GEORGE Osborne’s decision to offer tax breaks for high-earners does beg the question whether “we are all in this together” any longer – the phrase that has come to define his Chancellorship until now – when his measures for low and average income households will be offset by the decision to maintain fuel duty at record levels and a perverse decision to squeeze pensioner incomes.
Yet the furore about whether this was a Budget for millionaires – a political dividing line that will persist until the next election – masks the fact that a new generation of wealth-creators are required to help Britain earn its way in the world, the Chancellor’s new soundbite of choice.
This imperative came when Mr Osborne warned, almost sheepishly, that growth this year will be a very modest 0.8 per cent. Though this expectation is an increase on his previous forecast by a mere decimal point, it is considerably less than the 2.5 per cent rise which he predicted exactly a year ago.
And, because of the prolonged slump, the Chancellor had to balance the need for a major economic stimulus with the need to keep the deficit under control – and without the sweeteners that Gordon Brown used to disguise the deteriorating state of the public finances on his watch.
Mr Osborne was right, therefore, to cut corporation tax by further than envisaged – the one surprise in a Budget that lacked impact because it had been so widely leaked. Aspiration is a priceless asset which needs to be nurtured. He must, however, ensure that this boost to business is not eradicated by pointless red-tape.
The need to lessen the country’s reliance on the public sector also justified the scrapping of the 50p tax rate – why retain a measure, brought in by Labour, which has failed to deliver the intended revenue and which has also created a false impression that Britain is closed to new business?
The Chancellor’s challenge is ensuring that his other measures to tax the well-off actually work, and deliver the projected sums, when their accountants have proved so adept at sidestepping every previous Treasury clampdown on tax avoidance.
That said, Mr Osborne’s decision to raise personal tax allowances – and adjust his changes to child benefit – will be welcomed by many families. However, the Chancellor should be careful not to exaggerate their impact. Most individuals will not benefit from the £170 tax boost until next April – he has repeated Mr Brown’s sleight of hand of giving 12 months advance warning of policy changes, presumably to maximise their political value – and the small-print reveals pensioners will pay the price for alterations that Mr Osborne glossed over.
In the meantime, many households will be hit by August’s planned 3p rise in fuel duty – it is regrettable that Mr Osborne could not scrap this – and continuing increases in the cost of living.
For, while most areas will see a second successive council tax freeze, there is no guarantee that this will be affordable next year and it was perhaps significant that the NHS and education, two key areas of public spending, received cursory mentions.
Far from injecting fuel into the economy, Mr Osborne’s theme 12 months ago, this omission suggests that the Chancellor still has his work cut out to ensure Britain does not grind to a halt – even though Labour’s hostile response offered little policy clarity.
Nevertheless, it is welcome that the need for improved transport links across the North – and plans to improve rail routes from Sheffield and Bradford to Manchester – was belatedly acknowledged. Yet this spending commitment is modest compared to the sums being made available to the North West and London for transport improvements, and Mr Osborne still has to convince Yorkshire travellers that he is on their side when this region’s infrastructure continues to hold back investment opportunities.
In conclusion, Mr Osborne’s approach should be viewed as “work in progress” – whether it be infrastructure renewal, budget deficit measures or policies to encourage aspiration. The Chancellor has shown resilience in a tough political landscape – but he needs to ensure that this Budget is remembered for the new jobs that it creates rather than the tax affairs of an elite minority.