Posts tagged Budget 2012

Thoughts on the Budget

Following politics can be really frustrating. Sure, it’s fascinating and intriging - but it can also be deeply frustrating.

Take yesterday’s Budget. George Osborne made his announcements and then, immediately afterwards, listening to Ed Miliband’s response, I was left wondering if he’d even listened to any of the announcements Osborne had just made. Miliband had clearly decided on his narrative in advance and chose to ignore the inconsistencies that didn’t fit within this narrative.

And no sooner had Osborne’s speech and Miliband’s response finished, it all spilt out of the House of Commons into the media and social networks. The interpretations were so polaraised. Osborne had - in an announcement that probably took up 1/500th of his speech - said that the highest rate of tax would drop from 50p to 45p. Going onto the BBC News site later, this part of the Budget was their headline. Apparently, this was the main and most important part of the Budget. It wasn’t.

Labour chose to interpret the Budget as being all about making things easier for the rich and harder for the poor. Whether this was factually acurate was, of course, irrelevant. It was about political point scoring. The fact that hundreds of thousands of people were brought out of paying tax at all was totally ignored. This is something that you’d of thought Labour would support. And, in reality, they do. But can they say this? No. It wouldn’t fit with their narrative on this whole Budget being about tax cuts for the rich. Politics!

There are two announcements that Osborne made yesterday that have stuck and made all the headlines: First, the drop from 50p to 45p for the highest rate earners (those who earn over £150,000). And, second, the so called ‘Granny tax’. These have been used to shape a narrative that says that the coalition (and in particular the Tories) are grabbing from the poor to support the rich.

And you know what, this is great for newspaper sales and website pageviews! But I hope the more discerning citizens will see beyond the media hype and political point scoring and realise that these changes are not nearly as dramatic as they are being made out to be.

How much will dropping the 50p top rate cost us? Next to nothing. There’s even a chance it might save money. Which raises the question of whether people’s wanting the 50p rate has anything at all about national interest, or if it’s simply a hating of anyone rich. Whilst some highest rate tax payers may end up better off, overall the wealthiest people in our nation (via various other means) are going to end up (as a whole, if not individually) contributing a greater amount to our economy than before.

And then there’s the Granny tax. Taking from pensioners seems to be a total no go for politicians. Why? Because pensioners vote. Keeping pensioners happy is often key to political success. But should pensioners be free from suffering from any of the cuts most of the rest of us have been facing?

I know it’s not popular, but I don’t believe in universal benefits. What’s the point in rich pensioners having free bus passes and help to pay their heating bills? It’s nothing but a waste of money. And this new Granny tax isn’t on all pensioners; it’s on the wealthier pensioners. (Note: pensioner doesn’t automatically equal poor.) As the IFS has now said, ‘this looks like a relatively modest tax increase on a group hitherto well sheltered’. And, in real terms, this will mean a loss of equivalent to just 0.25 per cent of income.

So, in essense, the two main stories from yesterday’s Budget are really non-stories. They are both pretty neutral changes that in the grand scheme of things aren’t that big a deal. Unless you’re only interested in a particular political narritive that doesn’t depend on factual accuracy!

UPDATE:

This article isn’t written to suggest that I support everything in the Budget. It is simply to make the point that the people have jumped on two issues that are not actually that big a deal.