The Back to the Future UK Budget

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By Gerry Hassan, The Scotsman, March 22nd 2012

George Osborne, rather like Gordon Brown, thinks of his Budgets, in acutely political terms and calculations.

The top rate tax cut gives a boost to 328,000 people, whereas the stamp duty hikes could at most affect 4,000 people – 1% of those at the top getting tax cuts. And that is if they all decide to sell their houses. In November 2011 a mere 121 homes were sold worth £2 million or more, 98 of them in London.

Osborne presented this as a measured, pragmatic Budget, but his road of travel is clear. Millions of taxpayers may have had their thresholds raised, but massive public spending cuts and welfare cuts are coming, of which he said absolutely not one word.

Pensioners are being hit by having their tax thresholds frozen. ‘Middle Britain’ is seeing its income squeezed as the 40% tax rate draws in more and more people, while he obsesses about the tiny group of super-rich taxpayers.

Why this is happening isn’t an accident of some supposedly insensitive Chancellor. It is a direct product of a broken British political system, and a Tory Party entrenched in the South East of England which knows little directly of the North of England, Scotland and other parts of the UK.

Who they listen to is even more narrow and unrepresentative. Cameron, Osborne and the Tories after their successful rebranding of themselves as ‘compassionate Conservatives’ now interpret ‘modernisation’ of the party and country as being the ‘restoration’ and acceleration of the Britain pre-crash, the liquid economy and democracy of focusing on the global winners.

In this he is aided by a merry band of revolutionaries who are attracted to the flat tax revolution spreading round emerging economies such as the former Soviet bloc. With their obsession with the Laffer Curve they are the new flat earthers who constantly cite that the lower the taxes on the rich the more the take. This misses that in a completely unequal economy, where for example the richest 1% had all the income and wealth, they would obviously pay more tax than in a more equal society.

British politics are now shaped by a set of dynamics which have been clear from the 1980s, the Tories unashamedly placing themselves as the party of London, the South East and the City. Cameron and Osborne are taking a bigger gamble than Nigel Lawson in 1987 and 1988, who rewrote the tax book on the back of rising incomes. This time the Tories have the Lib Dems as their human shields to provide some progressive cover.

There are some welcome initiatives in the Budget. We did see the final agreement between the Scottish Government and UK Government over the Scotland Bill and the limited, flawed fiscal autonomy it proposes.

Yet in reality this Budget makes the case for Scotland taking as many economic levers into its own hands, to counter the truncating and distortive effects of Westminster politics and its South East obsessions. But just as importantly, it calls out for developing alternative economic ideas which break with the failed ‘Britain plc’ and articulate more than just making our own small Scottish version of this world.

Courtesy of Gerry Hassan – http://gerryhassan.com