Thursday, 22 March 2012

Reflections on the budget

It is often said that if a Chancellor’s budget is cheered on delivery the next day it will be given the thumbs down. 

Many now see this budget as one for the fat cats.  
A close look at the small print of the budget contained in the red book showed  it barely changes  the country’s public finances. The rule that the chancellor has adhered to is, what he gives in taxes will be balanced with taxes that he takes. Hence, the economist’s jargon of a fiscally neutral budget.
Just like any household with no change to their income what becomes interesting is what they prioritise. And just so, with young George Osborne’s effort. 

His budget showed very clearly what his priorities are. Help to businesses and to the rich. 

Business was helped with lower corporation tax. This was done in the hope that the action would make Britain an attractive place to do business.  But will international businesses be rushing to our door with inward investment? Unlikely. 
Evidence shows that inward investment decisions are not usually made on tax rates. What the international entrepreneur looks for is a work force that is educated and well trained  and an infrastructure that is capable of getting their goods to market quickly, cheaply and efficiently.  
Yesterday little was said about increase sums for education . Indeed the talk was of further public expenditure cuts and of course the big story on infrastructure is that the much criticised private finance initiative is back in vogue. 

Despite PFI being costly to the public purse in the long term it provides a quick fix if the government does not want to immediately invest. 
Cutting corporation tax is hardly likely to act as the stimulus to get the economy moving  and reduce the 2.7 million that are unemployed. Neither, for that matter will cutting the the taxes of the rich stimulate economic activity.
A political budget is what we’ve had. But is it good politics. Well, certainly the budget will not have harmed George Osborne’s prospects within his own party. He will be seen as the authentic voice of Conservatism. 
But you don’t win elections by playing to the prejudices of your own supporters. Even when those supporters donations pay such an important part in the running of your party. 
Being seen to be the party of the rich won’t make you popular with the voter especially when it gives more cash to bankers that already get £5 million pay packets.  And especially not, when it seen as being at the expense of the frugal pensioner.
Like a poor magician the Chancellor’s slight of hand on pensions has been seen by the audience. Nothing worse than a trick that's gone wrong.

To give taxes to the rich and make pensioners pay more to the Treasury this ain’t good politics in anyone's book. The rush to the airwaves today shows that they’ve realised what a major blunder they’ve made.
You can cut back on welfare payments and get away with it. But to take away from the grey voter whilst be seeing to give to your chums is bad politics indeed. It sends all the wrong signals. 

A point that Ed Miliband was quick to latch onto. The message he's quite keen to get over is that we're now not all in it together. Incidentally, his performance certainly was his best to date. Who knows, his party might not dump him before the next election if this form continues. 
It’s the rich that gets the pleasure and the poor? Well, this budget answers that.

1 comment:

  1. For what purpose does anyone attack the rich? They are rich, I am poor, we are all human.

    I need certain services. They can either be provided free of charge largely because of the largesse of the rich who pay the bulk of the tax in this country, or else I must pay for them. Or go without.

    It really is very Wales to keep wanting something for nothing!