So the budget is out after all the speculation. Looking at different newspaper headlines on wednesday morning was interesting - some of the more right wing papers saw Osborne as the Messiah come again, sorting out the economy by getting tough on scroungers. The less vitriolic elements of the press seemed slightly confused. Some saw the poor as being hardest hit, other the rich, whilst still other saw it as an attack on the middle classes. There has also been a lot of debate around whether its a progressive or a regressive budget - I find this whole line of debate rather off the point and unhelpful. I would say currently that all the main parties are neither really progressive or regressive, but somewhere in the middle and overwhelming pragmatic more than anything else.
There was a certain element of poltical one-upmanship to it - Labour had budgetted to halve the deficit by 2014, Osborne goes for eliminating it. He almost certainly won't manage that, but he will, if his strategies work, exceed Labour's target. Many on the left had feared the conservatives using the current financial crisis as an excuse to bring in radical changes on ideological grounds. I don't see that in this budget at the moment. It seems far more pragmatically political than ideological.
A personal view
For me, personally, the net result will be not much change financially. I gain £200 from the raised tax threshold, lose £75 in increased NI contribution (Labour's policy, but not changed here) and the difference will probably be within £50 of the extra VAT I will be paying. The public sector pay freeze, if adopted in Scotland, will affect me, but was to be expected and to have to wait to see what happens to my public sector pension. Reform of the system is certainly needed, but I will wait to see how they go about it. As I will probably have to work to 70 or 75 before I can claim it, by which time the stress might well have driven me to an early grave, I can't say its my over-riding concern.
Views on the Budget
Taxes - I would wholeheartedly support the increase in capital gains tax and the raising of the tax threshold ( two concrete things in the budget from the Lib-Dem side of the coalition). On reflection, I think the increase in VAT is also something I'd be broadly in favour of. Our economy has been too driven by (at times rampant) consumer spending which is both economically and environmentally unsustainable. Taxing spending rather than income seems to be one way to start to re-dress this and maybe it will encourage people to re-use, recycle and repair more. The freeze on council tax is less positive for me. I don't think its achieved much in Scotland except further strain already stretched local government budgets. The amount of extra money it gives people is really not that siognificant. In other words, the move is little more than a populist gimmick.
Cuts - the full impact of the cuts will not really be seen until the Spending Review in the autumn, but as far as the changes to the welfare system go, the changes in the child benefit/tax credit system go - they do seem to be cutting payments wealthier parents who don't need it whilst providing more to those who do need it. I haven't seen any hard figures for what the net result would be for a poorer lone parent, for example, but it seems fair.
My main concern with the budget is the proposed changes to housing benefit - the proposed cap levels would make it impossible for many people to stay in private housing in many areas, whilst the social housing sector is already overloaded and run down in many places following two decades of underinvestment. Further cuts in housing benefit for those on Job seekers allowance for more than 12 months seem unnecessarily punitive and built on the naive assumption that there will be jobs available (which is in itself, dependant on many other factors). There is certainly a trand of thinking amongst the Tory front benches that people should be more willing to move areas to find work, but this seems rather destructive to ideas of family and community and social cohesion. This is the one area of the budget that I have the most problem with.
Business - Again, the decisions here seem more broadly sensible to me - the bank levy could maybe have been slightly higher, but the encouragements to small businesses in certain regions are welcome.
Pensions - and again, the moves to protect pensioners seem reasonable.
Overall - a cracker of a budget?
So, overall its not as bad as it might have been. Its reasonably fair, but could have been much better. The housing issues are going to be one to watch I fear and my own feeling is that the cuts maybe go further than is needed and this might have a detrimental effect on employment, the economy and therefore ultimately hinder cutting the deficit.
The very rich will probably come out best - they always do, they've not been hit as hard as they could affiord and probably have the resources to find loopholes anyway. The very poorest will also be the ones to suffer most through cuts in benefits and services and will be the most affectec by the VAT rise. The middle I think will be squeezed, so those at the top of the poor and bottom of the middle will be brought closer to those above them by the raised tax threshold and those at the top of the middle will be brought down towards those just below them by the increase in CGT, etc... So the shape of the budget is a christmas cracker - those on either end of the scale pulling or dropping away from a squashed together middle.
2 comments:
Although I broadly agree with you, I completely disagree about two things.
Firstly I think that the Housing Benefit caps are entirely realistic - £200 a week for a one bed flat is far more than needed almost anywhere as is £400 a week for a 4 bed.
Secondly I disagree about the very poor being hardest hit by VAT. VAT is not charged on most of the essentials of life and as the very poor spend a far larger percentage of their income on food than other sectors of the population then I think the rise affects them less - only fuel and adult clothing are really affected.
The grey area is the effect of the public sector cuts. My hope is that the new government will sweep away many of the useless and counter productive target systems and redundant paper exercises which will result in far less wasted time for most services and therefore less reduction in quality.
With regard to the Housing caps. In Edinburgh (which is towards the top end, but nowhere near London prices) if you were paying rent weekly, £400 would be below average for a 4 bedroom property. It would be about average for a monthly rent. But as I said, there are places in the country which are far more expensive.
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