The Chancellor presented his Budget today under considerably more stormy skies than he might have expected, and certainly more than he would have wished. A series of worrying economic indicators have emerged since the Autumn Statement, which have led to whispers of further cuts and dark days to come for Osborne and the Government. With customary aplomb he took on his critics and gave us some big-ticket announcements to boot, here are the five things we learnt.
The Osborne Legacy
George Osborne’s budgets are a masterpiece in political theatre. It’s easy to get caught up in the dodgy growth revisions, the promise of a miraculous surplus by 2020 or the hastily arranged £3.5bn of non-allocated spending cuts, but to do so misses the true purpose of the Chancellor’s bi-annual announcements to Parliament. They are all about brand Osborne and broadening his appeal as the One Nation Conservative whose aim is not only to finish the Labour Party electorally, but to end the very need for its existence. Whether it was through the creation of a tax-free Government incentive for saving (what was otherwise known as a pension, we may in years to come only know as the Lifetime ISA), the persistent freezes on excise duties, the incentives for small business, the carrot-and-stick approach to corporate taxes for multinationals or the ‘tax a bad thing to pay for a good thing’ (sugar tax to pay for kids playing sport) approach – this Budget was a classic of the Osborne genre. It was another step on the road to marking Osborne out as the definitive centre-ground politician of our post-Blair age – a man who both dislikes the idea of the ‘big state’ but embraces it with both arms. With its emphasis on the key planks of the Osborne Manifesto (Northern Powerhouse, Devolution, Tax Avoidance) it was more than what commentators frequently view as the Osborne pitch for the Tory leadership – this was all about the Chancellor’s legacy.
Despite the rather lukewarm (or even significantly negative) sentiment towards directly-elected Mayors and other similar measures, this Budget saw the Chancellor continue to bulldoze the idea of further local devolution into the lives of an ambivalent public, with the East of England now signing up to the project, along with further city deals for Scotland and Wales. However, the devolution agenda for Osborne has always had more to it than just gifting away power – it is the chance to cement the Tories electoral chances in that jurisdiction. The South West – where the collapse of the Lib Dems opened the door to a Tory majority – received particular rewards this time around. Reduced tolls on the Severn Bridge, a ‘science and innovation audit’, increased funds for ultrafast broadband (and 5G!), parish refurbishments and separately funded local budgets all acted as an added incentive to keep those in the South West and rural Wales crossing the blue box. Ever the strategist, Osborne also seized his opportunity to make some targeted strikes in Scotland and London ahead of May’s elections, name-checking both Ruth Davidson and Zac Goldsmith as driving forces behind his spending decisions, both of whom are looking to defeat the Labour Party – a sport in which the Chancellor revels.
Cuts? What cuts?
Despite his sunny introduction and emphasis on the relative positives of Britain’s situation vis-à-vis other states, it can’t be denied that the outlook has darkened considerably since the Autumn Statement. It was because of this that one of the most-discussed elements of this Budget was the likelihood that Osborne would be forced to announce further cuts to public spending. It turns out the commentariat broke their losing streak with a correct prediction, but you wouldn’t have known it from the speech given. Only careful listeners will have picked up on the announcement of an additional £3.5 billion in cuts to public spending, which were inconspicuous next to other big-ticket announcements. This cut is to be found through a departmental efficiency review which will identify Government Fat which has apparently somehow survived two successive Spending Reviews, although protected budgets remain that way. You can almost hear the knives sharpening on Whitehall.
Talking about young generations
The Chancellor has a track record for financing repeated giveaways for pensioners and businesses, but there has been a perception that has often been on the backs of younger generations, who have suffered from, in real terms, negative interest rates on their non-existent savings for the best part of a decade – at the expense of those whose asset values have sky-rocketed. Today, he sought to address his younger critics, some of whom may have felt that previous Budgets were ‘trying to put them down’. His announcement of the ‘Lifetime ISA’ will be a boon to younger savers, and was specifically designed to avoid the conflict between the need to save for a pension or a deposit – otherwise known as the Millenial Dilemma. He also caused something of a ‘big sensation’ with his announcement of a tax on sugary drinks, which is aimed at keeping children fit and healthy, at the same time as continuing Michael Gove’s Blairite education reform agenda by promising to make all primary and secondary schools academies. The latter of these measures will impact children rather than millennials, but it was clear that today the dial was clearly shifted towards the young.
Small is beautiful
With the same hand that sought to recoup some of the tax lost from big corporates, Osborne also set out a series of measures aimed specifically at businesses at the other end of the spectrum. A further cut to corporation tax (down from 17% following last year’s decrease to 18%), cuts to business rates and the continuation of rate relief for small businesses will all find a warm reception with the small business lobby. We also saw a common sense extension of stamp duty reforms to the commercial sector, which should give firms in the market looking to make investments some breathing room. This Budget was arguably Osborne’s clearest articulation of his message to business to-date – pay your way and you will be rewarded. However, he will find little forgiveness with small businesses if gambles on growth and the deficit fail to deliver, and they find themselves suffering as the result of a downturn.