A Budget to Boost Confidence and Growth
I was not expecting much from today’s budget. The Chancellor did not have much room for manoeuvre with the economy failing to meet growth forecasts and therefore tax revenues coming in below expectations. Last year’s budget was derided by the commentariat as an “omnishambles” and did much to undermine George Osborne and the government’s economic reputation. As a result the Labour party has opened up a consistent lead of around 10%.
The government has also not exactly exuded competence in recent months. Too many open goals have been left to the opposition and the government has failed to convey a consistent message to the electorate. However, unlike last year, the budget contents were not widely trailed or leaked, and other than an unfortunate mistake by the Evening Standard, the surprises were kept under wraps.
The confirmation that projected growth has been cut to 0.6% for the current year was no surprise. With the continuing troubles in most of the UK’s export markets it would be amazing if we were immune to the difficulties in the Euro-zone. As it is we are better placed than many and I expect that later this year the 2013/14 growth figure will be revised upwards just as the “double-dip” recession is revised away.
The Chancellor was helped by under-spending in some departments and saving £3.5bn on EU contributions thanks to the agreement negotiated by David Cameron. Against the tough economic background George Osborne delivered some good changes with cuts in Corporation Tax and National Insurance, abandoning Labour’s planned increases in fuel duty and beer duty, and helping guarantee loans to help homebuyers. All of these make good economic and political sense. The first two help businesses and the last two help consumers. The freezing of fuel duty helps everyone!
I do not see the sense in cutting beer duty by 1p. I think that this may come back to bite the government and there is no sense in cutting duty when every penny of existing tax revenue should be used to reduce the deficit. I also do not agree with the planned new tax credit for childcare. This will cost £750m which could have been used to cut the deficit. The Chancellor should take a leaf out of Nigel Lawson’s book and use every budget to simplify the over-complicated tax system and reverse many of Gordon Brown’s ridiculous measures. A good vision for the government would be to abolish as many loopholes, credits and exemptions as possible and move towards low flat rates of tax wherever possible. This would save a fortune, raise more revenue, make the UK more attractive to outside investors, and minimise tax avoidance.
On the spending side I cannot comprehend why the government persists with the ridiculous policy of pumping billions more into overseas aid in order to meet the arbitrary target of 0.7% of GDP. Too much aid is wasted and it is indefensible to be sending money abroad while cutting defence, police and other domestic budgets. Protecting the health and education budgets makes sense provided that both are subject to far more rigorous scrutiny.
Overall though, I am impressed with what George Osborne managed to do today. Most of the measures will be effective AND popular. No mean feat! It was noticeable that Ed Miliband had nothing constructive to say in response. He was left looking like a petulant, whining 6th former who had come unprepared to a balloon debate. The tweets of some of his supporters (such as the Labour Reading West candidate) illustrated how far Labour still has to go to regain any credibility on the economy. They seem to think that attacking everything, calling for more spending more quickly, and ignoring their own responsibility for the fact that “there is no money”, constitutes an economic policy. Silly slogans like “Mums not millionaires” are vacuous and based on profound ignorance and untruths.
Today George Osborne set out a plan to boost business and restore confidence and I commend him for it! It will be interesting to see how it plays in the country and whether there is any impact on the polls. The omens are promising.