By Dan Atkinson
FOR my money, the best advance description of Wednesday’s Budget to emerge from the company of City analysts came from Barclays Capital: ‘A Budget of small numbers.’
Well, quite. With rating agency Fitch breathing down his neck about the possible loss of Britain’s triple-A credit status, George Osborne is hemmed in, to say the least.
Any slippage on his deficit-reduction plans would look very bad indeed. But he is pre-committed or semi-committed to some expensive notions that make it far from easy to hold the line.
Is he? Yes, indeed. Credit easing, for example – the scheme to get money to smaller firms – is a form of public spending, albeit one deferred until whatever proportion of borrowers that cannot pay then proceeds to default.
Then there has been some rather loose talk about making the cost of nannies and other domestic employees tax deductible. There is a solid commitment to raising the personal tax allowance to £10,000 by the end of this Parliament.
High Speed 2 – the very costly train service planned to speed important business people to their destinations – will have to be paid for at some point, even if the first large cheque can be post-dated beyond the next election.
Forget the stone-faced caricature. The Chancellor is no more naturally tight-fisted than most Tory Chancellors have been (remember such Scrooges-in-reverse as Reginald Maudling, Anthony Barber and late-period Nigel Lawson). Left to his own devices, Osborne, I suspect, would be announcing £100 million investments in science capital development, £100 million for pothole repair and £200 million for new railway projects.
Oh hang on, he actually did all those things in last year’s Budget. And that is not to mention the £3 billion capitalisation of the Green Investment Bank.
Tossing round big numbers attached to worthy projects is, I suppose, meant to take the sting out of the ‘age of austerity’. The danger is that it is not the sting that is taken out but the point. Should we really be in a dire emergency, only saved from a Greece-style catastrophe by the tough decisions of the Coalition, then many will wonder why all this money is not going to reduce the deficit further.
Happily, perhaps, for the Chancellor, in terms of presentation, there is a very much smaller number for him to play with on Wednesday in terms of giveaways to the general public. Only about £5 billion, in fact, which represents the proceeds of better than expected tax revenue. The betting is that the ‘squeezed middle’ – those who are caught between the abovementioned £10,000 tax allowance, which is of special value to lower earners, and the mooted axing of the 50p top tax rate – will be love-bombed, perhaps with a smoothing of the rough edges on the Child Benefit cut, due next year.
Funnily enough, another measure likely on Wednesday, the new catch-all anti-tax dodging rule, is also likely to be tweaked to make sure Middle Britain is not affected. Rather than an anti-avoidance rule, it is likely to be an anti-abuse rule, aimed at the more outrageous schemes for sheltering income and profits and not, for example, cracking down on spouses who apportion their cash between themselves for reasons of tax efficiency.
Given the electoral cycle, this is probably the Chancellor’s last chance to do something radical and unexpected. But given the minimal room for manoeuvre, the betting has to be on modest measures and minor love bombs in a Budget of small numbers.
Tags: economic climate, The Budget 2012
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