Expert Comment - 2012 BudgetWednesday 25 April 2012
Bill Jones, Adjunct Professor of Politics at Liverpool Hope University
The 2012 budget is George Osborne's third and he was keen to: maintain downward pressure on the deficit; offer incentives to business; and all the time insist his measures are fair and consistent with his 'we're all in this together' Coalition mantra. The result of intense intra- party bargaining, the outcome seems to be something of a curate's egg.
The headline measure was clearly the reduction of to 50p tax rate to 45p from 2013. And this is his biggest political gamble. Polls show 60-70% of voters opposed any change including 65% of Tory voters, so the government's 'fairness' claim will be widely challenged and not just by Ed Miliband who dubbed it a 'millionaire's budget'. Osborne's claim was that the tax only produced £100m and not to £2.7bn Labour had originally assumed it would deliver, so an alternative way of raising taxes was to be preferred.
However, the introduction of a 7% Stamp Duty on properties worth over £2m is not the annual 'mansion' tax which the Lib Dems wanted as effectively a 'wealth tax' but merely an extra 'sales tax'. Increasing personal tax allowances to £9,205 takes many low paid out of taxation altogether but the freezing of age-related allowances for half of the nation's pensioners will save £3.5bn but alienate a section of society most likely to vote.
Effectively this is a 'neutral' budget which in net terms, neither gives or takes away but reshuffles the tax burden so that it falls in a rearranged fashion. But these rearrangements, with their hits on pensioners and with further cuts in welfare spending pending is not obviously counterbalanced by the increases in personal allowances to low earners.
The jury is out on the fairness of the these measures but Osborne is bound to lose some credibility, in such straitened times, for reducing the taxes of the richest 1% in society.