It was a Conservative Budget from a Conservative Chancellor aimed at middle-class people who vote:
pensioners, savers and the middle classes. The economic package announced by George Osborne yesterday included a number of appealing, common-sense measures that deserve to be widely welcomed, such as the introduction of a Pensioner Bond, increasing the Isa limit on tax free savings and the freeing up of pensioners at last from having to buy annuities at woefully poor rates of return.
The middle classes are experiencing an ongoing squeeze on their incomes caused by the cost of living crisis and this Budget will given them some welcome assistance.
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Yet it was unfairly skewed in favour of the better-off, with only limited good news for the poor, who have suffered the most in the recession. The most important measure for them was the welcome raising of the tax-free allowance to £10,500. This will benefit many millions of taxpayers but will have a proportionally greater beneficial impact on the lowest paid, some of whom will be taken out of tax altogether, and is included in the Budget due to the Liberal Democrats, who wish to raise the tax-free allowance further still. Tax on savings for those on low incomes will also be abolished, which will have a modest impact on those struggling to make ends meet. But the bulk of the goodies in this penultimate Budget of the current parliament were for pensioners and the so-called "squeezed middle", who are those most likely to vote.
They may be relied upon to make the trip to the polling booth not only at next spring's General Election, but also at the referendum, and aspects of Mr Osborne's Budget statement were clearly orchestrated to harmonise with the pro-UK campaign. His reference to falling tax revenues from North Sea oil and gas (revealing that the Office for Budget Responsibility had revised down the revenue forecast by £3bn) was a nakedly political point, not being a figure that is normally highlighted at the Budget. His claim that it would represent a loss of £1000 per person in the tax take of an independent Scotland ramps up the war of statistics between the Yes and No camps.
The Chancellor avoided a blatant pre-referendum giveaway for Scots, which is a relief, since September's decision is too important to be reduced to a question of short-term gain, but there were a number of measures that were designed to raise smiles in Scotland, including the promise of start-up support for new air routes, a freeze on whisky duty and support for investment in oil and gas extraction in the North Sea. The Chancellor will also have hoped that undecided middle-class Scottish voters worried about the impact of independence on their savings and pensions might have had their heads turned by what they heard.
He began his address to MPs with a barrage of figures on the recovery of the economy that came alarmingly close, at times, to triumphalism: a growth forecast of 2.7% for 2014; a record number in work; the deficit down by one-third and due to be down to a half by next year; borrowing down from £157bn to £108bn and due to fall further; even talk of a surplus.
There is no doubt that, this spring, the green shoots of recovery are bursting through, which will eventually have a transformative effect on people's lives as the rise in employment is starting to show.
Even so, it has been very late in coming. Had austerity been applied less drastically, the long economic winter might have ended sooner. The Chancellor's boast that UK growth outstrips that of the United States and Germany is disingenuous, given that the US and Germany recovered healthy levels of growth long before the UK. The Labour leader Ed Miliband was only telling it like it is when he reminded the Chancellor that living standards have fallen for millions of people.
Moving on to specific measures, Mr Osborne offered some sensible ideas. The increased tax-free savings limit on the new combined cash and shares Isa will benefit savers and could encourage people to save at a time when debt levels are growing, partly due to low interest rates. Meanwhile, the Pensioner Bond offers a better rate of return than the markets for older savers. Together, these measures represent a sensible, low-cost source of borrowing for the Government.
It is also good news that pensioners will no longer be railroaded into taking out poor annuities and will have greater flexibility in how they use their money, but a word of caution is required. There is a risk that some pensioners could spend their pension pots and be left with little to live on. That would result in their housing and care costs in later retirement devolving wholly onto the Government.
On the new welfare cap, the Chancellor announced he had set it at £119bn, to rise in line with inflation, £6bn above next year's projected spend on welfare. Yet a pledge to cut it further is expected in the next Tory manifesto, with the Chancellor already having promised to gouge £12bn more out of welfare. What could the consequences of this policy be for children living in poverty, the disabled and sick? A proper debate is required.
In essence, this Budget was an unashamed appeal to the Tory heartland and a missed opportunity because of it. Mr Osborne chose to raise the higher-rate tax threshold by more than £800 by next year. This will make a difference to a limited number of households that are currently under duress, particularly single-earner households, but it will also benefit millions on high incomes who do not need it. This is simply playing to the Tory backbenches and should not be a priority. Meanwhile, the Government's childcare support measures, absurdly, are set to help couples earning up to £300,000.
Mr Osborne has proposed some sensible reforms that will benefit millions, but ultimately chose to favour the better off over the poorest.