Tax receipts do not lie.
Tax receipts do not lie. Yesterday the Chancellor, George Osborne, basked in the glow of self-congratulation over an Autumn Statement that sounded impressive. Everything ?? growth, unemployment, inflation ?? was rosy. But an unpalatable fact persisted. Revenues are not coming in at anything like the rate predicted.
Mr Osborne's boasts for his ??long-term economic plan?? therefore sounded like special pleading. At one point he even asserted, boldly, that revenue shortfalls could always be balanced by still more cuts in public spending. That is neither tenable nor far-sighted.
The Corporation Tax take is down; North Sea revenues are down; above all, income tax, fully 27 per cent of the money government collects, has been miserably disappointing. This year it has produced barely £100 million more ?? just 0.1 per cent ?? than last year. The Chancellor who promised in 2010 to have the public finances repaired by 2015 is far short of the target.
So the budget deficit has not fallen as promised. As recently as March it was predicted to stand at £86.4 billion for this year. The Coalition admits to £91.3 billion. While Mr Osborne predicts sunlit uplands and a surplus in 2018-19, a worse shortfall next year is certain. In total, the Chancellor will be £13bn wide of the mark over two years.
Like the accused calling a character witness, Mr Osborne again summoned the Office for Budget Responsibility (OBR) to support his determination to ??stay the course??. The tactic has become risible. The OBR's prediction record is a story of failure. In March, it forecast total government revenue growth of almost five per cent; ??receipt growth?? was just 2.4 per cent.
Even the OBR's ability to look on the bright side cannot mask reality. The UK's three per cent GDP growth in 2014 is certainly deserving of praise. So why is growth predicted to collapse to 2.4 per cent next year, and 2.2 per cent the year after? Either the recovery is fragile indeed, or the country is recovering from a hellishly low base.
The low-wage economy imposed as an expedient in the aftermath of the banking crash has become the distinguishing feature of UK life. That, like taking the poorest out of income tax, does nothing for receipts. Stamp Duty returns have also been disappointing. Mr Osborne's response yesterday was to offer a cut costed at three-quarters of a billion pounds. Is another housing boom really his best bet?
Stamp Duty reform remains, nevertheless, a challenge to the Scottish Government. There is justice in Mr Osborne's giveaway. To apportion tax on a graduated scale, especially to those prepared to spend extravagant amounts on property, looks ?? on paper ?? like a fair way to proceed.
The possibility of a devolved Corporation Tax for Northern Ireland is another matter. The complaints from politicians in Belfast struggling to compete with a 21 per cent rate (20 per cent from April) while the Republic enjoys 12.5 per cent are nothing new. But how would a Scottish-based business expect the SNP to react? We might deplore a ??race to the bottom??. Scottish voters are liable to ask about sauce, geese and ganders.
Bizarrely, the Chancellor said not a word yesterday about reforms to the tax regime as it affects the North Sea. Instead, Danny Alexander, Chief Secretary, will be allowed the honour when he speaks in Aberdeen today. The Autumn Statement, it seems, is not just pre-announced but post-announced. The fact remains that one of Mr Osborne's crucial revenue streams risks being damned up by falling oil prices and his own tax raids.
As electioneering efforts go, the autumn statement was timid. Mr Osborne admitted, in fact, that it amounted to a slight fiscal tightening. In 2010, those who believed his promises of speedy recovery would have bet on tax give-aways. The Chancellor has no such latitude. Like his devotion to unending austerity, he should be judged by the fact.
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