LONDON – Austerity remains the U.K. government’s mantra, Treasury chief George Osborne said Wednesday — even as he lauded the stronger than expected economic recovery.
With one eye on the general election in just over a year, Osborne sought to sweeten his budget statement with an effective tax cut for all and sweeping changes to the country’s pensions and savings. But there were no big giveaways, with promises like that likely for the run-up to the election.
“Faster growth alone will not balance the books,” he said. “Securing Britain’s economic future means there will have to be more hard decisions, more cuts.”
In perhaps his most radical announcement, Osborne has loosened the rules on savings plans for retirement accounts —a measure that may appeal to older voters, many of whom form the base of his Conservative Party and who are being tempted by the rival, U.K. Independence Party. Other tax changes, such as raising the level at which individuals pay tax, should, he hopes, appeal to all.
The big hope for the Conservatives, who have governed the past four years with the Liberal Democrats, is that the U.K.’s recent economic rebound will bear dividends at the ballot box.
Following a raft of upgrades to the U.K.’s economic outlook, Osborne said independent figures from the Office of Budget Responsibility are showing growth of 2.7 per cent this year. That’s up on the 2.4 per cent prediction last autumn and makes the U.K. the fastest-growing top seven industrial economies. Osborne also lauded forecasts that the U.K.’s budget deficit will narrow and actually turn to a small surplus by 2018/19.
But Ed Miliband, the leader of the opposition Labour Party, said the government had failed to achieve the economic targets it set itself when coming to power in 2010 and quickly challenged claims the budget will help those struggling with tough economic times.
The annual budget statement is a set-piece event in the British political calendar and is often laced with measures designed to offer a talking point to Britons up and down the land.
Osborne’s statement was no different. A cut in the tax on beer could well raise a cheer in the pub while a freeze on the duty paid on gasoline will certainly be met with relief at the pump. Another attempt to grab the headlines was a cut in the tax on bingo from 20 per cent to 10 per cent. Bingo has many female fans in Britain, and the measure could be seen as an effort to appeal to female voters, particularly those at the bottom end of the income scale.
Osborne also promised that taxes on long haul flights would become uniform, ending an anomaly that gave Hawaii an advantage over the Caribbean, for example.
And in a move that will invoke nostalgia, Osborne showcased plans to replace the pound coin with a 12-sided coin made with two separate metals. It resembles a “threepenny bit,” which circulated in Britain from 1937-1971.
Miliband seized upon the change to pound home the point that the fruits of recovery from the Great Recession were not being spread equally.
“You can change the shape of the pound but it doesn’t matter if the pound is square, round or oval,” he said. “You’re worse off under the Tories.”