A Budget seldom betrays its true story on the day of publication, and this year’s is proving to be no exception. Two days on, George Osborne’s Budget seems to be unravelling at both ends – with the right attacking the overall fiscal position, whilst the left within the Conservative Party are increasingly alarmed by the severity of cuts to benefits for the disabled.
On the fiscal position, the Chancellor was open in his speech that the deficit had risen in the last year but still stuck to his commitment to eradicate it before the end of the Parliament. A closer reading of the Red Book shows that a high proportion of that fiscal tightening is all to fall in the final year of the Parliament, and that the smallest fall in future growth would turn the planned surplus into a continuing deficit. And even the Office for Budget Responsibility stated that the chances of the Chancellor getting to surplus by 2020 were 55-45, not much better than a coin toss.
We’ve written before in TWFW about the persuasive theory that whoever wins the Conservative leadership election will abandon the Fixed Term Parliaments Act and go to the country in 2018 or 2019, and these Budget figures make that idea even more compelling. Governments usually ease the purse strings the year before an election, and tighten them the year after. To implement spending cuts and tax rises in 2019, 12 months before polling day is unimaginable, unless of course the 2019 Budget is a post-election one, not a pre-election one. Then it makes perfect sense.
Of more immediate concern to George Osborne though is the reaction to his plans to cut Personal Independence Payments to people with disabilities. The plans echo his failed efforts to cut tax credits, and you do not have to look far in the Conservative Party to find someone uncomfortable with the idea that the Budget cut Income Tax, Capital Gains Tax and Corporation Tax, whilst simultaneously hitting the disabled with a whopping £4.4bn cut in their income. Already the Chancellor is hinting that the plans could be subject to future review, although of course any relaxing of the plans would only worsen the overall fiscal position.
Any Chancellor would probably have found this year’s Budget a hard one, but it does increasingly look like George Osborne is in a particularly sticky situation between the proverbial rock and the proverbial hard place. He’s famed as a great political tactician, and he’s got out of similar scrapes in the past. He’ll need all his famed political skills to do so again.