The budget box. Photo credit: The National Archives.
Chancellor of the Exchequer George Osborne unveiled his 2013-2014 budget Wednesday afternoon, declaring boldly, “This Budget rewards work. Britain is going to earn its way in the world. There is no other road to recovery.”
Read the Chancellor’s statement here.
The question is now, of course, whether anyone believes him. The Budget was released to a predictable chorus of howling from both the right and the left, claiming that this Budget is a cynical, regressive hewing to austerity, a “raid” on pensioners’ pockets, a highly political exercise, and more. Some said it was “shocking” – despite the series of leaks that preceded it – and still others claimed that it ignored the growing gap between the haves and the have-nots.
The Takeaway: What you need to know about the Budget
So, did anyone approve?
Ed Miliband didn’t.
‘Sop to Lib Dem prejudice’. Simon Heffer, in The Daily Mail’s Right Minds column, bellowed that “this was a Budget of cynical public relations and downright posturing.” The “real needs of Britain”, growth and more jobs, were ignored in favour of sacrificing “traditional Conservative interests” “to appease Lib Dem prejudices”.
Trickle-down didn’t work in the ‘80s. So why does Osborne think it will work now, asked Larry Elliot, economics editor for The Guardian. This is “Nigel Lawson lite”, Elliot said, noting too that Lawson benefited from a booming economy, a luxury that Osborne most certainly does not have. Osborne and crew have yet to take responsibility for the fact that “since late 2010 – when the growth-inducing measures inherited from Labour wore off – the economy has flatlined”; this “cynical” and “regressive” Budget doesn’t do that.
Strong ideas, but two big gambles. Peter Oborne, writing at The Telegraph, liked the Budget’s clampdown on stamp duty avoidance and tax-dodging, and Osborne’s cuts to corporate taxes, making Britain a more attractive place to do business. “But at the heart of this Budget are two enormous gambles. One of these is financial, the other political, and if either of them goes wrong this Coalition government will lose its way – and the Conservatives forgo a realistic chance of winning the next election,” judged Oborne. The gambles? The “political gamble” of the 50p to 45p tax cut for the top earners, “the act of a conviction politician” that “just looks terribly unfair”; and the “financial” gamble of Osborne ignoring the warnings of credit ratings agencies, who have threatened to downgrade British debt. “If anything, the Budget loosened rather than tightened the fiscal outlook. There was no attempt to rescue the pledge, made by the Chancellor in 2010, to abolish the structural deficit within the lifetime of this parliament.” Osborne hasn’t done too badly, Oborne claimed, but, he added, “It must be said that Mr Osborne does not have the air of a man who is fully in control.”
Bold and risky, but welcome. A leading editorial in The Financial Times echoed some of Oborne’s concerns: “George Osborne could have delivered a ‘steady as she goes’ Budget” and stuck to a “message of necessary austerity”. Instead, he has taken a bolder and riskier course, making big changes to taxes and carrying the Lib Dems along with him. The 50p to 45p tax cut wasn’t a bad decision, but it “risks undermining the coalition’s claim that the burden of austerity is being shared fairly”. Even so, the paper judged, “The Budget marks the beginning of a shift away from taxing income towards accumulated wealth. Admittedly these are small steps, but welcome nonetheless.”
Much to applaud, but what about QE? Fraser Nelson, at The Spectator’s Coffee House blog, thought that though there was “much to applaud” in the Budget, it was “striking” that Osborne never mentioned quantitative easing, despite the fact that “the Bank of England — 100 percent owned by the Treasury — is midway through the largest QE experiment ever attempted in the developed world”. Pensioners, who are about to be hit with a tax increase, have been the main “victims” of QE “both by the inflation it stokes, and by its effect of lowering interest rate”, which “heavily hit annuities”.
Debt plan same as Labour’s? Or worse? Nelson’s post was all about the fine print, which revealed, shockingly, that spending remains untouched and just as high as it ever was. This, Nelson claimed, makes Osborne’s plan for reducing Britain’s debt nearly identical to the Labour plan he attacked not long ago. In fact, the debt to GDP ratio is actually higher than Labour’s plans. Moreover, Osborne’s not cutting debt – he’s cutting the deficit, two different things. “Maybe he is referring to paying one loan, even though he’s taking out even more. But there’s still no excuse. We all know about using your Amex to pay off your Visa card.”
Doesn’t care about have-nots. Andreas Whittam Smith, writing at The Independent, claimed that perhaps the most important question to ask about Osborne’s Budget is to what extent it widens or narrows the gap between the haves and the have-nots. This is not merely a question of fairness, but an issue that affects the quality of life of virtually everyone in society. And with this Budget, Smith concluded (after much preamble), “that Mr Osborne spends little time thinking about the gap between the haves and the have-nots and so he simply cannot imagine that it is too wide. The nearest he gets to the subject is a sense of fairness. And he would say that the best answer is to create more jobs. Unfortunately, that task, so appropriate to the heavy employment pre-computer economies of old, is immeasurably more difficult nowadays.”
More on the UK Budget 2012
- The six most important points of the Budget
- What Osborne should include in the Budget
- Is the UK economy doomed?
- Winter of Discontent II looming?
