regime is more benign and certain.
Likewise, the radical announcement on business rates, which takes thousands of small firms in England out of paying anything, will put pressure on Mr Swinney to follow suit.
Mr Osborne himself faces questions about how he can achieve all that he set out. Some believe he will miss his targets by some considerable margin.
As for yesterday he had his supporters demanding an encore, though of course there was a deeper message buried in his red book. This was not simply a one-night performance. Mr Osborne was playing to the gallery that will select Mr Cameron’s successor. Whether or not the numbers in the Budget actually add up can wait for another day.