Next week the Chancellor of the Exchequer rises to give his second proper Budget speech – and it will be his most important yet. It probably will be the most important of his career.
Get it right and the economy might begin to recover at his second attempt; get it wrong and we are heading the way of the Greeks and the Irish despite all the sacrifices that have been made already.
Of course if he gets it right then the political fortunes of the government improve immensely, while if he gets it wrong then the game’s a bogey and even an incoherent misfiring Labour Party has the chance of resurrection.
The problem stems from the relative weakness of the UK’s economic recovery – thanks in part to the Eurozone crisis depressing many of our natural export markets and thanks to the levels of domestic debt that people are trying to repay (and are therefore not consuming goods like they did before). The poor retail sales figures announced in Scotland this week being just one example of the problem.
I have written before about how the Chancellor needs to find ways of encouraging investment in the productive parts of the economy that can add value, but thus far there has been nothing but confusing signals of some taxes coming down (such as scrapping the 50p rate), and other taxes being invented, (such as a mansion tax that the Liberal Democrats favour).
None of this gives me any encouragement that the Chancellor knows what he is doing and the best that can be said of such shuffling of money is that the information appears to come from the office of Vince Cable – so it is absolutely worthless. Let’s hope so.
More encouraging has been the reports that the Chancellor is going to drastically reduce corporation tax – the tax on profits – as a way to make Britain a far more attractive place to do business. This would be costly to fund, but it would at least give hope to the unemployed that the Chancellor is going for a high growth economy that will create jobs.
Still, there has been no suggestion how such a cut will be afforded so again it is, for the moment, wishful thinking.
More absurd is the idea, floated by Chancellor Osborne while he was in the US with the Prime Minister this week, that he might introduce 100-year bonds – rather like the war bonds set up after the Great War. A more daft idea I cannot think of for they would be a guaranteed loss-maker for anyone buying them and are just a way to fleece the public by appealing to their public-spirited sentiment. If such a scheme were to go ahead and it was run by a bank it would be up in court accused of mis-selling.
There used to be a time when Chancellors went into what was known as “purdah” for at least six weeks, if not longer, before a budget. You never saw or heard of the Chancellor and you certainly had no idea of what he was thinking.
This was all before the New Labour spin machine got hold of the Treasury under Blair, Brown, Mandelson and Campbell – and started churning out double and triple accounting to make their schemes look good.
It’s high time Chancellor Osborne discovered the old ways of purdah and put his unhelpful colleagues under the same restrictions.
So far, the Chancellor has a lot to be modest about – next week will tell us if he deserves such a flattering reputation.
EU’s dog’s dinner
LAST week I raised the issue of how VAT being is charged on dog food except for working dogs – but that guide dogs for the blind and hard of hearing are not considered working dogs. I said it should be an easy hit for the Chancellor to correct this – but how wrong could I be? Very wrong it seems.
I am indebted to Jamie McGrigor MSP and Struan Stevenson MEP who took up the cudgels on this issue and have reported back to me an official response from the Treasury – and it is as annoying as it is frustrating. To cut a long story short, the fact is that the Chancellor cannot change this VAT rule even if he wanted to – because of the European Union.
Agreements with our “European partners” do not allow the UK to amend the law to make clear that food for assistance dogs is not “pet food”, or to change the guidance so that assistance dogs are classified as “working dogs”.
The UK could seek to amend the agreements to allow a reduced rate of VAT on food for assistance dogs; however, the most recent EU agreement on VAT came after more than six years of discussion and there is no appetite in the EU to revisit the issue of VAT rates.
Of course, the rule can be got round by buying dog food that is sold for working dogs – unfortunately for many blind people this is just not possible for obvious reasons. European Union? Yet another reason why we’d be better off out.