Well, no one can say that wasn’t an eye catching budget, no matter what you think of what was announced. It was a deeply political budget, from a deeply political Chancellor. It reminded me of a Nigel Lawson budget, and I mean that in a good way. And it was a budget from a Chancellor with one eye on the next election and the other eye on the Liberal Democrats.
There are so many headlines from this budget (unlike his last two) that it is very difficult to know where to start. It was a political risky budget and in some ways its short term impact rests on whether Labour is able to kick the ball into the net on the 50p tax rate. Osborne has economics on his side in his argument that the 50p rate was not pulling in the money, but just being right economically does not necessarily win a political argument. Mention 10p tax to Gordon Brown. The fact that pulling in 5 times more money from the rich than the 50p tax rate did may get obscured by the axing the 50p headline. It’s up to George Osborne and his colleagues to get out there on the airwaves and put the case very loudly and very clearly.
The other big headline from this budget is the rise in personal allowances. The LibDems will trumpet this as their major victory in the budget, and the Chancellor will no doubt let them. The rise to £9205 next year means that a rise the following year to £10,000 is an inevitability. Two million people have been taken out of tax altogether. Will the coalition get the credit for that? I wonder. In fact, I don’t wonder at all. I think the bulk of the people who will give the Chancellor credit will be people unaffected by the measure.
The Corporation Tax cut was a welcome measure and will no doubt attract many businesses to this country. We now have some of the lowest business taxes in the G20. I was, however, disappointed not to see further measures on encouraging small businesses to take on more new employees, and in particular apprentices.
The Chancellor has also sought to ameliorate the effects of the Child Benefit cut on people earning more than £44,000. There was an innate unfairness in the original proposal and this has now been addressed, although in a needlessly complicated way. But surely we can all agree that no one on more than £60k should get this benefit. It needs to be targeted at those who really need it.
As I thought, there was little room for the Chancellor to do much on fuel duty and sure enough, he didn’t postpone the next 3p rise, planned for August. He tried to assert that he had saved the motorist £4 billion by removing the fuel duty escalator and stopping Labour’s plans, but he needn’t expect any thanks for it.
A final word about the response from the Leader of the Opposition. Kinnockesque is the kindest word I can ascribe to it. Full of waffle, bluster and buttock clenching amateurishness. Just shouting “Same old Tories” repeatedly isn’t going to get you very far. His advisers must have been holding their heads in their hands.
So where does this leave George Osborne? Well, among Tory MPs and Tory members his reputation will be at an all time high. In very difficult financial circumstances he pulled off a budget which cut taxes for virtually everyone in one way or another. He should have convinced the international markets that he is sticking to his deficit reduction plans. And he has kept the Liberal Democrats happy. I’m not sure what else he could have achieved.