GEORGE Osborne added the two most eye catching measures to his Budget at the very last minute. We know this because the Office for Budget Responsibility said it learned of the 2p cut in corporation tax and the 1p cut in fuel duty too late to consider their effects on its economic forecasts.
Always the master tactician, Osborne included the cut in fuel duty to close down the Labour party’s most potent line of attack.?The corporation tax cut was held up while he found a remedy to deflect the dubious but populist claim that he is handing tax cuts to the banks.
Since becoming shadow chancellor, Ed Balls has used rising petrol prices to great effect. He forced a vote on cutting VAT on petrol and has used every press appearance to complain about the price of fuel, all too aware that prices at the pump are the most obvious example of soaring inflation.
But Osborne’s decision to cut fuel duty by 1p, which took effect at 6pm last night, offered some immediate respite to hard-pressed families. He also cancelled the Labour government’s fuel duty escalator by raiding the profits of North Sea oil companies.
The upshot is that a litre of petrol now costs 6p less than it would have done. Allies of Osborne were yesterday pointing out that this will save owners of a Ford Focus over £3 every time they fill up the car (coincidentally or not, the Balls family happens to own a Focus). Much of the benefit will be wiped out by the introduction of a price floor for carbon, a complex but all too real tax hike that will add £17 a year to the average consumer’s energy bill by 2015-16, according to Treasury estimates.
Elsewhere, there were lots of “micro” measures – headline grabbing gimmicks that have been
poorly thought through. A cut to red tape for businesses with less than 10 employees? A sure fire way to stop firms hiring that eleventh worker.
Osborne also knew that the Labour party would try to portray any reduction in the headline rate of corporation tax as a tax cut for banks.
That’s why he jacked up the bank levy without notice – for the second time in as many months. Another line of attack was swiftly closed down.
This kind of politicking is reminiscent of Gordon Brown, especially while he was chancellor. Who can forget the 2p cut in the main rate of income tax, designed to put the Tories on the back foot but paid for by scrapping the 10p rate for the lowest paid.
Brown, a Scottish Labour chancellor, wrong-footed the Tories by raiding the poor. Osborne, a blue-blooded Conservative, wrong-footed Labour by raiding the banks. How times have changed.