Tuesday, June 22, 2010

June Budget Initial Thoughts

Before I start into what is in the actual budget, two parties admitted in the General election that things would have to be tougher than Alistair Darling intimated in his last budget. Of course the party that didn't say that was Labour, they said they had done enough in the last budget to make things better for the economy and fairer for the poorest.

The budget that George Osborne has just brought before the house does a number of things to improve fairness. It has lifted the personal income tax allowance by £1000, realigned state pensions increases with earnings (or 2.5% whichever is greater) and brought in a Banking Levy to help pay for the mess that the Banks aided by Labour got us into. These are all things that as a Lib Dem I stood for not against as Ms Harman would have you believe.

There are also environmental taxes that have been brought in and an increase in capital gains for the highest earners. That last is something that Harriet Harman seems to have forgotten when she said it was a right wing ideology budget. After all it was Labour that increased the gap for capital gains for the top earners which surely is 'right wing' in concept but brought in by Labour.

Of course I've said here in the past that VAT is a regressive tax, indeed our VAT bombshell launch was in Glasgow and so I was there. We still have our exceptions for food and children's clothes and looking at the alternatives to share the burden of paying for Labour's debt a VAT increase in January has got some merit. It is only on what you purchase at the 20% rate that will increase in price (sadly fuel is one of those which will knock unto public transport) but it would not prevent meals being put on the table or clothes being bought for the poorest children.<

As for Gordon Brown's pledge not to increase VAT this came on on the 30 April after he like the other parties said they had no plans to increase it. It was seen as one desperate last roll of the dice. It is one thing to say you do not have plans for something before you see how bad things really are once you enter Government it is quite another to say you'd do nothing when you know the extent of the mess. Or to crow about excellent growth rates (which now that the independent body has downsized) then accuse to new Government of downplaying growth when in fact your Darling's prediction were ahead of any curve from any independent advice through the crisis (something he failed to hit once).

So yes it is an austere budget but from what I've seen so far there is enough of the fairness from the Lib Dem manifesto in who will pay, who will get some breaks that mean that the lowest paid will benefit most. The markets seem to be responding well, it would appear that it has struck the right balance with them, now could the banks please start lending to business so we can start to kick start the recovery into action rather than the slovenly crawl that Labour produced.

1 comment:

Chris Guy said...

I'm generally in agreement with you - I work for a small business based in Scotland and the cuts in Corporation tax will help us grow and make it more attractive to invest. The VAT rise is hard to swallow but something needed to be done to dig us out of the hole dug deep by Gordon. I reckon it would affect average income workers to the tune of around £20-£30 a month, or to put it another way, the sacrifice of one night out per month. Necessary and unavoidable.

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