All Budgets are political, but some are more political than others and George Osborne’s Budget speech yesterday was clearly looking ahead to the next General Election – with half an eye on the Scottish Referendum too.
With the economy growing faster than forecast, unemployment falling and business confidence growing, Britain may not be booming but the worst of a deep recession is clearly behind us and a confident Chancellor took the opportunity to reward the ‘makers, the doers and the savers’.
The Chancellor expressed particular sympathy for those with savings and pensioners, who he said had suffered most during the long recession – and many of whom, incidentally, would be natural Conservative voters.
The main points of the Budget were a new Pensioner Bond savings scheme offering up to 4% interest and a new single ISA with an annual tax-free savings limit of £15,000. Those ‘hard-working families’ so beloved of the politicians were supported too – the amount workers earn before income tax will go up by £500 to £10,500 and this comes on the back of extra funding for childcare support announced on Tuesday.
Other headline-grabbers include a 1p cut in beer duty with no increase on spirits or cider, and Bingo tax halved from 20% to 10%. Inevitably smokers will be asked to cough up more – cigarettes go up by 2% above inflation.
Predictably there has been a mixed reaction to the Budget statement.
Responding to Osborne’s statement, Labour leader Ed Miliband said the Budget ‘confirms people are worse off under the Tories. A worse off budget, from an out-of-touch Chancellor.’
Mr Miliband said: “The Chancellor spoke for nearly an hour. But he did not mention one central fact: the working people of Britain are worse off under the Tories.
“Living standards down: month after month, year after year.2011 – living standards down. 2012 – living standards down. 2013 – living standards down. And since the election working people’s living standards £1,600 a year – down.
You’re worse off under the Tories. Their 2010 manifesto promised: “An economy where…[people’s] standard of living…rises steadily and sustainably”. But they have delivered exactly the opposite. Standards of living not rising steadily and sustainably, but falling sharply and steeply.
And today the Chancellor simply reminded people of the gap between the Chancellor’s rhetoric and the reality of peoples’ lives. Living standards falling for 44 out of 45 months under this Prime Minister – unmatched since records began. No amount of smoke and mirrors today can hide it.
We already know the answer to the question millions of people will be asking in 2015: “Are they better off now than they were five years ago?” The answer is no. Worse off. Much worse off. Worse off under the Tories.”
Miliband said the Budget was the ‘same old Tory trick – a classic Tory con. Give with one hand and take far more away with another’. He went on: “The Chancellor painted a picture of the country today that millions of people simply will not recognise. Because this is Cameron’s Britain 2014: 350,000 people going to food banks, 400,000 disabled people paying the Bedroom Tax, 1 million more people paying 40p tax, 4.6 million families facing cuts to tax credits.
“But there is one group who are better off. Much better off. We all know who they are. The Chancellor’s chums. The Prime Minister’s friends. The Prime Minister rolls his eyes, he doesn’t want to talk about the millionaire’s tax cut. No mention of it in the Budget speech – the beneficiaries of this year’s millionaire’s tax cut.”
Scotland’s Finance Secretary John Swinney said the Chancellor’s Budget ‘fails to deliver for Scotland.’ and said that independence is the only way Scotland can properly create opportunities and secure the investment in public services and the economy Scotland needs.
Commenting on the Chancellor’s Budget, John Swinney said: “Scotland is a wealthy country and we can more than afford to be independent. In each of the last 33 years Scotland has paid more in tax per head than the UK and in the last five years Scotland would be £1600 per head better off than the UK – money that could have been invested in the economy, in public services and reducing debts.
“This was Westminster’s last chance to show it could create opportunity for Scotland and reject the diet of austerity. Once again Westminster has failed to deliver for Scotland. This budget confirms a further squeeze on public spending and a further austerity plan.
“The £63m added to the Scottish budget today is small beer compared to the significant cuts Scotland has faced since 2010. The Chancellor is planning a further £37 billion of cuts across the UK over the next two years and tens of billions to come afterwards. These cuts would be worse still if Scotland does not vote for independence and Westminster takes the knife to the Barnett formula.
“The reality is Westminster has presided over the weakest recovery in living memory, and since the downturn began the UK has had the weakest performance of any G7 country outside of Italy.
“UK public sector debt is now set to reach £1.5 trillion, its highest level in history, confirming that the Chancellor’s economic strategy has failed.
“Despite the Chancellor’s claims of improved economic performance by the end of next year, the UK economy is now expected to have grown by 5% less than he projected when he first came to office – forcing him to borrow an additional £190bn beyond his original forecast.”
The Finance Secretary continued: “While I welcome the Chancellor’s choice of whisky as his referendum tipple, sticking with the Westminster system will leave Scotland with a severe hangover. The changes on APD simply do not go far enough to solve the problems faced in Scotland and with independence we will reduce rates of APD by 50% with a view to abolishing them completely when conditions allow.
“Help for savers and pensioners is long overdue but with real incomes being squeezed very few families in Scotland will be able to take full advantage of what is on offer.
“And with the welfare cap set to include pensions credit and savings credit which currently offer real help to poorer pensioners and will continue in an independent Scotland the Chancellor’s claims to protect pensioners do not stack up.”
Commenting on the latest projections from the Office of Budget Responsibility and the Chancellor’s claims on North Sea oil, Mr Swinney added: “Westminster and those opposed to independence cannot simultaneously accept in full the Wood Report with its projections of higher production and at the same time cite the OBR forecasts of lower revenues from declining production.
“Increased investment in the North Sea will lead to increased production with a further 24 bn barrels of oil still to come from the North Sea.
“The Scottish Government has shown the progress that can be made in Scotland with the few powers we currently have. Figures today show Scotland is continuing to outperform the UK across all headline labour market indicators, with a lower unemployment rate, higher employment rate and lower economic inactivity rate. In addition, the latest surveys show business is both investing in Scotland and hiring in Scotland.
“In just under six months’ time voters in Scotland can choose to put all the decisions on taxation, spending and job-creation in the hands of the people of Scotland, not Westminster politicians, build on our success and escape from the poor decisions of Westminster governments we didn’t elect.”
Childcare charities have welcomed the extra support to working families, but they claim it has shown the Government has continued to fail to put children at the centre of spending decisions.
Dr Hilary Emery, chief executive of the National Children’s Bureau said: “Today’s Budget is not that of a Government aspiring to make our country the best for children to grow up in. While NCB welcomes commitments to assist families with the costs of childcare and to extend the pupil premium to early childhood services, we are concerned that the Government is again taking a piecemeal approach, failing to put children at the heart of spending decisions.
“For childcare to make a difference to the life chances of vulnerable children, it must be good quality. So, it is vital that the early years pupil premium raises the quality of childcare – increasing levels of staff qualifications, securing strong leadership and providing support for children with additional needs.”
The Child Poverty Action Group said: “We responded positively to announcements of increased investment in childcare cost support through Universal Credit. But we believe that overall the Budget has done too little to help families and will lock-in austerity cuts for the long-term.
“Shortly before the Budget, we published research that helps shed light on the likely consequences of the Chancellor’s new ‘welfare cap’, which will set a ceiling on support for families, single parents, disabled people and carers. It will affect social security, benefits and tax credits for those groups and will mean that any future governments will play of these groups needs against each other in a zero-sum game. We believe it will tie the hands of future governments, making it almost impossible for them to take direct measures to reduce child poverty as part of their child poverty strategy.
“We have also highlighted in our press statement how the cumulative effect of all the Coalition’s budgets is largely regressive. The poorest are the worst affected, whilst many people in the wealthier half of the population have actually been made better off as a net effect of all measures due to the size of tax cuts they have received relative to the impact of cuts on them.”
Scottish Secretary Alistair Carmichael argued that the Budget emphasises that Scotland’s economy is successful and stronger as part of the UK.
The Secretary of State for Scotland said: “The Budget means the consequences of our referendum decision are becoming clearer. Do we want to gamble our place in a UK that is working well for Scotland in return for a go-it-alone option with no UK Pound and falling oil revenues?
“We can decide to remain part of a strong United Kingdom. Scotland would be staying part of a fast growing UK economy. We would be sticking with a UK that is creating more jobs, increasing spending in Scotland and keeping our UK Pound in our pocket. A Scotland where we share opportunities and risk with all other parts of the UK.
“Or we could choose to walk away from the UK. We could stop sharing with the rest of the UK and gamble on a Scotland that goes it alone. This would be a Scotland without the UK Pound. A Scotland with volatile and falling oil revenues, with higher costs and with our big companies looking to leave. We would be turning the rest of the UK into our biggest competitor. We would be turning to 28 different EU governments for negotiations on Scotland’s future. The consequences are clearer. The decision is ours.”
The Trades Union Congress say that the Budget is ‘ a short-term Budget to shrink the state and help the rich’.
TUC General Secretary Frances O’Grady said: “This was a pre-election Budget, with its give-aways aimed at the better off rather than lifting the living standards of the many. It will be paid for by further years of austerity, public services brought to near collapse, public sector pay cuts and a welfare cap that bites into the safety net that any of us might need.
“There was nothing for the young who continue to face the worst job market in decades and unaffordable housing.
“Nor was there any relief for low and middle earners who, after years of falling living standards, have no spare cash to take advantage of the help for savers, and who now face year on year cuts in benefits for working families as the welfare cap bites.
“The best news for the long-term health of the economy is the genuine help for manufacturing, but it was the exception in this highly political short-term Budget that continued the Chancellor’s project to shrink the state and help the rich.”
However employers’ organisation the CBI gave the Budget the ‘thumbs-up’. CBI’s Chief Policy Director Katja Hall said: “The Budget will put wind in the sails of business investment, especially for manufacturers. This was a make or break budget coming at a critical time in the recovery and the Chancellor has focussed his firepower on areas that have the potential to lock in growth.
“It’s encouraging to see higher than expected growth in the short-term, but as the Chancellor recognised, tough challenges remain ahead, so it’s right that the Budget reflected the fiscal reality. The economy needs to rebalance and this Budget will help businesses hungry to invest and export.”