LAST week I posed the question could George Osborne grasp the rare opportunity to rise from being a good Chancellor to being a great Chancellor – by becoming a hailed reformer of our taxation system?
On Wednesday we had the answer and, sadly, it was a resounding No.
I give that judgement more in sorrow than in anger, for I had high hopes that he would at the very least announce reviews of this tax here and cut many taxes there. In so doing he could boost the supply-side of the economy that would free the people to be more productive, create jobs and relieve poverty in the process.
All we got was a Budget that – over the piece – raised more taxes than it cut, created more loopholes and fees for lawyers and offered a review of pensions that could lead to us paying tax on our savings when they are tax deductible at the moment.
To say it was disappointing is an understatement. He blew it.
Instead of being a reforming Budget we got a highly political Budget that sought to outflank the Labour Party by going further on what is called a “living wage” than even Ed Miliband had proposed. Cunning politics it may be but bad economics it most certainly is.
Corporation Tax is an outdated way of taxing companies for being successful – which is why so many have found legal ways of avoiding it. Instead of announcing a review to find a better method of taxing companies that will encourage them to make profits and employ people, Osborne announced a tax cut that came at a price – he would, at the same time, force wages up.
While this sounds good for those in work it is very bad news for those that will be looking to enter the job market in the next five years – especially our children who leave school without qualifications. They need to get on the jobs ladder – and raising the minimum or living wage (the name is meaningless) will ensure that 60,000 people (mostly young) will not get a job. They will be priced out of work.
Jobs in lesure and care industries will be especially hit, some businesses will struggle to meet their costs. Such effects are never seen in a rising jobs market – which is why politicians can get away with it in the good times – but become blatantly obvious when the economy takes a turn for the worse. Just look at eurozone, where youth unemployment is more than 50 per cent in some countries.
It is no use saying there will be 1,000,000 new jobs in the future when, without Osborne’s smart-alex plan, official figures say there could have been 1,060,000. Will Osborne ever meet any of those 60,000 people that are never recruited?
Since the minimum wage was introduced in 1999 youth unemployment has doubled – yes, doubled – to 1.02 million at a time when two million jobs have been created.
Why have Labour and the SNP not attacked this? Simple, because they too support the minimum wage that kills jobs for the young and unskilled.
As if this was not enough to suggest that the British public (as a whole) has voted Tory only to get Labour policies, Osborne also announced that he was delaying the eradication of the deficit by a further year. In total this meant there would be an extra £85 billion of spending over the next five years.
This actually resembles the SNP economic plan that the Tories said would lead to ruin. Osborne has talked a tough austerity game and then delivered a more modest, almost anti-austerity budget!
This may be hard for some people to take on board, for all they will see is Osborne’s welfare cuts (many of which can be justified if we are to maintain the broader welfare budget) but the truth is he will be spending more, borrowing more and taxing more than he promised in the general election.
Then there are the subtle tax increases on insurance premiums that will put up our car cover and make our holidays more expensive. Too small to cause a stooshie but reminiscent of Gordon Brown’s stealth taxes.
Tories may cheer at his cunning and how Labour is left speechless but we needed a Budget for the people – not one for the Tory Party.
The Westminster talk is that this Budget has moved George Osborne forward as a leader to replace Cameron in four years’ time. For me it makes him even less attractive than before and I would certainly not place a bet on him.
Yes, Osborne moved some tax thresholds to help taxpayers but in the main he has missed the opportunity to reform, has raised taxes and made the system more complicated. I struggle to give this Budget two out of five. Rather than going from a good to a great Chancellor his political posturing could see him move from a good to a bad Chancellor. This Budget could undermine all his previous good work.
For me it truly was a Diana Ross penalty kick moment – I so hope the goalposts don’t come crashing down upon us all.