First published: Prospectmagazine.co.uk, 18/03/2016
Both hope that “something will turn up”
After yesterday’s Budget, it is probably fair to say that George Osborne’s role model is Wilkins Micawber. Those familiar with Charles Dickens’s novel David Copperfield will easily see the similarities between the book’s eponymous character and the Chancellor: Copperfield is always indebted, hopelessly optimistic and renowned for his belief that “something will turn up.”
When we peel away the layers of detail, gesture and obfuscation, what does this budget amount to? We have the prospect of a major tightening of fiscal policy in 2019/20, in the run-up to the next General Election. The Chancellor’s hope is now that money will appear from somewhere, so that he never has to implement this tightening. He will at least be hoping to defer it to the next Parliament.
The Budget headlines may all be about the announcement of the sugar tax, set to raise over half a billion pounds a year, but there was nothing sweet about it. How did it come to this? In November, the Chancellor was brimming with confidence as the Office for Budget Responsibility (OBR) had “given” him an unexpected £27bn windfall, allowing him the leeway to cancel, among other things, the contentious cuts in tax credits that he was planning. The windfall was the product of lower debt interest expense, changes in the way in which VAT and National Insurance receipts were modelled, and higher corporate tax receipts, for example, which offset things like the impact of lower equity prices on tax receipts and the higher cap on welfare spending….Read more: