Every Budget has a Day Two, once the number-crunchers have been at work, and George Osborne's emergency Budget is no exception. Day Two is when certain broad themes and trends emerge more clearly and small, but significant, drawbacks come to light of the sort that Chancellors habitually try to bury.
To give Mr Osborne and his Treasury team their due, there was a notable absence of any small print in the full version that contradicted the speech he gave in the Commons. There were not, as so often in the budgets of Gordon Brown, unpleasant surprises lurking in the further recesses of the printed documents. He delivered the news straight: some of it good; most of it bad.
This does not mean, however, that this emergency Budget did not contain traps for the unwary or raise further questions. It may, for instance, have escaped some tax-payers at the upper end of the basic rate that the rise in the personal allowance will be paid for in part by a fall in the threshold at which the 40 per cent rate applies. More people will thus be liable for the higher rate, even if their net tax bill is the same. More families than might have expected it are also likely to find their tax credits reduced or abolished. Only three groups of people have been mostly protected from the pain: the poorest families with children, pensioners, and – at the upper end – entrepreneurs. But all will be hit by the rise in VAT.
Two broad trends emerge. First, Mr Osborne has drawn a sharp distinction between pensioners and other recipients of state help. Pensioners – for the time being, at least – keep their one-off allowances, and state pensions will be indexed against earnings. Everyone else will either lose one-off benefits (pregnant women; new mothers) or have the indexation switched from the Retail Price Index to the Consumer Price Index, which is likely to make them less generous, with time, than they would have been.
The second is his attempt to curb the cost of the fastest-growing benefits and encourage work. In some ways, Mr Osborne has only accelerated and sharpened measures introduced by the last government: single mothers will be switched from income support to jobseeker's allowance when their youngest child reaches five (rather than seven); existing (as well as new) recipients of Disability Living Allowance will have to take a medical. There will be a ceiling to housing benefit, and a reduction if the recipient is still jobless after a year.
Both the Opposition and lobby groups have sounded alarms about these measures, warning that some people could find themselves uprooted, even homeless, in the South-east and other expensive areas, and some people could lose their DLA. Among the working and tax-paying majority, however, the logic will probably be widely accepted as – to use Mr Osborne's word – fair.
Despite the welcome transparency of this Budget, however, all is not as it seems. Something that, paradoxically, is not there in either the big or the small print nonetheless casts a dark shadow: the effect on public services of the mooted 25 per cent cut – over four years – in most government department budgets. How these cuts will be distributed and what they will mean in terms of jobs and services has still to be worked out. It stands to reason, though, that poorer households – as heavier users of these services – will lose more, maybe much more, than richer ones. This is the point at which the fairness of Mr Osborne's Budget risks breaking down.
There is a way to mitigate this: by removing the ring-fencing of the NHS – a Conservative policy that was, in fact, opposed by the Liberal Democrats before they went into coalition. It could be that when voters see the harm to be inflicted on other services, they might press for a re-think. But the measure of an astute Chancellor is how far he is prepared to lead, rather than follow.Reuse content