Tuesday 18 March 2014

Pre-Budget Tory choices

Is it too little too late for George Osborne? I mean the main idea in the budget seems to be raising the lower tax threshold which has been firmly associated with the Lib Dems. Osborne's main achievement on tax has been to lower the top rate from 50% to 45%. Overall, this is not good and is reflected in the Tories never having led in the polls since this set of changes was announced in the 2012 budget. Its cold comfort that it has equally affected the Lib Dems who are set for a form of electoral oblivion this year and next.

So what could the Chancellor do to make this different and what strategy to take. There are only 3 roads politically to choose:

One is to make some headline grabbing tax cuts or benefit rises as a blatant voter bribe. These though don't come in for a year and then that is very near the next election, probably too close for people to notice in their pay/benefits cheques.  Still, it might make Labour squirm a little as they will be left having to argue for higher taxes over and over which is boggy ground from which to try and advance.

Secondly, to take the long-term approach, realise that the deficit is still out of control and the macro-economy is still in a mess. Make a few changes, but with a neutral at best tax impact on the public finances. Some big announcements about things far in the future like HS2 etc that have no real impact on today's figures because there is no major spend this Parliament.

Thirdly, to start laying pure political traps for Labour now, really cutting back on Welfare and merging National Insurance into payroll taxes or changing the name of Employers NI. Make huge investment promises on airports, roads and rail that will need funding next Parliament but not major funding now, however jump-start them to begin in earnest in 2015. Move pensions and benefits back into line with RPI instead of CPI. Cut subsidies for Energy companies starting next year. Lower the headline tax rate and move the 40p threshold to £45,000. None of these ideas make much sense for the long-term benefit of the Country in terms of balancing its books (or even coming close), all though will prove anathema for Labour to reverse when they get into power and will make their 5 years very hard to make a success of economically.

So these are the 3 options, what will the Chancellor do? One, two or three?


Anonymous said...

The choices

- make work pay better so there is an incentive to produce rather than to receive.
- make saving pay better so there is an incentive to save rather than to receive.
- make private sector pay better so there is an less incentive to stay in the public sector.

I'm sure someone has told George this but he doesn't seem to be able to grasp it.

visc said...

Anon dust off your old public choice theory textbooks to know why it'll not happen. Besides Osbourne is corporatist to the core.

Bill Quango MP said...

The government does a perfectly sensible libby-con tax break; Childcare tax break, and is hammered for it for not giving it to those that don't pay for childcare.

UK has drifted into a weird entitlement/fair/unfair/gimme gimme/takefromthem place.

Its quite absurd to give a tax break to someone not paying for the service that the tax break is for. Like giving the married tax allowance to single people for the sake of fairness.

We are becoming very French.. Ie - ungovernable.
if we don't sort ourselves out
a wicked Thatcher figure will be heading our way to force us to take the medicine.

Electro-Kevin said...

The childcare tax break does three things:

- creates employment for child minders (the taking-in-each-others'-washing economy)

- it enables a property boom through more dual income mortgaging (the taking-in-each-others'-washing economy)

- lets stay-at-home-mums know that they are unwanted - the last thing the establishment wants is people doing their own washing.

DJK said...

It's being phased in over 7 years, FFS. This is Gordon Brown politics: a big noise about a footling measure that's already introduced and won't be fully implemented until the parliament after next.

Nick Drew said...

@ UK has drifted into a weird entitlement/fair/unfair/gimme gimme/takefromthem place

never a truer word

are there no ideological Tories / Conservatives in the entire government ?

CityUnslicker said...

Not for me ND. I hate the bastards these days. Every tax increase hits me and every benefit or break is denied. The Tories loathe people like me and I loathe them back in triplicate.

I vote UKIP anyway but now if this budget pans out the way it is being set up then I'll vote Labour over Tories everytime. Labour don't claim to be on the side of the strivers, at least they are honest and Ed Milliband is painfully honest in his naive way. Cameron and Osborne are betraying bastards for the right in the way that Blair was for the left.

Blue Eyes said...

George has left himself in an impossible situation. Having convinced everyone that he was going to introduce swingeing cuts to public spending he has failed to do so. Having expended the political capital on the cuts, he hasn't actually achieved any. So he's both lost any sympathy from those who were politically opposed to him but responsible enough to accept that cuts might be needed, and failed to bring the state under control so that a recovery can get under way.

If he'd actually done what he promised, he would have done some savage cuts at the start, been incredibly unpopular for a while but by now we would be starting to see some of the fruits of his efforts. We might be getting some real growth and there would be room for tax cuts.

Instead we are limping along, with exactly the same problems we had in 2010. Huge state. Buggered banks. Public sector pay and pensions unreformed. Quangos unassailed. Economy over-regulated.

Meanwhile the fiscal reforms this government has made have made the public finances even more reliant on a relatively small number of medium earners. The very low paid now make even less of a contribution to the services they receive than ever. The very high paid got a nice little tax cut. Those of us in the middle have been stuffed. By a Tory chancellor to boot. Mums have been lavished with ever more free school meals and ever more subsidised childcare. The baby boomer vote has been bought off with totally unaffordable rises in the state pension, while the tax burden on those who actually earn money and try to get on has got tougher and tougher.

Do you know what George? Fuck you.

I am not even going to bother looking at the news tomorrow, because I know exactly what is coming for me: more taxes, more micro-managing giveaways for swing voters in key marginals.

George had a once-a-generation chance to shrink the state and do some of the things he used to claim to want to do. Instead we got the fucking pasty tax.

You had one chance as Chancellor, George, and you cocked it up so much that I wonder if I would have preferred Ed Balls.

CityUnslicker said...

Quite right BE, we are on the smae page. All I would add is those 'middle-income' people is quite big band it basically encompasses anyone who earns between about 40k and 150k.

The MEDIAN salary in London is 35k. The tories have totally attacked their own base - whilst everyone else gets freebies. Good riddance to them.

Pogo said...

@Blue Eyes: Instead we are limping along, with exactly the same problems we had in 2010. Huge state. Buggered banks. Public sector pay and pensions unreformed. Quangos unassailed. Economy over-regulated.

You forgot to mention "an insane energy 'policy' based upon uncomprehending acceptance of green wibble and a total lack of knowledge of physics and engineering".

Anonymous said...

Winder what they will say in May when the results of the European Elections are in...

"The real test is the General Election". Well we have had a General Election and you were all found wanting. Roll on 2015

Blue Eyes said...

CU yes I read your comment after I posted mine and was pleased to see we pretty much agree (as usual)!

I can't work out why the Tories have been so keen to screw the very "strivers" they claim to support. According to George Osborne I am rich and pleased to pay 50%+ tax on every extra pound I earn. Presumably he has never tried to live on what Lawson and Lamont described as a middling professional salary. I cannot claim to be in poverty by any means by I am hardly flush and living in a mews house in Chelsea either. And yet apparently I have very much broader shoulders than most.

My brother has strived more successfully than me and finds himself in that black hole where every extra pound he earns gets taken away from his personal allowance. If that isn't an incentive against working hard then I don't know what is!

And the Chancellor thinks there is enough money to increase spending!

hovis said...

"If he'd actually done what he promised, he would have done some savage cuts at the start, been incredibly unpopular for a while but by now we would be starting to see some of the fruits of his efforts."

BE: He should have read his Machiavelli.