Andrew Grice: Budget for the wealthy that exposes Tories’ fatal flaw

Inside Westminster

Share
Related Topics

During the 2010 election campaign, David Cameron had sleepless nights about what he feared might prove the Conservatives' fatal flaw: the public's view that, when it came to the crunch, his party would side with its wealthy friends rather than "people like us".

His fears were not misplaced. Such doubts played a part in the Tories' failure to win an overall majority. Today Mr Cameron looks comfortable in his own skin as Prime Minister. I doubt he is having sleepless nights over this week's Budget. But he should be. It has backfired badly.

The public has bought into the Coalition's central mission of cutting the deficit. But people are unsure whether the Government is living up to Mr Osborne's "we're all in it together" pledge. They want the cuts to be combined with fairness, a big ask but one that should be part of the core mission. Through a combination of bad luck and bad judgment, the Chancellor has undermined the Tories' credentials on "fairness". Reducing the 50p top rate of tax on incomes over £150,000 a year was always going to be a hard sell. The idea was to balance it with two Liberal Democrat demands: a tax cut for those on low and middle incomes, and closing tax loopholes exploited by the rich – a "tycoon tax" under which they would pay a minimum 25 per cent tax on their income and higher stamp duty on homes worth more than £2m.

The bad luck for Mr Osborne was that the Lib Dems were so keen to get some public credit for the "fairness" measures that they talked them up before Wednesday's Budget, so they hardly came as a surprise to the media on the day. The bad judgement by the Chancellor was to think he could freeze the tax allowances enjoyed by pensioners with people barely noticing it.

A year ago the Budget surprise was good news – a bigger-than-expected cut in fuel duty. This year it was bad news; before Mr Osborne had even sat down, the media had dubbed his move on pensioners a "granny tax". It has already caused more trouble than it was worth. Without it, the Chancellor would have had an easier ride over his controversial tax cut for the top 1 per cent. But in the media's mind, and therefore that of the public, a tax cut for the rich is being funded by an attack on pensioners. Bad politics, especially for a party that relies heavily on the grey vote – and the greys do vote.

When Mr Cameron and Mr Osborne jointly addressed Tory backbenchers a few hours after the Budget, they were in confident form and indulged in some joshing, unaware that the next day's headlines would be dominated by the "granny tax". One Tory MP said: "They were a bit too cocky and complacent. It already felt like the morning after the night before. People welcomed the cut in the 50p rate but the raid on pensioners took the gloss off it."

The Chancellor's critics were right. The post-Budget headlines were bad.

A year ago, a YouGov survey found that 44 per cent judged Mr Osborne's second Budget as fair, while 31 per cent disagreed. The verdict on this week's package is very different: 32 per cent believe it is fair and 48 per cent unfair.

The Lib Dems can legitimately claim they had made it a fairer Budget than a Tory one would have been. They stopped the Chancellor cutting the top rate to 40 per cent, joining forces with a nervous Mr Cameron. Mr Osborne had to settle for the 45p I suspect will remain until the election.

The Lib Dems set the agenda in the Budget negotiations. They won a start towards their goal to shift tax away from income and on to wealth, which dates back to John Stuart Mill. "It's been party policy for 150 years," quipped one Clegg aide.

The Lib Dems hope their public lobbying for a big rise in the personal tax allowance will finally mean the voters know it is their policy.

Nick Clegg's negotiating in public, which angered Mr Osborne, was an attempt to break the cycle in which the Tories seem to get the plaudits for the Coalition's good works and the Lib Dems the blame for its nasty medicine.

Mr Osborne has other ideas. He agonised over whether to brand the minimum tax rate a "tycoon tax" because this is how Mr Clegg described it publicly in the run-up to the Budget. The phrase was in and out of the Budget speech as it was finalised. When Mr Clegg saw the final draft, it was missing. He urged Mr Osborne to put it back at the last minute, but the Chancellor refused.

The Lib Dems had distanced themselves from the 50p rate cut and so Mr Osborne did not want them to claim credit for the "tycoon tax", even though it was their idea. "We can't let the Lib Dems look like the good guys and paint us as the nasty party," said one Tory moderniser.

The worry for Mr Cameron and Mr Osborne at the end of a landmark week is that they may have managed to do that all by themselves.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / Web Developer

£350 p/d (Contract): Guru Careers: A Software Developer / Web Developer (PHP /...

Recruitment Genius: Trainee Social Researcher

£14000 - £15000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Financial Controller

£35000 - £45000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Head Porter / Concierge

£16000 - £28000 per annum: Recruitment Genius: This award winning Property Man...

Day In a Page

Read Next
The UCAS clearing house call centre in Cheltenham, England  

Ucas should share its data on students from poor backgrounds so we can get a clearer picture of social mobility

Conor Ryan
A study of 16 young women performing light office work showed that they were at risk of being over-chilled by air conditioning in summer  

It's not just air conditioning that's guilty of camouflage sexism

Mollie Goodfellow
Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks