Can George Osborne seize the day in his Budget next week and ensure he becomes remembered as one of the great reforming chancellors in British history?
It’s up to him to show he has the mettle, for seldom has a chancellor had such an opportunity – he is literally staring at an open goal – will he blast the ball into the net or do a Diana Ross and miss altogether?
Look at all the advantages he has. Most importantly, he is not new to the job. Osborne has been Chancellor for five years already and knows his way around. He has found out, sometimes by his own errors, what works and what doesn’t. He should therefore know what needs to be reformed – including some of his own work from the past that was necessary during the Great Recession and has served its purpose – and some that was foisted upon him by the Liberal Democrats that he can now reverse or modify.
Secondly, he is at the beginning of a new five-year term of government and the general rule that should always be adopted is to get the most difficult political measures in first so that any pain can be given time to heal. Not everything that needs to be done will be universally popular so it makes sense to take the hardest decisions now.
Thirdly, the political landscape is to his advantage. He has a Conservative majority that is for the moment united, but that won’t last with an EU referendum due within two years – while labour is essentially leaderless and rudderless. Even this week Labour dropped its commitment to restoring the 50p highest rate of income tax, who knows what it will believe in next week?
So the moment is propitious, it’s now up to him to take advantage of his position. He already has a number of credits to his record so he can now move his rating from a “good” to a “great” Chancellor. He has brought the economy safely out of the meltdown it suffered in 2008-2011; he has raised the personal allowance to the level of the minimum wage – a benchmark from which it is never likely to fall below; his reform of access to personal pension pots is liberating pensioners across the UK; and he has reformed stamp duty so that it is a much fairer graduated system.
So what can he do now?
Well there’s a great deal of unfinished business from the last government that clearly was blocked by the Liberal Democrats that he can now act upon. Chief of these must be the raising of the inheritance tax threshold to a million pounds – but this should not be just for heritable property but all assets, such as shares and artefacts.
The next is reducing the top rate of tax from 45p to 40p. I can already hear the groans that this is about helping the rich, when it is in fact about helping everyone but the rich. Sure it would mean the richest earners get a tax cut, but the effect is more beneficial to everyone else.
When Osborne reduced the rate from 50p to 45p it resulted in the Treasury taking in £9 billion more from this group of people because it gives them an incentive to earn greater amounts of money. I’ve no doubt that reducing it back to the 40p rate it was originally would bring in more money too. That means more money to spend on public services or reduce the public spending deficit, either way it is the normal taxpayer who benefits and the richest pay for it.
When he turns to new ideas for tax reform George Osborne needs to look at making it easier and cheaper for employers to hire staff by reforming or cutting taxes that punish enterprise. He could raise thresholds for contributions to National Insurance and reduce or abolish Air Passenger Duty, for instance – both the sort of changes that would be likely to generate more income for him from the greater economic activity they would encourage.
Likewise he could buck the politically correct madness that sees our duties on beers, wines and spirits cost half as much again as they do in Spain or France, where there is less of a problem from alcoholism. That’s a tax cut that is always popular with the punters and raises revenue.
If Osborne really wants to help ordinary people and give a lift to the economy Osborne could take the VAT rate back down to 17.5 per cent. Nobody seems to be suggesting it but it would be hugely beneficial to those on the lowest incomes and send a strong signal that we are beyond the worst of the economic disaster.
Politically he could seek to reduce any taxes that John Swinney will have control over later this year, so he would have to take the decision to raise the tax or leave alone, helping to define Swinney as the tax-and-spend Finance Secretary that he is.
So there’s a great opportunity and no doubt there will be a few surprises. When I review the outcome next week, will my glass be half full or half empty?