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The politics of the Budget are clear – and the holes are becoming clearer too

Posted on 21 March 2012 | 2:03pm

If the frontbench had accepted Ed Miliband’s invitation to raise their hands if they were going to be better off as a result of the Budget, we’d have seen an awful lot of fingers in the air. I understand why instead they squirmed and, in George Osborne’s case, sank a little deeper into the green leather.

Nick Robinson rightly made the point to Danny Alexander just now that the vast bulk of people who will benefit from the top rate tax cut will NOT be affected by the other measures designed to bring in money from the rich. So Labour’s line that a lot of wealthy people are going to be made substantially wealthier as a result of the Budget is sound.

And Stephanie Flanders rightly made the point to Mr Alexander that as a result of benefit and other changes, the poor (I paraphrase) are going to get hammered. It is worth adding here that many of the benefit cuts already in the pipeline have not yet come into effect, and that cuts to tax credits take away for many any gains from the raising of personal allowances.

His MPs clearly thought Osborne presented his case well, but as often with Budgets, the things he did not focus on are likely to become as politically potent as the things he deliberately highlighted. The hit on pensioners will be chief among them.

Labour MPs were clearly cheered by Ed Miliband’s performance, and with good reason. He looked confident, and had a clear message exposing what many people suspect does indeed lie at the heart of the Cameron-Osborne philosophy – namely that they think the rich work harder if made richer, and the poor work harder if made poorer.

Compare and contrast, for example, the language and the policies to deal with welfare cheats with the fact that his main argument for reducing the top rate of tax is that the rich with their sneaky accountants managed to avoid paying the tax they should have paid. And of course his much vaunted HMRC report focused on the year of change – the accountants could not have done the same trick twice. It was also a year when the economy was particularly sluggish, and tax revenues low in any event. Therefore the argument for the reduction he made, alongside his claim that his changes will raise five times more money, are pretty spurious.

It is also worth bearing in mind that if it is possible to lose so much money through tax avoidance, it is risky that he is resting a lot of his hopes for raising the money he needs for all his ambitions — on tax avoidance.

And though he tried to make something of a slightly higher OBR growth forecast, it is still well short of what Plan A was meant to deliver; and not even his best friends or speechwriters would describe Osborne’s Budget as a plan for growth.

  • Chris lancashire

    That’s it Mr Campbell, you can let rip now.
    Oh, by the way, on the hand raising issue, it’s a fairly sure bet that the majority on BOTH front benches would be raising their hands.

  • micky_mullet

    Is Ed Milliband not a millionaire too?

  • David Steele

    I have always found it sickening that people voted Cameron in in the first place.  His policies have shown that he lied to get the job and now the poor and vulnerable (even some of the middle class) are getting hammered.  

  • reaguns

    Agreements with AC blog:

    Agree with AC about Nick Robinson, and especially Stephanie Flanders one of the first of the commentators/twittersphere to point out poor getting hammered.

    Much fallout to come from pensioner hit surely.

    Thought Ed M (of whom I’m still overall a fan) did well, thought Ed B (of whom I’m not a fan) did well too on beeb.

    I believe in Laffer Curve, but agree with AC analysis of 50p rate distorted effects thus far. I think if you have a top rate of 80-90% (as UK and US once had) then reduce it to 35-50% you will see huge increase in tax revenue (we did.) But difference in 50-40 surely less significant. Political gamble.

    Disagreement with AC blog:

    “Cameron-Osborne philosophy – namely that they think the rich work harder if made richer, and the poor work harder if made poorer.”

    What is making the poor poorer this time? Only the benefit hits I think, right? And Tories and Labour are in total agreement now that the way you make the poor work harder is to act like communists or nazis and force them to work or starve. I.e. mandatory workfare and Labour’s endorsement of same.

  • Luke Wilcox

    You’re missing the point here. It not whether they are or aren’t millionaires it’s whether they believe they should be, as high earners, taxed more or less. The difference in the front benches is stark…

  • Olli Issakainen

    Anti-Robin Hood Budget.
    The key coalition point behind the budget is a bogus one. The rich are not being hit.
    £16bn tax avoidance by the rich meant that 50p top rate did not bring in as much as it could have done.
    George Osborne has failed on growth and jobs.
    He is £158bn off the track because of low growth and high unemployment.
    Mr Osborne is increasing debt by £500bn during this parliament – not paying down debt.
    300,000 people will be drawn into 40p tax rate.
    Real average earning has fallen 7.7% since 2008. Unemployment is 2.67m.
    Inflation is 3.4% (target is 2%).
    Growth in 2011 was only 0.8%. No one should believe the OBR when it says that the UK will grow 0.8% this year.
    2.2% is needed for plan A to work, anyway.
    Stamp duty (7%) only adds £56.6m.
    Rising tax threshold to £9,205 benefits higher income households with double earning, but fails to benefit the very poor at all!
    Government borrowing in February hit record £15.2bn.
    Tax avoidance measures will not work.
    People with high income will benefit most from the budget. The poorest families will be hit hardest.
    The budget fails on fairness, growth and jobs.
    But corporation tax will be cut to 22%.
    Plan A is not on track.
    George Osborne must deliver growth before 2015 or he is finished.
    My guess is that he will join Dame Edna Everage into retirement.
    Moody´s and Fitch do not have faith in Osborne.
    88% of the cuts are still to come.
    We are no wiser from where the growth is supposed to come.
    To quote George Osborne, “people have been warned”. 

  • kitty

    the hypocrisy of champagne socialist ed miliband, his party betrayed  post new labour damaged the values of his core voters,  the good work of tony blair,and now he  is  happy because he has a little class war to hide the fact that he has no policy , he thinks that labour have put the blame on someone else and that unreformed and unapologetic he can enter no 10 by the back door like his election win!
    george osborne was very brave to put country first, this tax was regressive,spiteful, anti-business and slows down the economy -rather like gordon brown!, we removed the last last goverment as they were damaging to the economy so why not this tax,
    it was temporary, desperate measure, and crude crowd pleaser from a failed prime minister during the last three months of his failed goverment. tony blair would not have done such a thing and even alastair darling said it would have been damaging in the long-term.
    regardless of what the media say the OBR, KPMG  and OECD say it was damaging and un-business like and would have a negitive effect on the public sector , ED BALLS  is glad it is gone but no one in labour has the guts to say so will you alaistair?

  • Anthony

    He may have an expensive house – he lives in north London after all – but I doubt he’s in the top tax bracket.

  • Ehtch

    A predictable budget, with a huge amount of new baffing red tape introduced. It will cost a fortune to implement. Not much mention of the basics, on the personal level of citizens of this country.

    And not much mention on telly that Feb borrowing (announced early this morning, a good day to bury bad news tactic) was double of what it was Feb 2011, much higher than Osborne expected, based on his previous pie in the sky predictions on UK borrowing. So how are we supposed to trust this bugger? He’s making the figures up as he goes along, it looks like. Bet he struggled to pass his O-Level Maths in school, even with large amounts of paid extra tuition.

    Quite a rubbish, disjointed and unbalanced budget. But to be expected from a biased amateur Chancellor. 

  • Gilliebc

    Chris, as a business man yourself would you say this budget helps or hinders your business?  Or, perhaps neither.  This is a genuine question btw.

  • Anonymous

    Yes – but Labour didn’t make the tax cut which would benefit themselves.

  • Chris lancashire

    Sorry Luke, Mr Miliband’s question was fairly straightforward : “Will you be better off as a result of the 45p rate? Raise your hands or just nod” (I paraphrase slightly) I believe – fortunately we aren’t privy to all their tax returns – that both front benches would have to raise all their hands.

  • Anonymous

    Yes, but he was not the one making policy to help millionaires, therefore he was quite justified in that line of attack in my opinion.

  • Anonymous

    Osborne’s talk of simplification is a bit much. Ok, if a document is 10000 words and you cut it to 9999 then yes technically you have “simplified it” but you have not made it “simple”. He had the nerve to quote Adam Smith on this! If you want to apply Adam Smith to 21st century then tax code should fit in a tweet (140 words.)

  • alienfromzog

    I don’t think I’m making a big assumption here by suggesting that Mr Campbell has earnings over £150,000 and will be better off personally because of this budget.

    This budget that he (rightly) hugely criticises.

    Just a thought.


  • Niko Porto

    When he mentioned benefit reform, he seemed to suggest similar reductions in departmental budgets in the next Spending Review. He surely needs some serious growth (unlikely) to absorb that.

  • Janiete

    Er … don’t think so.

  • Carol-Ann

    I come from abject poverty and I was diagnosed with Crohn’s Disease when I was 14yrs. which thwarted my chances of an Oxbridge scholarship because I was very ill from age 13-29yrs However, whenever I was half well I would be out working at various jobs. I had originally worked on the Accounts Dept of large firm but was not too proud to take bar work or even cleaning after birth of daughter. I have never done anything illegal saved for years-never went out for years to get a deposit for my own house having been chucked out on the pavement several times and then squatted in a condemned house with no running water or heating, when I was a kid because stepfather was a drunk as well as a violent psychopath.
    Is it too much to ask that I am allowed to keep more of my pension and occupational pension when I am still paying a mortgage as I married at 40yrs and bought a new ‘old’ house with my DH. I am not greedy or into expensive jewels or fancy car, status symbols mean nothing to me, I just want enough to pay my way, eat good food, have a modest holiday and run a basic (made in Britain) car which is a necessity to us. Just let me keep MORE OF what I have earned over my lifetime. I dont mind contributing to other people who are going through a hard time  I’ve done that all my life via  NI and tax as well as charitable donations. My DH has worked for 30yrs despite having cerebral palsy and epilepsy.He worked on short term contracts and no pension until last 14 yrs of working.
    Anyone want to start a campaign against The Granny Tax? Maybe every pensioner should send Osborne a pair of red granny bloomers with a slogan like The bottom line is…. we want our money back . We have seen red now we will vote red!. DONT BE BLUE, VOTE RED.

  • Ehtch

    BBC Newsnight tonight – rubbish rubbish rubbish rubbish, in a few words. Get a grip of your show, Paxo – too many smug wealthy people on it. This is the UK after all, inclusion and all that, wasn’t a granny in sight.

  • Ehtch

    …and if you want someone to moderate and post comments Alastair, while you’re up in East Anglia watching Burnley, maybe, just give me a shout. Just give me a cheat-sheet yes and no list to follow.

    Only joking, maybe. I might let the odd naughty one slip through, for amusement reasons, personal sense of humour of mine, and all that.

    Hard luck by the way – losing to the tractors.

  • Ehtch

    Furthermore, seeing Paxo riding a Royal Enfield Bullet, Indian made, in India, on that doc the other night, shown on BBC at the moment on old Brit Empire, made me piss my pants in laughter. Hell’s Angel he definitely wasn’t. Talking to the cow in that field started my giggles.

  • Anonymous

    Chris why can’t you get the simple point:

    Both labour and tories are rich and will be better off with the tax cut.

    But the tories are the ones who made this tax cut, not labour.

    So labour can quite legitimately attack them for it.

  • Anonymous

    It is such a lopsided budget that I can only think there has to be a Plan C in waiting for next year. It is absurd to bring so many extra people into the 40% band while cutting the top rate to 45%. And the spread of tax rates at 20%, 40% and 45% is absurd. So maybe his secret plan is to cut the 40% tax rate next year.

  • Janiete

    Yes, it is mostly benefit hits that will make the poor poorer, especially those in receipt of tax credits. In addition, I think all government payouts will be uprated in line with CPI rather than RPI, including pensions and child benefits.

    Tax credit reductions to some families will be 4 to 5 times greater than the increase in personal allowances. Anyone in receipt of housing benefit will be hit significantly, most of whom are working and trying to provide for their families.

    Couples unable to raise their working hours to the new threshold of 24 hours per week from 16 hrs, will lose between £40 and £70 per week from this April. 

    Let’s not forget that other mean minded, nasty measure of frozen minimum wage levels for under 20’s and only a 1.8% increase for the rest.

    But hey, ho, they had to find £40,000 a year tax handouts for millionaires from somewhere. How else would they keep these people happy:

  • Ehtch

    …and don’t you know it, a granny headline appears on the beeb front page, 01:33 posted by them, GMT. Pathetic! But no granny on their always “dynamic” linked headline,

    Super pathetic. Bad show Shepherd’s Bush, West London.

  • Ehtch

    Agreed, and some of this nonsense below commented is just inverted envy from the right. So what if Alastair is coining it what he does? Here is Dave being a turd when he was in opposition, turns my bile now looking at it, grrrr,

    David Cameron banned me from commentating on his youtube videos when he was in opposition, it didn’t take long, the tosser, happened surprise-surprise a couple of months before the general election May 2011. He is a wanker, and a tosser, and a knob, and a spare prick at a wedding, like the rest of his mates. And with modern communication these days, they will be yesterdays men/ladies very soon, for being such complete and utter hypocrites. Stoooopid people in power.

  • Mabozza Ritchie

    It’s understandable that Income Tax dominates the headlines as it’s easy for the politicians and the press to soundbite, but lots of tinkering in this budget that will have an impact, particularly to business.  The standout item for me though is that the tax on dividends for those in the 50p (now 45p) tax bracket also reduces by 5p (to 37.5%). Another gift from Gideon that will benefit only the extremely wealthy.

  • Anonymous

    Over lunchbreak noticed AC on “My Life In Books” with Anne Robinson and Jeanette Winterton. Great episode, definitely want to read AC’s pick “Team of Rivals” about Abraham Lincoln.

    Very interesting how one of AC’s heroes (it seems) is Lincoln, yet Alastair is ostensibly on the other side of the political fence… or is politics more complicated than that.

    Nice quote too about why he likes the book, its about “The beauty of language, and the power of politics.”

  • Janiete

    ‘Both labour and tories are rich and will be better off with the tax cut.’

    I don’t understand why you say this. There are some Labour MPs with significant personal wealth but it is the exception rather than the norm. Most Lab politicians live on their own salaries and whatever their partner (if they have one) earns.

    In financial wealth, background and policy there are very important differences between the parties. To encourage the notion that ‘they’re all the same’ plays to a right-wing narrative which seeks to undermine the Labour Party with its natural support base.

  • Anonymous

    I don’t dispute any of that but I think mandatory workfare / forced labour is worse and as far as I can tell from Harriet Harman and Ed Miliband labour now fully support this!

  • Anonymous

    Well either way, my point is that labour were not the ones making policy in this case which benefits rich people, top earners.

    So even if labour people are rich, or are as rich as Tories, they could still legitimately make this attack.

    I don’t know the relative wealth of all the MPs, though I would like to. I suspect Tories would have more wealth but I’d be surprised if most labour weren’t pretty darn well off too.

  • Anonymous

    Let me rephrase – if you have info about wealth of various mps, thats ok you can make that argument that the tories are richer.

    I’m making the argument that even if labour were rich, they can still attack tories for making policy to suit rich people yesterday.

  • Chris lancashire

    Neither Gillebc, it makes absolutely no difference, as most Budgets over the years have done.
    Low interest rates, on the other hand, have been a great help.

    Politicians, of all parties, way overestimate their power to affect the economy.

  • Gilliebc

    I thought that might be the case Chris.

    As for your last sentence, I completely agree.
    Thank you for your response.

  • Ehtch

    OOPS! edit – May 2010 election, of course.

    Interesting bit on netiquette on This Week tonight by Dave Gorman, with yourself on it Alastair. I know myself I cross the line at times, but only with my, ahem!, use of certain part of the anglo-saxon language. Welsh are well known for their bizarre swearing – they sware words stringed together in a peculiar fashion. Geordies too, you wouldn’t know if they were swearing or not at times. Glasgie too.

    I think with all this new communication will make “swear words”, as described, extinct soon. But I am not saying the local Vicar will start using those words.

  • Chris lancashire

    I think you are venturing into very dangerous ground if you want all MPs to declare their tax returns.
    Returning to your main point, yes quite right, the Coalition did reduce this pernicious and divisive tax quite clearly. What gets me is the sheer hypocrisy of politicians – in this case Mr Miliband; here is a man demanding to know his opponents tax affairs whilst allegedly happily taking part in a (legal) IHT avoidance scheme on the family home.

  • Richard

    The ferocity of the argument about plus/minus £100 million or £3 billion re 45p tax rate suits all the politicians down to the ground. The fact is that with £1 trillion debt, and £40 billion a year interest, with the debt rising by £120 billion this year we are all p****** into the wind. If, next year, the economy were to grow by 2.5%, as GO predicts, and the rate of tax take remains constant, tax take would increase by £17.5 billion, against £40 billiondebt  interest.

    The fact is that if the public actually understood the facts they would realise we are SKINT. Whilst we all argue over the loose change represented in the budget tax proposals politicians can get on and enjoy their power and musical chairs in Westminister.

    The treatment of pensioners is lamentable. Majoring on the generosity of 5% pension increase, and failing to admit that the only reason for this “record” increase was because it was linked to inflation which was 5% last Autumn, the trigger date.

    Austerity may be the answer, but we are on a razor’s edge. Borrowing more is not the answer, if it is to keep spending at current levels. The fact is if the world economy does not pick up and we sell more abroad, we are  bound hand and foot and must implement policy to suit the markets. Any sign of weakness and our borrowing costs could soar and engulf us.

    The first party to explain fully the dire situation to the public will sink without trace. A government of national unity is required, and people will have to understand that living standards will have to reduce to the levels of the sixties, debt paid off with low inflation necessary throughout. In the past rampant inflation has been used to devalue the £ and pay off debt. This is no longer an option, as once again the markets are running the show.

  • Richard

    Nurse, Ehtch hasn’t taken his medicine again!

    Such eloquence!

  • Anonymous

    Defending Ed Miliband is not my natural territory but I saw him grilled by Andrew Neil on this (the best griller imo) and I don’t think there was anything untoward about Ed’s IHT on family home.

    Again, even if Ed was worth 40 billion he can still level that accusation at tories because he is not the one asking for lower rates for billionaires.

    Warren Buffet on the other hand…

  • Ehtch

    Well? It’s the truth, isn’t it? You’re not telling me it isn’t? The harsh truth always hits that certain nerve when eloquently put by the man on the street.