British Budget Seen as Conservative Election Statement

Chancellor George Osborne boasts of high growth and tax cuts but the deficit remains high.

Chancellor of the Exchequer George Osborne makes a speech in Manchester, England, June 23
Chancellor of the Exchequer George Osborne makes a speech in Manchester, England, June 23 (HM Treasury)

In introducing his spending plans for the next half year on Wednesday, British chancellor George Osborne drew a contrast between his Conservative Party’s successful economic policy and the opposition Labour Party’s obsession with taxing the rich.

“From his first to his last sentence — from boasting about Britain’s growth to unveiling the coalition’s version of the mansion tax — Chancellor George Osborne delivered his Autumn Statement with not just one eye but both fixed firmly on polling day,” wrote the BBC’s political editor, Nick Robinson.

Osborne told lawmakers in London 3 percent economic growth was expected for this year, making Britain the fastest-growing Western economy. He also reported that half a million jobs had been added this year and unemployment was set to fall to 5.4 percent in 2015 which would be one of the lowest jobless rates in Europe.

“Aware that Labour’s most potent political charge is that the Tories are on the side of the wrong people, the chancellor unveiled a series of tax hits on the rich,” reported Robinson.

Rather than introduce a “mansion tax” on high-value homes, which Labour has proposed to do, Osborne said he would raise stamp duties which are levied when houses are sold. For homes under £250,000, the rate would be 2 percent or less. For homes valued at £1.5 million or more, the rate would be 12 percent.

“That makes it very difficult for Labour to sustain the charge that the Tories are the ‘party of the rich’,” argued The Telegraph‘s Janet Daley.

Osborne’s policy is also fairer than Labour’s, she wrote, “because it will not affect people living in houses that happen to have increased wildly in value over the decades, due to forces completely beyond their control. It will be a one-off charge on those who are purchasing, not a wealth tax which would fall on those who are staying put.”

The money would be used to finance higher spending on health care as well as tax cuts for middle incomes and a further raise in the tax threshold, taking more low-income working Britons out of income tax altogether.

Although Osborne boasted that the deficit had been cut in half since the Conservatives and Liberal Democrats came to power in a coalition in 2010, he has had to revise his original plan to start bringing the national debt down by the time of the next election in 2015.

Borrowing is expected to come down to just over £91 billion next year from £97.5 billion this year. But under current plans, the budget will not achieve surplus until the 2018-2019 fiscal year. Debt as a share of economic output should reach just under 73 percent by then, down from 80.4 percent now.

Yet Osborne did not announce significant new spending cuts. He reiterated his commitment to a two-year freeze in working-age benefits, first announced in October, and rather announced new spending on infrastructure and scientific research.

Still, it is hard for Labour to criticize the slow pace of deficit reduction when their own spending plan entails even fewer cuts and no welfare reforms.

The Guardian‘s Michael White predicted that in the months leading up to the next election, “neither side will be frank about the tough choices needed to curb the annual deficit and lower the accumulated debt mountain after polling day. Cut more? Borrow more? Print more money? If reelected, Osborne will do all three,” he believes. “So will Labour, though it will try to cut less hard and tax the better off more.”

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