Magazine article New Statesman (1996)

What the Budget Will Not Reveal

Magazine article New Statesman (1996)

What the Budget Will Not Reveal

Article excerpt

Most voters are oblivious to the day-to-day combat at Westminster; their preferences are shaped by longer-term trends. The Budget is an exception. In this parliament, George Osborne's 2012 "omnishambles" Budget, which entrenched the impression of the Conservatives as the party of the rich, is the most salient example.

It initially appeared likely that this year's Budget (on 18 March) would be a minimalist affair. The Liberal Democrats briefed that they would strike no significant deals with the Tories on account of their desire to distance themselves from their coalition partners in advance of the general election. Mr Osborne, it seemed, would be denied the chance to unleash any fiscal fireworks. But more recent briefings suggest there will at least be a few sparklers. The government is reported to be considering raising the personal income-tax allowance to nearly 11,000 [pounds sterling], rather than the scheduled 10,600 [pounds sterling], after lower-than-expected inflation (which has reduced the cost of debt interest payments) gifted the Chancellor a 5bn [pounds sterling] windfall.

A cut in this very visible tax would be politically adroit but more progressive options exist. A further increase in the personal allowance will not benefit the 4.6 million workers who earn too little to pay tax; the biggest winners would be households in the top half of the income distribution. A better course would be to raise the National Insurance threshold (now at 7,956 [pounds sterling]) or to cut VAT, which hits the poorest hardest.

Having failed to meet his original deficit reduction targets (borrowing this year is forecast to exceed 80bn [pounds sterling]), Mr Osborne has scheduled several more years of austerity. As a result of his plan to achieve a 23bn [pounds sterling] surplus by 2019-20, while cutting taxes by 7. …

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