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27 November 2015

Don’t let the spin hide George Osborne’s tax rises

Far from U-Turning, Osborne has simply changed the way he hits the working poor.

By Chris Leslie

Nothing should distract from the fact that yesterday George Osborne announced another £28bn of tax rises that will hit working people, families and businesses around Britain.

As is so often the case, the Chancellor had a series of bold claims which began to unravel as soon as we saw the details in the Office of Budget Responsibility (OBR)’s blue book.

Of course, he claimed to have changed his mind on tax credits. But in reality when Universal Credit is introduced, notwithstanding its shambolic roll-out, many of these cuts will still hit working people hard. The independent OBR has made it quite clear that “the cost of the tax credit reversal is more than offset by cuts to a variety of other benefits”.

On social security spending, the Chancellor’s couldn’t even pretend he had a story to tell of sound management. He was forced to admit that he will breach his self-imposed welfare cap – not just for one year, but for three successive years. The Conservatives illustrate how a crude ideological approach, rather than patient and careful reform, is failing to root out the massive costs of fraud and error.

Meanwhile the Resolution Foundation has found that working households on Universal Credit, the replacement for tax credits, will lose an average of £1,200 in 2020, and £1,300 for those with children. 

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George Osborne has now carried out two Budgets and a Spending Review this year and we have had a different plan on each occasion.

As he hastily rewrote his plans over the last few weeks his political allies have tried to hide the chaos by claiming he was in “listening mode” – but after yesterday there will be many more problems to which the Chancellor will have to pay attention.

Look at the detail of his announcements. With that extra £28bn of taxes and an additional £18bn of borrowing, he has veered wildly off the course he set himself.

After being forced to back down on some of his cuts to the police, George Osborne is still hacking away at public services, such as the budget for transport which shrinks by 37%.

By imposing major cuts on business development he will hold back, rather than help boost our economic prosperity. And local authorities have been hit for six with a combination of massive grant cuts and enforced council tax rises which will be harder to shoulder especially in less well-off communities.

The Chancellor’s announcements have already caused the OBR to downgrade disposable income by end of this Parliament, with the productivity rate revised down for three years from 2016 and average earnings also falling from 2016 onwards.

Together these changes show George Osborne has no long-term vision for sustainable growth in output and living standards. Add to this his now depressingly traditional practice of selling off more of the taxpayer’s assets on the cheap – with the Land Registry the latest public body under threat from a cut-price privatisation – and the picture emerges of a Chancellor who will do anything to try to achieve his fiscal targets at the beginning of the Parliament in order to boost his chances of being prime minister by the end of it.

In politics, changing your mind can sometimes be a sign of a strength. Yesterday, however, all we saw was short-termism from a man who might claim to be a modern conservative but delivered a very old-fashioned mixture of attacks on working families, spending cuts and typical Tory tax rises.