Yesterday’s budget was, as has been the norm for the last 20 years, a PR platform for a chancellor hoping for the keys to Number 10. However, in this Conservative budget, despite Mr Osborne’s positive spin, the failure was clear for all to see.
Annual growth was revised down from 2.2% to 2%, meaning quarterly growth for 2016 will on average be lower than growth in the last two quarters of Labour’s term in government – as the recovery began. This the Conservatives claim is due to ‘international storm clouds gathering’, unlike the global financial crisis of 2008, which was of course precipitated by spending on public services.
Reductions in growth, of course, cause a black hole to appear in public revenues, as the economy is now £18bn smaller than was projected. However they cause an even greater hole in the Chancellor’s credibility. One of the three tests the Osborne set himself on ‘economic credibility’ was to reduce the national debt as a percentage of GDP every year. In this budget he has failed that test.
This follows his failure in July to remain within his self-imposed ‘welfare cap’. The third of his tests – to run a £10bn budget surplus by 2020 – now also seems it will not be met as public borrowing was revised up to £21.4bn, for 2018-2019. To meet this would require a £31.4bn reduction in public borrowing in a single cycle. As Paul Johnson head of the IFS has stated, this has ‘little wiggle room’ and would require a ‘real’ tax increase or significant spending cut to do so; something the Conservatives will be highly reluctant to do approaching an election.
By their own standards the Conservatives have failed on economic credibility. On doing what is just, the Tories have failed by anyone’s standards.
This budget sees its greatest cut at the expense of disabled people with the Personal Independence Payment cut for the disabled (£4.2bn); as well as cuts to the Employment Support Allowance ‘saving’ 1.4bn. This pays for a further cut to corporation tax, lowering the rate to 17%. Arguments for a ‘competitive rate’ will see this as a necessity, however even those who inhabit the socialist paradise of the United States, with a rate of 38%, would see the true priorities behind this cut.
The higher band tax changes will no doubt be heralded as a tax cut for middle earners. This is, however, a strange definition of middle considering only the top 14% of earners will benefit from this.
As with every Osborne budget, the distributional analysis shows those with the greatest means receive the greatest benefit from this budget. Contrast that with the 30% of the cuts impacting disabled Britons and it’s clear that this government’s priorities are far from compassionate. Despite Mr. Cameron’s rhetorical positioning, it’s clear that any notion of One Nation Conservatism is not part of this party’s agenda.