The credit rating agencies are likely to fall for it – Fitch has warned that the UK may lose its triple A rating in the next two years – but does Goerge Osborne’s Budget make much sense, if he’s wedded, as he says he is, to his Plan A of stiff public spending cuts?
There are some substantial giveaways in the Budget – the top rate of tax cut from 50 percent to 45 percent, an increase in the personal tax allowance, and the raising of the income ceiling on child benefit, etc. And, of course, there’s the cut in corporation tax.
The Chancellor says this is a Budget on the side of aspiration and enterprise. Certainly, to attract foreign business to the UK, and to encourage domestic firms to remain located in the country, the corporation tax reduction is a good idea. The cut in the top rate of tax is likely also to encourage the super-wealthy to remain.
But how is this to be paid for? The Chancellor talked vaguely about clawing back another 10 billion pounds in welfare benefit cuts annually but absolutely no details were provided.
One slice the of the population that doesn’t come out of this well is the elderly. The phasing out of the age related allowance for pensioners is going to hit them. I can’t quite see the sense of this.
The UK is facing already a pension time-bomb, as other developed countries are too. UK pensioners and those close to pension age have been hard hit by low interest and annuity rates since the financial crash and now they will lose out on the phasing out of the age related allowance. In short, the government is aggravating the problem that will come with the greying of the country.
So, is this Plan A-? I am not sure the Chancellor has done enough to encourage growth and enterprise with this Budget – a growth that can bring in more tax revenues to cover the giveaways. And neither am I sure this Budget will be as tax neutral over five years as the Chancellor claims it will.