The big story of the Budget was a difficult one – the Chancellor was going to be forced to admit that he had missed one of his golden fiscal rules, to have debt declining as a percentage of GDP. Since the Government called off the sale of Lloyds Bank shares earlier this year due to the global economic downturn, the failure to meet this key economic indicator looked set to dominate the headlines for the Spring Budget.
So the ever versatile Mr Osborne decided to throw in some other red meat in order to turn the heads of the headline writers – with what appears to have been some success. A controversial sugar tax will be introduced on fizzy drinks in 2018 and the proceeds spent on more school sport. Some on his own side won’t like the meddling, but the public health lobby will love it and he can rely on Labour support.
Then there was some popular adjustments to personal finances too – personal allowances for both lower and higher rate taxpayers increase significantly next year, capital gains tax is being cut to 20% and ISAs made more generous for both young and old, particularly the so-called ‘generation rent’ who will be given extra help to save for a pension as well as a house.
There was also some welcome announcements for the nations with help for the Scottish petroleum industry, a halving of the tolls on the Severn Bridge in Wales and a new air ambulance service for Northern Ireland and help for the regions, with more road and rail schemes announced across the country.
Critical too was the fact that he was careful not to cause any upset that could influence the Europe Referendum – hence pension reform was shelved, fuel duty increases stopped and a major shift in businesses taxes heralded to help small businesses (the people more likely to be voting ‘Leave’) while taking a swipe at the reliefs that enable bigger businesses to avoid UK tax. The fiscal transfer involves large sums, of the £9 billion taken from the big companies £7 billion will be returned to the smaller ones, more often corner shops, in the form of exclusion from business rates and other measures.
Indeed, the only group likely to be grumpy directly as a result of this Budget are people who can’t vote – the under 18s who will now be forced to continue to study maths until they finish school.
The surprise elements of the Budget will definitely have enhanced the Chancellor’s credentials as a successor to Mr Cameron – a project that has appeared somewhat rocky of late. The speech by the leader of the Opposition, Jeremy Corbyn, was centered on the proposition “this Budget as unfairness at its very core – paid by those who can’t afford it”. A broad swipe with the more detailed briefing from Labour highlighting the impact of the Budget on the disabled and “women’s” pockets. Despite claiming that Britain’s economic recovery was ‘built on sand’ and that the Budget represented ‘six years of failure’, after the Chancellor failed to balance the books as promised, the Labour leader’s response did not represent a forensic assessment of the nation’s finances that would have enabled him to capitalise on Mr Osborne’s weakness.
With the Europe Referendum still casting a shadow over the long term prospects for Messrs Cameron and Osborne, the Chancellor did risk the potential ire of some of his Tory colleagues by, once again, flagging up the risks of Brexit to the UK economy. But he will have pleased them by making clear that he was still set to meet his other golden rule – a healthy budget surplus in 2020 – and just, incidentally, the year in which his colleagues and whoever is Prime Minister by then, will face a general election.