It’s no surprise the hot money was pouring into the bookies for the Conservatives to be the largest party, as well as some heavy bets for an overall majority, while George Osborne was still walking tall and on his feet yesterday.
This was a new-look Chancellor on fire; funny, confident, highly political, and dare one say it, relishing every second of what was, give or take, a raft of good economic news for business and some populist measures for pensioners and savers.
While most of the smart money is still betting on a hung parliament, the odds have already steadied at 2/9, making this election even more of a political Grand National with the field more wide open than the usual two-to-three horses with a chance in the Derby.
And the best bit of the Budget news? That Osborne didn’t mess around or fiddle too much with the economy that is now growing faster than any other Western nation and, to boot, that the growth is being spread around the country with sharp growth in the North and the Midlands.
His claim that more jobs were created last year in Yorkshire than the whole of France wouldn’t look amiss on one of M&C Saatchi’s latest Tory posters. His other claim, that the UK will overtake Germany in a few years, will take some more convincing; productivity needs to improve far more before that will happen.
But why not? If you look at employment over the past few years, miracles can happen. Employment is now at the highest rate in history. More than 2 million new jobs have been created in two years – that translates into a 1,000 new jobs a day. Around 80 per cent of these jobs are, despite what doomsayers keep saying, full-time and skilled – although I’ve never understood why having a lot of part-time jobs is such a bad thing, as long as they are decently paid. Having more flexible working hours suits many families; and is one of the reasons why consumer spending is holding up so well.
Having said that, Osborne was making so much hay of being the party of equality and reward for hard work that he missed a trick in not putting up the minimum wage to £7; businesses could easily afford that and his 20p rise looked mealy-mouthed. Even so, more people are prepared to work for low-pay, as the numbers show: claimants and job-seekers are sharply down while youth employment is moving upwards; that has to be better than no job or benefits.
Helping self-starters was top of his list for business: first off, the 7 million or so self-employed were given a boost by abolishing Class 2 National Insurance – and just the sort of reform that Osborne should have done more. There was also more help for entrepreneurs and small businesses with higher tax relief measures for VCTs, EIS and SEIS schemes.
What a Conservative Chancellor shouldn’t be doing is messing around with pension pots; even if it was to take the wind out of Labour’s sails or as part of the deal with the Lib Dems. Given that his greatest achievement to date has been allowing pensioners to cash in their pensions – and after yesterday’s new move to cash in annuities – reducing the limit on pension pots to £1m was a silly, retrogade step.
Osborne also fell prey to totally unnecessary gimmicks like the Help to Buy Isa. This was pure politics and doesn’t do anything to help the housing shortage which is the real problem; a new plan to build affordable ‘“council” houses and looser planning restrictions in town centres would have been far more effective.
Being such a political animal, it wasn’t too surprising that Osborne wanted to get Margaret Hodge and her Public Accounts Committee off his back by pushing through with the “diverted profits” tax to crack down on tax-avoiding overseas companies like Google and Starbucks and to make them start paying tax here. He’s clearly keen to get this going as it’s one of the few measures that will be in next week’s Finance Bill.
But will the so-called “Google tax” work? That’s the question posed by many tax experts who warn that firms like Google – which pay around £300m a year in salaries to UK employees – might just up sticks and find a new home to avoid their taxes. (Paris maybe? The French need the jobs.) And the taxes would be chunky: Paul Smith, tax partner at Blick Rothenberg, estimates that if Google were to pay the new “diverted” profits tax, the firm could end up with a £200m tax bill. Whither Google?
His review of business rates was long overdue, but it’s never too late to do a good thing. But getting a fairer rating system for businesses on the high street so they can compete with those online and elsewhere will need bold as well as radical thinking; finding a way to control some of the exorbitant rents charged by landowners needs to be scrutinised at as well.
But will Osborne be there to see through the review? Or is this his last Budget? The odds on Ed Balls taking his place are still shorter than on Osborne staying. Yet whether he goes or stays, there’s no question the Chancellor has proved to be far more of a reformer than credit has been given: his pensions and savings revolution alone will mark him down in history. What is not often noted is that the cuts to corporation tax, from 25 per cent to 20 per cent this April, have increased tax revenues. In the year to January, corporation tax brought in £41.6bn – in Labour’s last year of office, the tax raised was £35.8bn. If you take corporation tax together with Vat, Paye and national insurance, the total take from the business community in the last year to January was £397.9bn – a £73bn increase on the £324bn raised in Labour’s last year in office. Who is the tax-raiser now?
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