WELL, was it good for you? Did the Budget tickle your fancy?
Not if you were a smoker, with cigarettes going up five per cent above inflation to nearly £7 for a pack of 20.
Call it what you like, but that’s a smuggler’s charter if ever I saw one. We can expect a flood of counterfeit tobacco into Britain, selling at half the price and still making a huge profit.
Nor will the two per cent above inflation increase on spirits – that’s 43p on a bottle of whisky – do much for the Exchequer. Time and again chancellors target smoking and drinking but are always surprised to find that the revenues are never quite as good as they hoped as the public finds ways to source cheaper products.
And if you are a tax-paying pensioner you might not be too chuffed by Chancellor George Osborne’s failure to raise the tax threshold – costing a potential loss of £83 a year. Fortunately, that will be cushioned by the cash in hand of the largest increase in the state pension of more than a fiver a week per couple. It certainly compares well with that 50p increase I remember Gordon Brown giving when he was chancellor.
Despite these complaints, I think this is a good Budget – but it’s a good Budget for all the wrong reasons.
It’s a good Budget because the threshold at which working people start paying tax has been raised to more than £9200 and is on target to reach £10,000 before 2015. This is good because it eases the pressure on families and makes work more attractive.
The trouble is that I fear the Chancellor did it not because he believes in taking low-paid people out of tax but to placate the Liberal Democrats in his coalition because he wanted to cut the top rate of 50p paid by a small percentage of wealthy people.
It’s a good Budget because the reduction of the “temporary” top rate of income tax from 50p to 45p will encourage more people to work harder or pay tax in Britain and there’s no point in being green-eyed about rich people. The reality of past tax reductions of top rates in Britain and abroad is that the rich end up paying more, not less – so if you do want to make their pips squeak then cutting the top rate makes sense.
Still, I don’t think the Chancellor understands this. I think he was throwing a bone to his backbenchers who have been banging on about this issue and saw it as a test of his resolve to take on the Lib Dems.
It’s a good Budget because it has cut corporation tax to a highly competitive 23 per cent, which is low for a large economy like Britain’s and will make the UK an especially attractive place to do business when all the other taxes, levies, duties and regulations are taken into account. This is good news as it will attract investment, help create jobs and allow more room for company dividends that will help replenish pension funds.
The sad thing is I am sceptical that the Chancellor really wanted to do this, but was instead worried into it by the threat of more companies moving head offices out of Britain (and especially the City of London). In other words, it is tax competition from other countries (such as Ireland’s 12.5 per cent) that forced the Chancellor’s hand – and the fact that he had to do something to try and revive the ailing economy.
What I’m arguing is that while this is on balance a good Budget because it is letting more people and more businesses keep more of their own money I still don’t think the Chancellor “gets it”. Until we have a chancellor who believes taxation is legalised theft, that governments do not have money of their own but that they take it from us and our employers through coercive laws, then we are not going to have a budget that treats us with respect.
Likewise, if this was a Budget for economic growth it would be cutting duties and taxes that affect domestic industries (such as distilling, aviation and tourism) and reducing costs to farmers, manufacturers, retailers – and the consumer – by cutting fuel duties.
Unfortunately, Chancellor Osborne failed to do this and, given my suspicion that he reluctantly raised the thresholds for some but not others, such as pensioners, and that his hand was forced in the top rate of tax and corporation tax, then I cannot call him a tax-cutting chancellor.
George Osborne is no Nigel Lawson. He’s not even a Neville Chamberlain.
I have yet to hear Mr Osborne make a speech like Nigel Lawson would on the morality of cutting taxes. The now Lord Lawson had balls and as a reforming chancellor he has no match. Until Mr Osborne argues with passion in his heart and fire in his belly that low taxes are still never low enough then he does not get into my chancellor’s hall of fame or to be granted a star on the tax cutter’s boulevard.