Thursday, 19 March 2015

Budget 2015

Yesterday George Osborne delivered his last budget of the parliament, and if he got it wrong his last ever. It was widely touted as the give-away budget to buy our votes in the coming election, just 48 days off now.

He started by recapping how wonderfully he had managed the economy in the last year; noting that he had finally paid off the South Sea Bubble and the First World War and was putting Lloyds Bank, Northern Rock and Bradford and Bingley back in the private sector, or at least their mortgages books in the case of B&B which is long dead and buried (zero compensation given to the shareholders after the "good" part of the bank was sold off.) He also revealed that the national debt was at last going down, but only as a share of GDP, not in real numbers, and not quite yet, but this year for sure.

The new forecast to eliminate the deficit and stop Britain living on borrowed money is 2019/20. (In his first budget in 2010 he promised to have that done by now.) It seems 2019/20 is the year everything turns good: the deficit is gone, there's a budget surplus and austerity ends (which means departmental spending starts getting upgraded in line with inflation.)

So the goods times were five years ahead when this government came to power five years ago and they are still five years ahead now.

But it must be admitted the give-aways were quite good. Corporation tax is being cut to 20%; north sea oil taxes are being cut to compensate the industry for falls in oil prices; a new help-to-buy (your first house) ISA is being introduced to which the government will add £50 for every £200 the saver puts in - up to a maximum of £3000 of government contributions. This 25% uplift is equivalent to saving your house deposit from gross income rather than taxed income.

This new ISA will be introduced in the autumn, which means it may never happen.

The chancellor is also making the first £1000 of savings interest tax free (only £500 for higher rate tax payers). This sounds pretty good since with the tiny savings rates on offer these days most people will never even earn £1000 of savings interest. However it could be difficult to administer. Tax is deducted from interest at source. So either the banks will have to start paying gross interest, or every saver will have to claim back their tax, which would be awkward because George has just abolished the annual tax return.

Osborne also took a few side swipes at Ed Miliband personally. He made reference to the "two kitchens" it turns out he has; the deed of variation he used to avoid tax when he inherited his parents' house, and his falling out with his brother.

"Two kitchens" may even stick as a nickname; it's sufficiently gauche, like Milipede himeself.

Bizarrely the junior coalition member, the Lib Dems, have produced their own "counter-budget" today; transported to parliament by Chief Secy to the Treasury Danny Alexander (aka ginger-haired muppet, if that helps place him for you) who stood at the government dispatch box and used government parliamentry time to present a party political broadcast - which is a serious breach of the rules.

It looks like the Lib Dem MPs are going to vote for the government's budget despite having a different one of their own. Lib Dem credibility will not be affected because it is already on zero.

Of course, with the general election looming in six weeks' time the whole budget may be a non-starter. A new government would certainly present a new budget soon after being elected. And now that we have fixed five year parliaments we are doomed to have one of these fake budgets every election year.

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