George Osborne’s Budget was his attempt to balance his fiscal conservatism against Robert Halfon’s call for the Tories to remodel themselves as ‘The Worker’s Party’. Working class leisure – from beer to bingo – was treated to tax reductions that are as much symbolic as they are significant in terms of pounds in pockets. And the big ‘rabbit in the hat’ policies – relief for low-income savers and for pensioners -were all about rewarding those ‘hardworking families’ we’ve all heard so much about. Osborne promised a Budget for ‘makers, doers and savers’. By (unusually in modern times) managing to keep key items for all those groups a secret until he stood up in the House Osborne will be rewarded for having achieved big wins on all three fronts. Expect very favourable headlines from the Tory press tomorrow.
The Liberal Democrats were bought off and persuaded not to ruin Osborne’s moment by Nick Clegg being given the chance to badge childcare reform as his own. They are also aware that – as the election looms – yellow on blue violence is best used strategically. Undermining the shared glory of a recovering economy would be very foolish. It is also worth noting that both Cameron and Osborne ‘love-bombed’ the Lib Dems today. Cameron’s advice to voters, during PMQs, to ‘vote for the parties on this side of the house’ will have gone down poorly with Tory backbenchers in yellow-blue marginals but very well with Lib Dem high command. Likewise the effort made by the Chancellor to credit Danny Alexander throughout his Budget speech.
Essentially the Budget targeted categories of people with small but significant changes. The ‘cook’ gets yet another lift in the threshold at which he has to pay income tax, money off his leisure activities and help to save for his future. The thief gets loopholes closed on an array of taxes – meaning he can no longer avoid stamp duty, corporation tax and/or income tax in the way he used to. His wife gets up to £2000 tax free childcare so that she can go out to work. And her lover? Well even the best allegories let themselves down eventually. Small but impactful was the theme here. A sober Budget that doesn’t create the impression that we’re back to boom but cultivates the feeling that the worst of bust is behind us.
The Labour Party was complaining today that they didn’t get the embargoed, pre-speech Budget in time to work up a full response. It told in Ed Miliband’s rebuttal to the Chancellor – in which he talked vaguely about the cost of living, Eton and what may or may not be in the budgets of an imagined post-2015 Tory-only Government. He didn’t talk about whether there was anything in the Budget itself with which he either agreed or disagreed. He didn’t even mention the flagship measures around pensions and savings. It was a simple ‘Same Old Tories’ attack that lacked detailed analysis. His backbenches were not enthused.
Ed Balls has been quiet – his team is spending the day frantically looking for errors, mistakes and hidden traps. But we can expect him to sound a note of caution on the impact of freeing pensioners from compulsory annuities. This will be popular with older people and those approaching retirement (all that is left of a ‘core Conservative vote’) but may create a timebomb – if people are able to spend significant chunks of their pot as they choose, how long before profligate pensioners are demanding bigger state pension?
One indication of just how penned in the Labour Treasury team is by Osborne’s maneuvering is their distinctly odd policy on the welfare cap – which they announced today. They claim to support the cap but not the components of the policy that actually control spending – such as the so-called ‘bedroom tax’. How they will guarantee an upper limit on welfare spend is therefore open to question – expect small but significant problems such as this to dog Labour in the run-up to 2015, with the hope of undermining their economic credibility.
UKIP have not offered much in the way of a coherent response. The economy is not their forte and many of their members have spent the day worrying that the new pound coin looks suspiciously like the Euro. But bingo, beer and pensions are UKIP territory – expect them to accuse the Tories of ‘stealing UKIP’s clothes’ when it suits and being ‘just like Labour’ when it doesn’t. The SNP won’t be happy either – Osborne downgraded predicted returns from North Sea oil, claiming that new forecasts mean an independent Scotland would have a £1000 shortfall per person in tax take, and offered a boon to the whisky trade by freezing tax rates.
George Osborne – not being in the position that he had hoped and unable to embark on a bonanza of spending to win support – has a dilemma. He wants credit for the economy beginning to grow. But he also wants British voters sufficiently frightened about the economy that they feel unable and unwilling to let Labour ‘mess it up again’. He has found an elegant set of phrasing to push this paradox – talking again and again about turning our recovery into ‘resilience’ in the economy. Expect more of this line in the run-up to the election. The key message is this – “The Labour Party are a one trick pony. They spend. We’re almost there, and things are getting better, but you need someone to carry on taking tough decisions. You know that we’ll do that. You might not like us for it, but you need us to do it.” Today Osborne delivered that message with a confidence that will reassure his and David Cameron’s backbenchers that there’s still hope.