You couldn’t exactly call it an atmosphere of hushed expectancy when the Chancellor got to his feet this afternoon. Riotous assembly would be closer to an accurate description. But then, everybody was expecting
“A very big budget” was what Treasury insiders had tipped the BBC’s experts to expect. And a very big climbdown from his previous hubris was what the opposition benches were slavering for, as they waited to see how Mr Osborne would deal with the embarrassing fact that he’s only nailed down about £1 billion of the famed £12 billion of welfare cuts that he’d announced in the spring budget.
But whatever it was that was coming, the papers were all agreed that it was going to be hideous. The crushing boot of the newly-triumphant administration, trampling through all the pre-electoral vaguenesses of the election run-up, now that the hard-liners had unfettered control of the reins for the next five years, and tough cheese if you didn’t like it.
Except that somehow it didn’t work out like that.
If the Chancellor was nervous about facing the howling wolves, it showed only in his weirdly strangulated voice. If he was embarrassed at having to scale back his forecasts for next year’s growth to 2.3% (from an upward-revised 3% in 2014), it didn’t seem to show either. And if he was obliged to concede that all those people who’d said his £12 billion welfare cut was unachievable? Well, he managed to prove them right by dressing up his decision to stagger the cuts over three years (£8 billion in one lump and £4 billion in a later tranche) as “listening to the people” and “committing the government to sensible policies that wouldn’t endanger the recovery”
Or some such weasel wording. The fact that economic growth was stalling, and that that was pretty much what the IMF had said would happen, appeared to have put the brakes onto his normal gung-ho, just a little bit. There can’t have been many people who would have disagreed that staggering the welfare cut was a pragmatic and sensible thing to do. Okay, so it wasn’t the platform that the government had been elected on, but who cared now?
Tax and IHT
The headline news, of course, will be that personal tax-free thresholds are to rise to £11,000 next, with the higher rate starting at a pretty generous £43,000. The result, he said, was that 29 million people will pay less tax. That’s always a good start.
Then there was the confirmation that the inheritance tax threshold is to rise from £650,000 (for the surviving partner of a relationship) to £1 million, thanks to the addition of another £350,000 which will be allowable in respect of property only.
It may still look to the Daily Mail tomorrow as if that’s a £1 million IHT loophole for property, but trust us, it isn’t. (In fact it raises the rather weird prospect of oldies with no houses selling up all their property to buy a million pound house, just so that they can make use of the extended allowance. Did anyone think of that possibility?)
And a cut in corporation tax to 19% in 2017 and 18% in 2020.
Who would be carrying the can for the tax giveaway? Mainly wealthier pension savers, it seemed, and the owners of £2 million houses that wouldn’t qualify – and tax-dodgers, who are get a new squadron of HMRC chasers on their heels – and buy-to-let landlords, who won’t be eligible for higher-rate tax relief in future.
And, of course, the non-doms. A new provision means that people who’ve lived in the UK for 15 of the last 20 years will have to pay pretty much the same taxes as everybody else, and won’t be able to shelter their London penthouses under offshore tax arrangements.
Get Your Calculators Out
At least, I think that was what the Chancellor said. I suspect that it won’t be until tomorrow that anybody will really know what his calculations actually were. They didn’t look to me like a massive shift in the fiscal balance of this country, but let’s see how well it all works out.
What’s definitely clear is that the fiscal plan involves £37 billion of further consolidation during the life of this parliament – and that the Chancellor plans to put up something called a “fiscal charter” to the House of Commons this autumn.
Also that the budget borrowing forecast is set to fall from £69.5 bn in 1015/15 to £6.4 bn in 2018/19 (so goodbye to fiscal balance in 2018) – then into a £10 billion surplus in 2019/2000
There was also some fairly indecipherable muttering about flexibility ion the pensions sphere, which appeared to suggest that a hybrid pension/ISA product might be in the offing, but it hasn’t been discussed yet.
Also that the bank levy rate is to be reduced over the next six years – and that an 8% surcharge on bank profits will replace it.
Transport and Industry
And that the transport infrastructure, which the Chancellor admitted is pretty terrible, is to be transformed by the reintroduction of VED on new cars sold after next year. It’s really a bit of a bother that so many are now clean enough to pay no VED at all, dammit, and something will need to be done about that.
And that, despite lots more guff about the Northern Powerhouse, there didn’t actually appear to be any significant new projects on the table. Although large companies will now face a levy which they can only nullify by taking on new apprentices. (Not a bad idea at all, actually.)
Return to the National Living Wage
And so to the big one. Farewell minimum wage, and welcome to the National Minimum Wage (trade mark), which will pay (tadaaaaa!) £9 an hour to anyone over 25 in five years’ time. The slightly less front-page-worthy reality is that it will start next April at a rather more modest £7.20 per hour.
Hmmm, looks like a cheap publicity shot, that one. But as we’ve said, it won’t become crystal clear until tomorrow when the nation’s number crunchers have had a chance to go over it in detail and work out who’s paying how much, for how long and to whom. Good luck, chaps.