UK BUDGET: A low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy

Today George Osborne delivered his seventh Budget as Chancellor and clearly enjoyed the absence of the Lib Dems as he undertook significantly more reform than the basic housekeeping many anticipated. The last Government may have been Tory-led but today the Chancellor, now free from the shackles of coalition, was able to bang the Conservative drum and instigate some of the measures he’s only been able to dream of, until now. It was the first truly Conservative Budget for 18 years and Osborne outlined his fiscal agenda for the next five years and set out measures which will “move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy.” The long shadow of Greece clearly hung over proceedings but perhaps adds credence to Osborne’s rhetoric that this is “a Budget that puts economic security first”. Like the Conservative’s General Election campaign literature, targeted at “busy people trying to get on in life”, today’s announcements demonstrate that the Tories wish to be seen as the party of work and not the party of welfare. Osborne was expected to deliver a big, bold set of announcements, including details of cuts to welfare and departmental budgets. He didn’t disappoint. The inheritance tax threshold will be increased to £1m from 2017; the NHS to receive further £8bn this year; a productivity plan, which will be set out in detail on Friday; a new apprenticeship levy on “all large firms”; and it goes on. In short, this Budget sees Osborne take advantage of a distracted Opposition by making substantial changes across the board that he knows are not popular on the Labour benches. It wouldn’t be a Budget without rabbits and hats, but it’s been a while since we’ve seen rabbits like this in the corridors of power. A new National Living Wage £9 per hour by 2020; a commitment to meet the Nato 2% spending target throughout the Parliament; Corporation Tax down to 18% by 2020; and, in something remarkably similar to Ed Miliband’s pre-election policy, non-dom status scrapped for permanent residents. All this on top of further curbs on those individuals and business avoiding tax, an additional £750m to HMRC to tackle evasion and staggering cuts to the welfare budgets for tax credits and working-age benefits. This was a big Budget, with big ambition, which will come up against opposition and significant scrutiny. The changes outlined go further than political posturing and pre-election manifesto commitments but we can be certain they will not allow for an easy ride, and will influence the finances of all aspects of the UK’s population once their true meaning sinks in.

By Joe

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