Today’s Budget is being hailed as either progressive and fair, or the worst thing to happen to Britain since… umm, well, what the last Conservative government had to do to repair the damage the last Labour government left us, depending on which side you’re on.
There are tweets and stats flying all over the place. So a few good things first of all.
George Osborne has increased the threshold for protected public sector workers – initially the threshold was £18,000 a year, now it’s £21,000 a year AND those earning under that get a pay rise.
He’s also increased the tax-free threshold significantly (as we supported when the Lib Dems first proposed it) on its way to £10,000 a year.
There is extra funding for the most needy – £2 billion in tax credits, increases in state pensions, help to freeze council tax.
He has reduced the rate of tax that businesses pay so that they can invest more and create more jobs and therefore growth.
These are all good things.
There are some more difficult things – obviously any tax rise is most unwelcome; for example, VAT is going up, and clearly capital gains going up will disappoint many.
However, the somersaults that the broadcasters are turning in an attempt to show who will be proportionally worse off are interesting. Pretty much everyone is having to contribute something to Labour’s mess. But those who are at the bottom end are paying the least, while those at the top are paying the most.
While it is hugely unfair on ALL of us that we have to pay still more to clear up the catastrophic state of our finances, we have to do it, so we should do it as soon as we can in order that the interest is kept as low as it can be.
There is, pace ConservativeHome, a limit to how fast you can start cutting spending in any meaningful way. There are also some things that in fact we should maintain spending on, either because a relatively small investment now brings greater returns in the long run, or because they are a service that we all rely on as a final resort.
The main criticisms from Labour (or at least, not from the Parliamentary Party but from the blogosphere) seem to be that it’s not fair to raise VAT. But because of the rise in tax-free allowances, and because George did not – as he could have done – raise the rate on food, children’s clothing or domestic fuel – the people who are most affected by this rise are not the poorest. If you are a basic rate taxpayer, you’ll have an extra £200 a year in your pocket, and to cancel out that tax cut, you would need to spend something like £8,000 a year on VAT-table items – not food, not heating, not books, not children’s clothes…
I don’t know many people who spend that amount on VAT-table items who are particularly poor…
And secondly, in the longer-term, shifting taxes from good things (earning, making your business grow, saving) to bad things (waste, carbon, the so-called health sins) is in and of itself a good thing. It is better to leave people with choices over how they spend their own money.
Finally, isn’t it a change to hear a Budget and not have the next 24 hours full of people discovering little footnotes that make us all worse off?
I know this Budget is not really giving any of us a huge amount of flexibility. But in the longer-term, this one is laying the foundations for the 2015 Budget – by which time the independent Office for Budget Responsibility says we are scheduled to have basically paid off the structural deficit, and have made a good start in reducing the national debt. That is where the real fairness lies in this Budget – in paying off the binge of borrowing and ensuring that we live within our means again.
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Hear hear! Actually, the only bit of extra VAT most people will pay is on fuel – and that isn’t a bad thing in itself. Also, very cleverly, it doesn’t come in for over 6 months, so the shops should get a boost before it happens – which just by chance coincides with the sales, so noone will care about 2.5% when there is 50% off to start with…