George osborne

Friday

Peter Hoskin

More demands on George Osborne

Is the defence budget the most chaotic in all Whitehall? George Osborne said as much last October — and he's still dealing with its hellish intricacies now. The main problem, as so often in military matters, is one of overcommitment. Thanks to various accounting ruses on Labour's part, large parts of the MoD's costs were hidden in the long grass of the future. It was buy now, pay later — with Brown doing the buying bit, and the coalition doing the paying. The number that William Hague put on it last year was £38 billion. The MoD was spending £38 billion more, over this decade, than had been budgeted. Even after the cuts, elements of that overspend were likely to remain. Which is why this story from today's Telegraph is worth reading in full.

Thursday

Peter Hoskin

Osborne’s credit card fraud

Well, David Cameron is doing his part to boost the Spanish economy — by EasyJetting to the country with SamCam to celebrate her 40th Birthday. But what about Spain's peninsular cousins, the Portuguese? They were, more or less, the subject of George Osborne's speech to the British Chambers of Commerce conference earlier — but not how they might have hoped. The chancellor didn't dwell on the prospect of British help for their stricken economy, but he did cite Portugal as a kind of worst case scenario. "Today of all days we can see the risks that would face Britain," he said, "if we were not dealing with our debts and paying off our national credit card." Ed Balls has since struck out against Osborne's argument, describing  it as "scaremongering".

Wednesday

Peter Hoskin

Winners and losers | 6 April 2011

The birds chirruping in the sunlight clearly didn't get Ed Balls's memo. Otherwise they'd know that today is "Black Wednesday," the day when the coalition's tax and benefit policies swoop in to leave the average household some £200 a year worse off. This is the message that the shadow chancellor is broadcasting this morning, be it on Radio 4 or in a post for Labour Uncut. His claim is that the coalition is — by going "too far, too fast" on the deficit — merely squeezing the "squeezed middle" even more. Only that's not quite the full picture. The Treasury, for one, is pointing out that today's measures will actually leave 80 per cent of households better off. So who's got it right?

Tuesday

James Forsyth

Budget lessons from across the pond for America

In Washington, a budget shutdown is becoming an increasing possibility. The Republican controlled House of Representatives wants deeper cuts than the White House will accept. This has led a growing bi-partisan group of Senators to try and revive the work of the blue-ribbon commission on Fiscal Reform and Responsibility that produced its report late last year. Interestingly, the commission’s proposals are very similar to George Osborne’s plan. UK Treasury analysis shows that the Osborne plan calls for an average tightening of 1.6 percent a year from 2009-10 to 2015-16  while the commission suggests 1.4 percent a year from 2010 t0 2015. The composition is also similar, both work on roughly three quarters spending cuts and one quarter tax rises.

Peter Hoskin

Memo to Johann Hari: this government isn’t planning to “pay off our debt rapidly”

What is the biggest lie in British politics? According to a new post by Johann Hari, it's that our debt is at dangerously high levels. "As a proportion of GDP," he writes, "Britain's national debt has been higher than it is now for 200 of the past 250 years." He makes some pugnacious points that will have you nodding enthusiastically, or groaning wearily, depending on your political persuasion. But he also undermines his argument right from the off, in his description of the Big Lie itself. Here it is: "Here’s the lie. We are in a debt crisis. Our national debt is dangerously and historically high. We are being threatened by the international bond markets. The way out is to pay off our debt rapidly.

Saturday

David Blackburn

Lawson: don’t do it George

Lord Lawson has given George Osborne’s Budget an A-minus. Writing in today’s Times (£), the former chancellor said that his successor ‘got the big questions right’ by sticking to deficit reduction and assisting hard-pressed taxpayers where he could. The only blemish was the carbon price floor for the energy sector, which Lawson describes as ‘nothing less than an anti-growth strategy’.  Also, Lawson warns Osborne against uniting income tax and national insurance. Unsurprisingly, Mrs Thatcher’s great reforming chancellor looked into this measure and is convinced that it is a non-starter. ‘This superficially attractive reform, which is by no means a new idea, was known in the Treasury in my time as NICIT.

David Blackburn

Marching with no alternative

Thousands have converged on London today, to march against the monolithic evil of 'cuts'. They have not stated an alternative, a fact that led Phil Collins to write an eloquently savage critique in yesterday's Times (£). That the protesters are incoherent beyond blanket opposition to the government is not really an issue: as this morning's lead article in the Guardian argues, the Hyde Park rioters of 1866 weren't brandishing drafts of the Second Reform Bill. But it's intriguing that Ed Miliband has decided to address this rally, thereby endorsing it. The Labour party hierarchy recognises that it is taking an enormous and perhaps totally unnecessary risk. First, Ed Miliband's oratory is not in the same league as that of Michael Foot, Jim Callaghan and Harold Wilson.

Thursday

Matt Oakley

Please sir, can we have some more?

There were few surprises in yesterday’s Budget. As expected, it focused on growth and the majority of the policies announced had been heavily trailed in the weekend newspapers. The fiscal picture did not change much. Potential over-optimism from the Office for Budget Responsibility on inflation and the output gap aside, the Chancellor is still on course to eliminate the deficit by the end of this Parliament.   This is very good news. The biggest danger during a fiscal consolidation programme is that governments water down their proposals due to political opposition or economic difficulties. In a 2009 report, Controlling Spending and Government Deficits, Policy Exchange argued that the preferred ratio of spending cuts to tax increases is around 80:20.

Peter Hoskin

Will the government break its health spending pledge?

Let's make one thing clear right from the off: the IFS did not just say that the government would break its pledge to increase health spending in real terms. What it did say is that the government is coming close to breaking it — and that's the truth. Here's the graph that we've put together to compare the real terms health spending figures in last October's Spending Review (the green line, calculated using last November's inflation figures) with those in yesterday's Budget (the red line, calculated using yesterday's inflation figures):   Hang on. Doesn't that show health spending going down in real terms, after this fiscal year? Well, yeah, kinda. But the IFS was reluctant to describe this as a definite "real terms cut," and for three main reasons.

Matthew Sinclair

Merging Income Tax and National Insurance Contributions – Simples?

“I am announcing today that the Government will consult on merging the operation of National Insurance and Income Tax.” The word ‘consultation’ in the Budget drew the longest, loudest sigh from me. Some commentators had hinted that Osborne was considering merging Income Tax and National Insurance Contributions (NICs), which would be a fantastic move towards simplifying our tax system.  Of all the pre-Budget leaks, this was one that sounded truly exciting and innovative.  But, alas, this idea is only in infancy and all that was promised was a consultation.  Of course, the Chancellor can’t rush into this. He has to get this right if it goes ahead, so a consultation is probably prudent.

Peter Hoskin

Laws gives another signal on 50p

Usually, the task of David Laws Watch is to judge just how close the former minister is to a return to government. But, today, his article for the FT is worth highlighting for a different reason altogether. Referencing George Osborne's signals on the 50p rate in the Budget speech, Laws has this to say (my emphasis): "The chancellor also signalled that excessive marginal rates of income tax – of 50 per cent, even 60 per cent – are on their way out. The Treasury believes that the majority of expected revenue from the current top rate is lost in avoidance. But the government is rightly cautious about the timing of the removal of these high rates: this cannot be our highest priority when those on low incomes are facing a real squeeze.

Fraser Nelson

Osborne gets his man

So Martin Sorrell is set to move WPP back to Britain. This was always part of Osborne's Budget plan, as I revealed in my News of the World column and also mentioned on Coffee House. As I said in the newspaper: "The Chancellor has been on bended knee, pursuing Sorrell with energy that would make Berlusconi blush. 'What do we need to do?' he asks. Sorrell’s answer is to cut the tax on overseas profits. So Osborne will, hoping to lure back companies who generate most of their cash abroad." Today, Sorrell will announce that he'll come back from Ireland if the Budget is made law. Of course it will be made law, governments collapse if they can't have their budget passed. So he'll redomicile, as will (perhaps) other multinationals.

James Forsyth

Another Eurozone country bailout looms

The front pages of tomorrow’s papers are a mixed bag for George Osborne. He’ll be happy with The Sun’s welcome for his abolition of the fuel escalator but, I suspect, a tad disappointed by the Mail’s warning that there are ‘Shocks under the bonnet’ in the Budget. Among the other papers, The Express is very keen—‘Budget gives us all hope—but The Mirror is predictably hostile. There’s one other story moving tonight which has Budget relevance, the resignation of the Portuguese PM (pictured left) after losing a parliamentary vote on an austerity package. This makes it highly likely that Portugal will become the third Eurozone country to seek a bailout.

Wednesday

James Forsyth

Osborne’s 50p question

If I was a betting man, I’d fancy wagering that if the economy is growing at a decent clip again by next year’s Budget, Osborne will abolish the 50p rate then. His announcement of a review of how much revenue it actually brings in, strikes me as a move to pave the way for its abolition. This review is, if it is using dynamic models, likely to conclude that the rate is bringing in no, or minimal, revenue and that a lower rate would produce more. This would give Osborne the political cover to reduce the rate. But, as with so much else, this is dependent on growth returning to the economy.  Osborne won’t want to get rid of the 50p rate until he can do some other things such as unfreezing public sector pay.

Tom Clougherty

On the whole, a qualified positive

To be sure, there was some good stuff in the budget, and I probably feel more positive about it than I expected to. The additional 1 percent cut in corporation tax, above and beyond what had already been announced, was perhaps the high point, although it will be the 1p cut in fuel duty (replacing a planned 5p rise) that draws the most favourable headlines. The rise in the personal allowance, meanwhile, is something the Adam Smith Institute has advocated for a (very) long time. Still, there were, as always, downsides. The goal to make UK corporation tax the most competitive in the G7 is a laudable one, and the Chancellor should be saluted for it. But as welcome as the corporation tax cuts are, they are only one part of the picture.

Mark Littlewood

Osborne made a start on deregulation, but there’s a long way to go

This was always going to be a rather modest budget. Having set out the Comprehensive Spending Review last year, the government had already decided its broad plan; we were never going to see much more than some minor tinkering. Nevertheless, as a budget billed as a serious driver for growth, it is a disappointment. George Osborne seems to have a reasonable understanding of the problems that need tackling, but he seems shy of solutions. Concerned about the regulatory burden on business and enterprise, the Chancellor announced that he would reduce the cost of compliance by £350m. But, even on his own figures, this is a tiny slice of the £90bn overall cost to companies. Cutting red tape by 0.

James Plunkett

Osborne the Reformer is an unfinished work

One interesting aspect of today’s Budget is the government’s change of tack on personal allowances. Back in June 2010, when the Chancellor committed to raise allowances from £6,475 to £7,475, he chose to cancel out the gains for higher rate taxpayers by lowering the level at which the 40p tax rate kicks in. The idea was to focus the gains of the policy on basic rate taxpayers, making things a little more efficient. The 40p threshold will therefore be lowered from April this year from £43,875 to £42,475 with the result that 700,000 people will become higher rate taxpayers. Needless to say, that’s proved unpopular, and so this time around the higher rate threshold won’t be reduced.

Patrick Nolan

Giving up before the race has begun?

How will history judge George Osborne’s second Budget? Once the headline writers have moved on to the next story and the longer-term consequences of the measures become apparent, will this budget be seen as doing the right thing? Unfortunately the answer is, at best, “not really.”   By sticking to the target of eliminating the structural deficit in this parliament, George Osborne got the big call right. As Andrew Haldenby has written, “It’s always easier to set a target at first but as people get tired of austerity there is a real temptation to stop before the job is done.

Peter Hoskin

The big question: has Osborne done enough to deal with inflation?

"We understand how difficult it is for so many people across our country right now." If you weren't sure which direction George Osborne's Budget was going to head in, then he clarified it right from the start of his speech. This was one to tackle the rising cost of living. And much of it — such as the raise in the personal allowance and the fuel duty cut — was welcome. But there is a nagging question hovering above Osborne's announcement today: has he done enough? The Chancellor will certainly hope so. After all, by scrapping the fuel duty escalator he has effectively encoded a tax cut into all of his Budgets from now on.

James Forsyth

Osborne pulls it off

George Osborne beat the expectations game today. His abolition of the fuel duty escalator for this parliament should — Elizabeth Taylor and Libya permitting — get him the front pages he wants.   Aside from the headline measures, I think there are three stories that will run on from this Budget. First, the government is accepting the Hutton report’s recommendations on public sector pensions in full. This puts the ball firmly back in the unions court, who had previously accused the government of trying to cherry pick from it. Second, the requirement that all planning decisions will have to be reached within one year will have a big impact. A huge number of projects get held up in the planning system for years, so this is a welcome move.