By tradition, the Chancellor, unlike Ministers at the despatch box at any other time of the year, may drink alcohol during the Budget speech. George Osborne has previously chosen to drink mineral water, as did the previous Chancellor Alistair Darling. Now George is running for leader he may want a more populist tipple next week…
Past Chancellors have chosen mineral water (Gordon Brown), whisky (Kenneth Clarke), spritzer (Nigel Lawson), gin and tonic (Geoffrey Howe), brandy and water (Benjamin Disraeli) and sherry and beaten egg (William Ewart Gladstone). The bookies will be giving odds next week, vote on what you reckon George should drink…
It is no secret that the budget is expected to see an announcement of the raising of the income tax threshold. It is no secret because Clegg is boasting at every opportunity that he can that this is a LibDem policy to help the low paid. With some justice, co-conspirators will remember that Daniel Finkelstein argued that raising the threshold was unaffordable and “punk tax cutter” Guido argued it was affordable and politically savvy. Nick Clegg joined the argument about this policy before the election – on Guido’s side. In government the policy was implemented by Osborne as part of the coalition deal. Nevertheless the LibDems get all the credit for the policy from the voters.
So how could the ever political Osborne get the electoral credit for the policy? Let Guido suggest how his speech might play out:
“Mr Speaker I have received many representations, not least from the junior partners in the government coalition, about raising the minimum tax threshold by £500, I have decided to reject these representations.
Mr Speaker it is not in the country’s interest to risk the stability of the economy…
[JEERING FROM OPPOSITION BENCHES]
…it is for that reason that I have decided that now we are seeing balanced growth, falling unemployment and a stable macroeconomic outlook, to raise the tax threshold by £1,000 to £11,000. The Conservative Party is a tax cutting party and when it is prudent to do so we will cut taxes for everybody. This tax cut removes the tax burden from thousands more people on low pay.”
In one stroke Clegg is outbid on fair taxes, the policy is reclaimed for the Tories, Osborne is cheered by his backbenches and the lowest paid are better off. Even better, most of those on in-work benefits will see their benefits reduced by an equivalent amount. The Brown benefits dependency culture will be undone a little bit more…
Both Osborne and Balls are on the celebrity 5:2 diet, though Guido hears not everyone was entirely happy with the chunky Chancellor’s austerity effort to cut his waist size. After a female aide changed Osborne’s hair and now his slimming regime, his wife Frances was overheard exclaiming: “If anyone is going to put my husband on a diet, it’s me.”
“The Chancellor comes across as someone who has survived a miserable low (who could forget his dismay at being booed at the 2012 Olympics?) and emerged psychologically stronger or, perhaps, less afraid to fail. Perhaps that explains his Caesar haircut. “There are more important things, dare I say it, for the country to be talking about,” he cried, looking pained.
But whose idea was it and where was it done? Osborne struggles: “It was just a … I means it’s … it’s been made out to be some great big change, a bigger change than it was.” Does his wife Frances like it? “Oh, she likes it,” he said, the shutters slamming down.”
Osborne ruining Ed’s big day by calling for a rise in the minimum wage is politically cunning, though it remains a fundamentally unsound economic idea. Here is a round up of how some of the more sensible think tanks responded to the idea of an increase to £7-an-hour:
Adam Smith Institute - “A minimum wage increase will hurt the poor, particularly young people and vulnerable groups like migrant workers. Most of the empirical economic evidence has found that increases in the minimum wage cause increases in unemployment. Even if the immediate impact is not large, this increase will lead to a long-run decline in job creation and standards for Britain’s poorest workers. It will hurt the very people it is supposed to help.”
Institute of Economic Affairs – “This move would not only jeopardise the jobs of some of the most vulnerable workers in the country, it will make it even harder for the young and out of work to get a foot on the employment ladder. If an employer cannot afford to hire someone because the minimum wage is too high, then someone who otherwise could have found work remains unemployed. The minimum wage is a blunt instrument. Increasing it will damage both business growth and society’s most vulnerable.”
Centre for Policy Studies – “Those who suffer most from a rise are the unskilled and young, who have low productivity and get priced out of the market – denying them the chance to accumulate “on the job” human capital. Higher minimum wages make it less profitable for firms to take on untested employees. This may be one reason why youth unemployment and unpaid internships became more common, even in a healthy pre-crisis jobs market.”
Still, you’d need a heart of stone not to enjoy Labour’s squirming this morning…
Osborne’s hypothetical £12 billion in future welfare cuts has had the desired effect in roughing up Balls and irritating Clegg, but it’s also re-opened old cabinet wounds. Sources closes to IDS have been very chatty, telling the Guardian that he is “alarmed” and the Times that: “You can’t keep hacking at the same people.” The speed at which this row has hit the front page two national papers would suggest to Guido that DWP were not completely in the loop in regard to yesterday’s announcement. They’ll be pleased though with news that the minimum wage is set to go up in yet another stunt designed to unsettle the opposition.
Talking the talk, Osborne has claimed “government is going to have to be permanently smaller and so is our welfare system”. Finally, if he is to be believed, the Tories will be “permanently cutting people’s taxes by permanently cutting spending”. He’s making the right noise at least, but when?
The Chancellor has pledged a further £12 billion of cuts to benefits from 2015 to 2017, yet the overall bill is £174.3 billion. Barely a dent. From the gloomy tones of the speech it’s not looking likely that tax cuts will come this side of an election either. This looks like playing politics rather than any genuine commitment to walking the walk.
Christine Lagarde the French chief of the IMF narrowly escaped being charged recently. Her candidacy’s main cheerleader for the IMF was George Osborne, Guido had his doubts at the time. The IMF is searching for a solution for debt laden European states to stop the €uro collapsing. Stop spending more than you tax is considered naive – how will the ruling elites get re-elected if they stop bribing the electorate with their own children’s money? Option 6 in the IMF’s discussion paper on the subject is brutally straight-forward. The final act of financial repression is to steal from everyone who has savings with a 10% wealth tax.
You have been warned now – just like Cypriot political insiders were – don’t keep any capital in €urozone banks. The IMF argues that the element of surprise is essential for the success of a capital levy…
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Knifed former civil service chief Bob Kerslake on his recent troubles:
“Many thks for kind wishes following back opn. Incision measured 16cm. A pretty big knife in the back! Photos on request.”