By John Knox
To my utter astonishment, the Budget was not as bad as I expected. George Osborne says he is taking five times as much from the rich as the 50p tax rate would have yielded. This is indeed a noble ambition, if it can be achieved. But I still think the 50p rate should remain, as an important symbol that half of what you earn, as a rich man or woman, should go to the state in which you are earning that comfortable living.
The Chancellor thinks the 50p rate deters hard work and enterprise. I doubt it. Top doctors, professors, lawyers, civil servants and company managers are not mainly motivated by money. Most have a driving force we used to call “a vocation”. And they are, after all, enjoying an income of £150,000 or more a year, riches most people can only dream of.
Mr Osborne thinks a 50p rate gives Britain a bad name abroad, discouraging entrepreneurs from coming here and forcing some to leave. I doubt this too. Most people, even high-fliers, do not migrate like birds chasing the last few berries of the season. They have families rooted in this country and have what we used to call “patriotism”.
At the other end of the scale, the Chancellor is raising the personal tax allowance to £9,205, which will take 800,000 more people out of paying income tax altogether and benefit the average family by £220 a year. This is, no doubt, a good thing for ordinary families and for the economy as a whole – particularly at a time of austerity. But I would still have preferred him to have introduced a lower tax band instead, on the principle that every worker should pay at least part of his or her income in tax, so that the state does not become a handout institution but is a co-operative venture to which we all contribute something.
Already some older people have complained that freezing the tax allowance for pensioners is unfair and will reduce their real income by an average of £63 a year. “We’ve contributed all our lives and we deserve better,” I heard one pensioner say on television. But the hard truth is that those contributions are not enough to cover the rising costs of the older population. And the less noticed truth is that pensioners’ monthly expenses are far less than for a working couple bringing up a family and paying off a mortgage.
Stamp duty going up to 7 per cent on houses over £2 million is a right-and-proper tax on the rich. It goes some way – as the Chancellor explained – towards paying for the cut in the top rate of income tax. The loophole of using offshore companies to buy expensive houses, thus avoiding stamp duty, will rightly be closed. This should have been done years ago. So too should a clampdown on top earners avoiding the 50p rate. Mr Osborne’s admission that the top tax rate yields “next to nothing” is shameful.
The extension of regional pay for civil servants is another controversial issue. It already happens in London, of course, but the idea that each council or health board or regional authority across the country should negotiate its own pay rates is a novel suggestion. I see little wrong in it, since the cost of living varies throughout the country. There are hints of further regionalisation in the announcement of three new enterprise zones in Scotland – in Dundee, Irvine and Nigg – where companies will be given special treatment on tax and grants.
The cut in corporation tax to 24 per cent is worrying. Is this the beginning of a race to the bottom across Europe? Surely, if a firm makes a profit, it should hand over some of that money to the state to pay for the roads its uses, the fire brigade which protects its property, the schools and colleges which educate its workers, the whole system of commerce which the state makes possible. Again the Chancellor has caved in to pressure from big business with his £3 billion concession to the oil and gas industry over decommissioning.
The ending of child benefit for those earning over £60,000 a year is still controversial – since it ends the era, as Ed Miliband said in the Commons, of us “all being in this together”. But at least the cutoff will not be as sudden as had been planned. And, more worrying, it is accompanied by cuts in welfare benefits that will hit the “squeezed middle” class the hardest.
Overall, though, the Budget has not been as generous to the rich and powerful as I expected. On the other hand it does little to change to lamentable state of our economy. There were some hints of a growth strategy – spending on railways, broadband, the energy and science industries, as well as a regrettable tax break for the computer games industry – one of Britain’s craziest exports. But the official prediction (from the OBR, the Orwellian-sounding Office for Budget Responsibility) is still stuck at low growth this year (0.8 per cent) and 2 per cent next year, with only one million jobs being created over the next five years.
This at a time when there are 2.6 million unemployed and one in five young people cannot find work. Paying down the national debt is all very well, but one has got to ask how the debt can be paid off when the unemployment bill is rising and so many people are not in a position to pay tax at all.
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