BUDGETS are not just about trying to outwit political opponents in a complex game of chess and propaganda, as some in Westminster believe. They are also about the vision that a chancellor and government wish to convey. In 1979, when Lord Howe slashed the top rate of tax from up to 98 per cent to 60 per cent and backed wealth-creation, free trade and free markets after years of socialism, it was obvious what the government believed in. The same was true when Lord Lawson slashed the top rate from 60p to 40p in 1988. Their message was powerful and explicit, and reinforced by strong actions. Their values were clear, as was their intention to change Britain’s economy, culture and society.
Gordon Brown also had a powerful vision: top-down social engineering. He massively increased public spending (he used to call it “investment”), the size and power of the public sector and its payroll; he also increased redistribution and ensnared vast numbers of working people in tax credits. Britain changed dramatically under his watch. Unlike previous leftist chancellors, he wanted to use the tax receipts generated by capitalism, rather than eliminate capitalism; he ended up almost destroying the UK as the bubble he helped fuel popped. But everybody knew where he stood: his vision was subtler than the socialists of yore but nevertheless very powerful.
Until now, the only vision we have had from George Osborne has been about “austerity” – a six-year plan to reduce the deficit. Apart from some limited pro-market measures – corporation tax is down (and may fall even faster today), a policy which Tony Blair might have backed – the rest of economic policy has been remarkably bland, non-ideological and guided only by the received wisdom of the civil service and international bodies.
The only major areas in which the coalition has broken with Brownonomics are public spending – out of necessity, to avoid a crisis, rather than out of conviction and because it believes that a smaller state is a good thing – and by boosting the personal allowance, which is great news. Another, substantial break could come with deregulation, including of planning and shopping – but the devil is in the detail. The rhetoric on wealth-creation has been mixed, with endlessly contradictory messages and policies. I predicted in this space yesterday that Osborne would try and triangulate, Labour-style, between tax cutters and class warriors by hiking the stamp duty payable by purchasers of homes worth £2m. I was right: later today, Osborne will confirm the creation of a new seven per cent super-band. It’s a shockingly high tax rate and quite unjustifiable; but it is less bad than an annual levy on all expensive homes (a Mansion tax) or higher council tax.
Once again, Osborne has shown himself wedded to Brownite-style spreadsheets, devising “clever” ways to take from one hand and give back from the other (he is rightly going to cut the 50p tax rate). The argument is being dominated by the class warriors: Osborne feels he must kowtow to them to be able to cut taxes in other ways, such as on corporations, even though the real argument ought to be about finding policies to incentivise growth, job creation and investment.
Osborne usually puts the pursuit and retention of power above all else. Today, he must show us what principles and philosophies he actually believes in, and why and how he wants to change Britain.
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