Mr Osborne's plan for austere times ahead

12 April 2012

The Chancellor, George Osborne, declared at the close of his Budget speech that he saw no difference between a Budget to help relieve the burdens on hard-pressed families and one to boost enterprise and growth.

He has tried to do both, notwithstanding a dispiriting fall in growth forecasts: he predicted growth of 1.7 per cent this year, down from the 2.1 per cent he forecast last year.

But his emphasis on encouraging business and attracting investment gives this set of measures a more forward-looking feel than his last Budget, where the priority was squarely deficit reduction.

For business, the Chancellor presented himself as a friend, declaring that his aspiration is to make Britain the most hospitable place to do business among the major economies. Tax cuts are central to that aim, and he is reducing corporation tax by two per cent in April and by even more for favoured companies. This should give the country greater appeal to investors. He is also attempting to reduce the regulatory burden on business. And he has begun with a radical simplification of the tax system.

The Tory Right may take heart from his declaration that the upper income tax rate of 50 per cent is a temporary measure. Yet at the same time he is to take more from long-term non-doms - a measure aimed, like clawing back the money that banks save on lower corporation tax, at forestalling criticism that the Budget favours business over ordinary people. He has increased the number of enterprise zones to 21, including one in London, a measure that acknowledges that some regions need particular help.

But while acknowledging the importance of London as a financial centre, he is also explicitly trying to bolster manufacturing. One way he wants to do so is by increasing the number of apprenticeships and creating more vocational-technical universities. It will take time for that investment in people to pay off, but it will eventually.

However, his loosening of planning restrictions will play badly with some communities and is hard to square with the principles of the Government's own Localism Bill.

At the same time, he managed to make the Budget seem progressive, in some respects. He has advanced towards the Lib-Dems' aspiration of lifting workers on less than £10,000 a year out of tax altogether by raising the tax threshold to more than £8,000 from next year.

The change will make most people only a little better off, but still, more than a million people have been taken out of tax. This aim is a better, simpler way of lifting people out of poverty than Labour's preferred means of bureaucratic tax credits.

The move to integrate tax and national insurance was well-heralded. That too makes for a more transparent tax system, although, prudently, the Chancellor favours an extended period of consultation. Mr Osborne's support for both Lord Hutton's proposals on public sector pension reform will not play well with unions, but his endorsement of a simplified universal pension of £140 a week is a useful advance. Meanwhile car drivers will cheer the reduction from 6pm tonight of a penny per litre in the cost of fuel and the scrapping of the fuel escalator.

This budget was made by a Chancellor with little room for manoeuvre. Within those constraints, he has made useful moves to help businesses. Now he must hope that they create the growth that he so desperately needs to mend the public finances and get the economy back on track.

Charity at home

One of the less-noticed but most welcome elements of the Budget is its encouragement to charitable giving. Tax on inheritance will be reduced for those making gifts to charity, while red tape on small Gift Aid donations is to be scrapped.

Charity begins at home - but it needs a gentle push from Government and it is good to see the Chancellor pushing.

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