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Edmunds DonnaDonna Edmunds is Head of Media for the Bow Group. Before the budget, she laid out her recommendations for a return to supply side economics in a Bow Group Briefing
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Osborne
has made it easy to damn with faint praise; budget 2013 was his best yet. After
last year’s omnishambles budget, Osborne was clearly keen to avoid Pasty Tax
II: The Return of Scrooge. Rather, he attempted to demonstrate that he was
listening, and yes, that we’re all in it together, with another freeze in
petrol duty and a penny off beer tax.

These
are welcome measures, particularly for Robert Halfon MP who can view the petrol
duty freeze as a personal victory, but the budget as a whole will do little to
quell unease on the Tory backbenchers over the next year, especially if the
growth forecast of a meagre 0.6% turns out to be optimistic. Looking at the
OBR’s growth predictions over the next few years – 1.8 per cent in 2014, 2.3
per cent in 2015, 2.7 per cent in 2016 and 2.8 per cent in 2017 – Macawberish
optimism seems to be the name of the game. The figures are based on an
assumption that rising wages will increase disposable incomes from 2015
onwards, but it’s unclear why either the OBR or the Chancellor believes that
wages will rise in real terms. The OBR also expects employment figures to rise,
but the private sector job market has only expanded because real term wages are
dropping so it’s unlikely that both wages and the job sector will increase
without a change in a third factor. Yet that nebulous third factor was not
delivered in this budget.

So
where does the Chancellor believe that growth will come from? The cut in
Corporation Tax to 20 percent demonstrates some understanding on his part of
the concept that tax cuts stimulate the economy, but he then delays the tax cut
to 2015. Why the prevarication? If Osborne accepts that these measures are
needed, why does he think that delaying them will help with the recovery?


Yet
there is a more fundamental problem with this budget than the fact that much of
it was merely tinkering on the side lines. ConservativeHome has noted that, when
it comes to the economy, there are three groups within the ranks of
Conservative MPs at the moment:  “There is the cost of living caucus,
whose main concern is the squeeze on household budgets. Then there are those
whose primary worry is this country’s long-term competitiveness. Finally, there
are the revolutionaries who want a whole new approach. Osborne knows he can’t
satisfy this last group. But he thinks that if he can please the first two,
he’ll be all right.” But the Budget isn’t a tool for keeping a party in line,
it’s a plan for the economic outlook of a whole country and everyone in it. Osborne
should be thinking less about name checking one or two of his fellow
Parliamentarians, more about how the measures within the budget will affect the
budgets of voters up and down the country during the 26 months until the next
general election.

Those
of us interested in politics have been lamenting for years that voter turnout
at the ballot box is falling year on year. We blame apathy, a lack of
education, an increasing obsession with gadgetry and entertainment, a ‘dumbing
down’ of the population. The cause is none of those. Rather the electorate are
increasingly aware that politicians are talking to, and acting in reference to
each other only. If politicians show no interest in the electorate, why should
the electorate show any interest in politicians?

And
that is why, despite the rhetoric on aspiration, this was such a weak budget
overall. First time buyers (and ceramicists) will take heart from the measures
aimed squarely at them, but continued inflation of the housing bubble and
further complication of the tax code through breaks for certain industries will
not help the economy as a whole. And in the long run, that means that they
won’t even help the individuals that the policies are aimed at. Likewise the
raise in personal income tax allowance to £10,000 – what good will an extra
£700 a year do if £400 of that is taken away by the VAT rise, and the rest by
inflation driven in part by QE? The answer is that it won’t do any good, not
for hardworking aspirational people across Britain, and ultimately therefore
not for the Chancellor come polling day 2015. 

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