Today’s Budget was the last chance for George Osborne to set the dial on his political fortunes – and the fortunes of the coalition.
By next year’s statement, with an election just a year away, it will be too late.
That was the backdrop to the chancellor’s thinking today. Many commentators expected a ‘jam tomorrow’ Budget with the Treasury having little fiscal room for manoeuvre in this parliament.
But again and again George Osborne demonstrated he was prepared to chance some bold policy measures during THIS parliament – and not just promise them only if voters give him a second chance after 2015.
The moves on the housing market stand out most clearly. The measures are designed to fire up housebuilding as well as encouraging homeowners stuck in their homes for the past five years to move up the housing ladder. The planned £130bn mortgage guarantee underpinning is a huge step – and perhaps the most eye catching headline from the Budget.
The question will be – will it do the trick? Policymakers have been trying to stimulate lending since the sub-prime market cracked in 2007. But this measure is the most significant boost to the market yet attempted.
The last Labour government relied on the health of the housing market for most of its good fortune. This is a gamble for Osborne. Has he given it time to work for his poll ratings?
The other major move – and the major cost to the Exchequer in the statement – is the move on national insurance. The new ‘employment allowance’ to cut national insurance bills by £2,000 for every firm. Some 450,000 small firms will pay no employer NI at all.
Now that idea was a Tory manifesto commitment. The Conservative backbenches have waited three years for this and they will be delighted. And in virtually the same breath Osborne gave his Lib Dem colleagues their keynote £10,000 income tax threshold – a year earlier than planned from 2014.
Most business will also cheer plans to reduce corporation tax to 20p by 2015. The price will be a harsher focus on ‘aggressive’ avoidance.
Asset managers are very pleased with the move to drop the Schedule 19 requirements which should boost the UK sector as a place to locate funds. It is a good move. The stamp duty abolition on Aim is great.
So perhaps more meat in the Budget than predicted by the commentariat.
By pressing ahead with a more radical tax reforming agenda today than many had predicted, the chancellor thinks he can keep his backbenchers happy and give business more confidence.
His spoke today of an “aspiration nation”. His backbenches call them the “strivers”. With the private sector continuing to soak up public sector job losses, he believes more voters will identify with those labels by May 2015.
Today Labour leader Ed Miliband pointed to the chancellor’s top rate tax cuts benefiting those who need help least.
So it is shaping up to be the “them vs us” election. Only voters can decide just how that feels.
Iain Anderson is director and chief corporate counsel of Cicero Group