Life: Left of Centre

The Budget for Millionaires

Posted on: March 24, 2012

So the dust has settled and George’s Osborne’s 2nd Budget has been universally panned – particularly by the Press. No surprise there. Indeed in recent years this has become the norm. He himself said that Britain should expect a long period of economic pain, in order to gain somewhere down the line – post-2017. A long way off.

But the most interesting facts of the budget are these: 8.7% unemployment is to be the expected peek this year. Yet economic growth is to reach only 0.8%. This looks like a ‘No Pain, No Gain’ economic policy to me. Where everyone suffers and only those best equipped to survive – the richest 1% – will.

It goes without saying that one of the most controversial part of this year’s Budget was the reduction of the 50p tax rate to 45p. The argument here is of course that we’re stimulating economic growth by saving top earners a little money here, thereby encouraging more spending in the wider economy. The reality is however that rich people are, well, rich, and are weathering this recession and recovery period pretty darn well. This will only make them richer – and to the tune of thousands of pounds in many cases. This change just won’t make any difference to the economy and is universally unpopular. Not just that, but recent research shows, that 5 million extra people will be dragged into paying the higher rate tax by 2014. Simply the opposite of a progressive budget, at a time when we desperately need one.
But it wasn’t all bad… to paint a balanced perspective, 24 million people will receive a real terms increase of £170 through an increase to the personal interest allowance, of the poorest. Yes that’s less than 50p a day but it’s something and every little certainly does help at times like these.

But the really controversial part of this Budget was the hit that both pensioners and parents took. Hardly the groups you would expect a Tory Chancellor to mess with (given their typical voting base) – so bonus points for moxie – but more importantly the very groups that government should look to protect and defend. 360,000 pensioners will soon be £285 worse off each year – hardly the richest group in society, and one which has already paid its dues. Child benefit cuts too will hit parents with combined incomes over £50,000 to the tune of 1% for every £100 over this limit. Now trust me here: a £25,000 income, per person, in London isn’t very much, especially when you take into account the cost of living, rents/a mortgage, transport and the expense of having a child. We should not be penalising parents, so important to our society. So-called ‘Middle Income’ or not.

At the heart of this Budget though is the central fact that 0.8% growth 5 years after this severe downturn began just isn’t good enough. Couple that to 8.7% unemployment and you have a crisis. A crisis of economic growth, but also one which is leaving a generation without skills, job prospects and – most importantly – hope. There is no clear idea or doctrine at the heart of government as to how we get growth across the whole economy, whilst also getting people back into work.

Britain has some of the lowest rates of Corporation taxes in Europe, yet these were cut yet again, to 24%, falling to 22% by 2014. Now clearly this is intended to stimulate growth – hence why Labour kept them so low for so long when in government. Yet like the new 45p top rate of tax, surely this is at best yet further window dressing that will at best do nothing for our prospects, and at worst a further attempt by a Tory Chancellor to further feather the nest of the well-off. All this as we were recently passed by Brazil as the world’s 6th largest economy.

One good piece of news is the £270m ‘Growing Places’ fund; investment which will hopefully help stimulate regional growth – sorely needed, especially in the North of England. Yet this begs the question why the government scrapped the widely successfully RDAs (Regional Development Agencies). Regional public sector pay is also to be brought in line with regional cost of living – as opposed to simply whether people do a good job, or hold right mix of skills, experience and knowledge like the rest of us.

Deeper inside the detail of the Budget are revealed a number of important points – with a wider impact. Firstly, duty rises on tobacco products (5%) and alcohol (2%), and a recently announced minimum unit pricing (40p) for alcohol. For too long Britain has accepted it’s casual association with binge drinking and simply standing by when many young people replace work, a good education and simply something to do, with a bottle. Now this won’t effect the price of most alcohol, simply the super strong spirits and super cheap lagers and beers. In my book, a start, though just that – these ‘sticks’ never truly work without the ‘carrot’ of a strong educational and cautionary message alongside.

Meanwhile the government’s ‘Greenest Government ever’ tag has simply disappeared under the pressure of (failing to) driving growth, announcing a so-called “major package of tax changes” to boost oil and gas extraction in North Sea, along with a £3bn new field allowance west of Shetland. Hardly innovative, not at all in keeping with the Coalition agreement, and simply not ‘green’.

Labour’s response was refreshingly robust. Ed Miliband’s ‘Budget for Millionaires’ taunts in response to Osborne’s announcement helped put the government on the back foot, and the Press ensured they stayed there. As he said, and I’ve stated above: “Wrong choices, wrong priorities, wrong values,” he told MPs. “Out of touch. Same old Tories.” This government needs to realise that there is a ‘Plan B’, and focus on providing opportunities for young people, discover a regional focus for job creation, champion the new and creative industries, be green *and* innovative in its thinking and planning for the future – providing real opportunities for skills and retraining.

Setting the agenda, for a change.

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1 Response to "The Budget for Millionaires"

The scrapping of RDAs was a slap in the face for a large chunk of British industry, particularly SMEs. The new £270m fund is welcome news, but the amount rests somewhere between tokenistic and pitiful.

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