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What does the budget mean?

Posted by
23 Mar 2015
George Osbourne seized last week’s budget as an opportunity to demonstrate the success of the current government’s promise to resurrect the economy on coming in to power five years ago.

Confirmation that growth in the UK was at 2.6%, faster than any other advanced economy in the world is sure to be a large story of the success of austerity and the Conservative Party during the next 48 days till the election.

Though whilst there is criticism from the Labour and Liberal Democrat camps, the headlines appear to be mostly positive – another budget brings another increase to the personal allowance, a promised rise in minimum wage to £8.00 by the end of the decade as well as the crowd pleasing drop or freeze on duty for alcohol and fuel.

But whilst there was good news for the individual, this really was the budget for business - true to his blue roots, Osbourne’s reduction in corporation tax is a gift to commerce and industry. The rate has been reduced from 28% since the coalition came into power, and now it sits at 20% - one of the most competitive in the world. A promised review into business rates, which are commonly perceived as the toughest tax on UK business, means that they are also set to drop.

As even the Daily Mail turned on the coalition on the issue of corporate tax avoidance Osbourne had no option but to face the issue head on. The ‘Google’ tax will close several loopholes in trading through Ireland, and is set to raise £3.1bn in avoided taxes. Businesses will also be responsible and in the wake of the HSBC scandal, whilst tax evasion is already illegal, new laws will be bought in to ensure punishment for those assisting in the evasion of tax.

Ed Balls has responded to the Budget to suggest that it was weak, but that the Labour Party were unlikely to reverse any of the measures, even though he believes that the sums didn’t add up. With £12bn in welfare cuts proposed, £10bn of which is undisclosed so far, there are many looking beyond the good news to where the deficit could be made…

As Ed Miliband pointed out in his response, there was no mention of the NHS or public services. Avoiding key election issues at this stage without the prospect of a two leader debate, is a smart move for the sitting party, but it certainly rings alarm bells for further cuts to a stretched welfare system, or for the NHS. The Institute for Fiscal Studies have demanded clarity on this unexplained cut.

A pre-election budget is often no more than lip service or an opportunity for a sitting government to set the scene for the Election to come, but without an opposition demolition, with six weeks to go there is little distinguishing the two main parties, who seem to be meeting in the middle on key issues like welfare, immigration and taxation.

And whilst ‘The comeback country’ is certainly rhetoric that has been leapt upon in the tabloid press, there is mounting concern that without an opposing view this Election could lead to no outright coalition opportunities, let alone a winner.

Next week’s televised ‘debates-cum-interview’ with Jeremy Paxman will be a key factor in separating the two parties, and offering voters and hopefully an understanding of what voting blue or red really means…
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