The UK is the 5th largest economy in the world but four million...
George Osborne’s sixth budget was very different from his first but clearly implied he did not mean it to be his last. In 2010 he inherited an economy in recession, burdened by a massive national debt. All he could offer was austerity and public sector cuts to reduce the debt. Now the economy is growing at 2.5% per year, more people are in work than ever, inflation is at 0.2% and living standards are starting to increase. How will this influence the election in May?
The polls show Labour and the Conservatives too close for comfort. The temptation to produce a give-away budget must have been strong but Osborne had to resist it and play the prudence card so he could warn us against risking losing the gains of the last five years by putting Labour back in office.
The economy gave him some help. In 2010 he pledged that the national debt would fall as a percentage of GDP by 2015-16. Very low inflation and interest costs have cut public spending; enabling him to announce that his pledge has been met. He will also sell off Northern Rock’s £13 billion mortgage book and £9 billion of the nation’s stake in Lloyds now the bank is back in profit. He expects the deficit to be eliminated by 2019 and public spending to be increased in line with the rate of inflation.
That said there were some interesting measures to encourage voters to keep him in his job. The personal tax allowance will rise to £10,600 this year and £11,000 by 2017. The minimum wage will be increased to £6.70 an hour and Class 2 National Insurance contributions for the self-employed abolished. Farmers will be allowed to average incomes for tax purposes over five years. Drivers will benefit from a continued freeze on petrol tax and drinkers from another cut in duties on beer, cider and whisky. First time home buyers are offered help with a new ISA topped up 25% by the Exchequer. From next April the first £1000 of the interest on personal savings will be tax free. A new Diverted Profits tax will catch the multi-nationals moving their profits to offshore subsidiaries.
There were no congratulations from the Opposition. Ed Miliband saw a gap between Osborne’s rhetoric and the reality of people’s lives. He claimed they were all £1,600 worse off, student fees had been trebled and fewer homes were built. He argued that the minimum wage should have been raised to £7 per hour and the poor were suffering from the ‘bedroom tax’ and other benefit cuts. He attacked the Chancellor for the absence of any mention of the NHS in his budget or measures to remove zero hour’s contracts.
Now it is up to us voters to decide. Has Mr Osborne really turned the economy around or are we still worse off? Will we soldier on until the budget deficit is paid off or do we want more public spending now? Come 8th May we will know the answer.