Most Budgets are fairly uneventful affairs these days, but not this one. Since I can remember, us punters have always waited in trepidation to find out what popular items the tax would go up on next.
A penny or more on a pint? Ten, 20p or 30p on a packet of cigarettes? It did not seem like a real Budget if there had not been some price hike on those small personal pleasures of life. Why, I can even remember back in the 1960s Harold Wilson’s government bringing in a new tax on crisps to benefit from their popularity.
Us kids were dumbfounded, no more little blue bags of salt to be shaken over Smith’s Crisps in the playground. Instead, our penny-conscious parents gave us stalks of rhubarb to munch on. We would dip them in paper bags holding granulated sugar (posh kids got castor sugar).
Streetwise kids would establish supplies of Golden Wonder contraband that soon devoured our pocket money.
But I digress. My point is, Budgets since time immemorial have generally been affairs you wanted to forget, as cash-strapped governments were always finding new wheezes to relieve people of their hard-won earnings.
Queues would form at the petrol station to beat the pump price going up at 6.30pm or supermarket shelves would be cleared of spirits before higher duty could be charged. Then, in the 1970s as the economy lurched from one crisis to the next, chancellors of all colours would introduce mini-budgets – hitting the punter with what was later to be called a “double whammy”.
So, this year it is a welcome change to see Chancellor George Osborne cutting a penny off a pint for the second year in a row and halving bingo tax from 20 per cent to ten per cent.
Other goodies included the freeze on spirit duties like whisky, the abolition of the alcohol tax escalator that had put duties up two per cent above inflation automatically and the dropping of the rise in petrol duty planned for September.
Better still is the raising of the threshold at which income tax starts to £10,500 – a great achievement when you consider Labour chancellors had let it languish at £6475 in the bad old days of super-boom and mega-bust.
Labour leader Ed Miliband can talk about the cost of living crisis all he wants – but as the former minister responsible for messing up the electricity market that makes it so expensive, I doubt he would have done any of these popular moves if given the chance.
However, it is not these long overdue but no less welcome reductions in what are incorrectly called “sin taxes” that make this an especially interesting or attractive Budget. What is different about it is the attempt to reform savings and pensions – this is a bold move that deserves to be a success and we could all be winners.
It may have taken Osborne four goes (five if you include the emergency Budget when he inherited the mother of all disasters) but this is his best Budget by far. It’s a radical Budget that will raise people’s living standards and encourage saving while bringing in higher revenues for the Treasury.
The ten per cent savings tax rate has been abolished, cash and shares Isas have been merged with a much bigger limit of £15,000 and compulsory annuities are to be abolished. Cutting the withdrawal tax rate on pensions from 55 per cent to the marginal income tax rate is expected to raise £1.2 billion in four years. The tax cut, combined with other pension reforms, will encourage more withdrawals and so increase the overall tax being paid.
And the Labour response? Well, Miliband gave a reply that simply ignored the Budget altogether. Why did he want a reply at all if he couldn’t be bothered to deal with the announcements Osborne made? If ever there was a lame leader, it is he.
The Labour response was left to former Tony Blair aide John McTernan who said on BBC’s Newsnight on Wednesday evening that “you can’t trust people to spend their own money sensibly”. There we have it in one easy phrase; you’ve earned it, you’ve saved it and deferred the gratification of spending it by keeping it for your autumnal years – but Labour’s top strategist says you can’t be trusted to spend it sensibly.
What patronising nonsense. Why should people be forced to buy an annuity? Why should they not be able to draw down what they want or need from the savings they spent years building? Why should they be taxed punitively for the enjoyment of their money paid out mostly from tax-paid earnings? Why should they not go on that cruise they have always dreamed about? (Tip: buy shares in cruise companies . . .)
The savings and pensions reform will probably need some tweaking – but the general approach of creating more freedom for savers by deregulating the system is one that we should all welcome.
Oh, and the Chancellor announced a pound coin with 12 sides – one for every time Miliband has spent it already.
I’m off to toast the Budget with a generous dram and, for nostalgia’s sake, a packet of crisps without (sadly) the wee blue bag of salt.