December 4, 2014 by Paul Goldsmith
1. So, er…apparently there’s an election soon? I say this with a wink because this was essentially a pre-election budget. As Nick Robinson said in his BBC column.“Aware that Labour’s most potent political charge is that the Tories are on the side of the wrong people, the chancellor unveiled a series of tax hits on the rich – not just mansion buyers but non-doms too, as well as tax-avoiding banks and multi-national corporations.The money raised by that “hit the rich” populism was spent on help for those that politicians like to call the “hard working”, in the form of tax cuts – on their earnings, kids’ flights, inheriting an ISA but, most significantly of all, anyone buying a house worth less than a million pounds.Some Conservative cheerleaders are already hailing a Robin Hood package.”
2. The big “rabbit out of a hat” moment was the change to stamp duty. This is the tax that is paid by those buying a house. I am going to look at this in more detail in a later blog, but it’s worth explaining how important this was as far as populist moves go. It means that 98% of new home purchases will involve a cut in stamp duty from what it might have been. This means a saving for instance of £4500 on this tax for those buying a home worth £275000, which is no small sum. This also means an increase of £18750 on the stamp duty paid by those buying a £2.1m house, which is also no small sum. It is the Tories answer to the Labour Party’s mansion tax, and it takes from the rich without punishing those who are income poor but wealth rich and couldn’t afford the mansion tax. Labour will make three points, one that they have set the agenda yet again by talking about a mansion tax, two that they can still have the mansion tax alongside this change in stamp duty, and three that this actually involves a LOSS in tax revenue at a time when the Tories are missing their deficit reduction targets. So it is still a bit of a risk. A popular risk though.
3. The Coalition have also responded to criticism of their lackadaisical stance on tax avoidance by raising the annual fee paid by those who are ‘non-domiciled’, those who have been resident in the UK but live away for enough time each year not to pay our income tax, up to £90,000. They have also levied a tax of 25% on the profits of multi-nationals that have been earned in the UK but moved overseas. The former will be paid with little faults by people of the sort of means to be non-domiciled and the latter may work, although I imagine Google and Amazon (two of the main targets) will have had tax accountants working on this since they first got a sniff of it, so I’m not holding my breath for a lot of revenue to be brought in, but it’s certainly a step forward.
4 Osborne couldn’t find a way to hide the fact that the deficit (how much Government spending exceeds tax revenue) has wont be eradicated by the end of this Parliament (May 2015) as he once promised. He also couldn’t hide the fact that this year’s deficit is actually likely to be HIGHER than last year’s. This is partly due to a fall in tax revenue, caused by the fact that many people in new jobs are on such low pay. But it is also going to be exacerbated by some of the commitments the Coalition is making now, as the election is approaching. Some of the commitments on spending are sensible, long-term projects such as roads and flood defences, which have to be worked on, although they are located in suspiciously marginal constituencies. If they want to enter the election with a continued lead on their stewardship of the economy, they need to make sure in the next year it doesn’t look as if the deficit’s renewed ascent continues.
5. Once Osborne finished, it was Ed Balls’s turn to respond to the statement. balls has not been very good at this in the past, and the Tories attempted some ‘sledging’ (which in this case meant shouting “apologise” at him repeatedly until told to stop by the Speaker), but to no avail, as Balls produced a particularly good end to his speech, which made the point that the deficit reduction target had been missed again, and reminded everyone of how the recovery was not being shared by working people. “Every target missed, every test failed, every promise broken. We need a recovery for the many not just a few, we need to balance the books in a fair way with a long-term plan to save our NHS. That is the Autumn Statement we needed. It will take a Labour government to deliver it.” Of course, there was very little on how Labour would deliver it, which should be happening at this stage of the Parliament, particularly when Labour’s credibility on the economy is so low, but never mind.