George Osborne sets the dividing lines in the UK's budget statement

The Chancellor's budget was very political, but will the other parties fall into his traps?

Chancellor of the Exchequer George Osborne
Harry Cole
On 21 March 2012 14:46

One of Dave's better Prime Minister's Questions outings was understandably overshadowed by today's budget.

The Leader of the Opposition was keeping his powder dry but that didn’t stop the Prime Minister putting the boot in on London Mayoral candidate Ken Livingstone and his taxes, followed by a well timed quip aimed at the Speaker of the House which left John Bercow smiling but stunned.

If Osborne had not spent the last week leaking the details of his Budget, the 58 minutes that he spent at the Despatch Box would have been a rollercoaster of bold moves that has set the political dividing lines for the next three years in Westminster.

Today's show would have resulted in a very big bang were it that we did not already know about every single move included. The new details came in the growth figures which, while not ideal, are not the complete nightmare that the UK could be facing.  

The Office of Budget Responsibility revised growth up 0.8 percent for this year, so a double-dip recession looks increasingly unlikely. They expect 2 percent in 2013 and 2.7 percent in 2014. Borrowing is a bit more bleak.

Though the Chancellor claims it is being reduced, borrowing figures are still astronomical. The government may well be saving £36bn on debt interests this year but the Chancellor confirmed that he will only borrow £14.5m per hour this year. Of course they didn't put it like that.

With the usual bashing for smokers and no treats for motorists there will at least be sighs of relief in pubs tonight as drinkers got away with it this time. Not that they could tax a pint much more without making it completely unaffordable to vast swaths of the nation.

With the numbers being run through, the politics was never far away. With growing anticipation, we all knew where this speech was going.

The details of the budget are already widely known and have been chewed over, but the political implications are yet to play out. Cutting the 50 pence income tax rate now rather than closer to an election makes sense politically. The Labour attacks on such a move will sound rather stale in three years time. Not that that usual stops them trotting the old lines. 

The real weakness in their opposition to this is that Labour refuse to commit to bring the 50p rate back in. Miliband may be often be foolish but it seems he’s not stupid enough to commit going into the next election promising a tax rise. It’s a ball and chain for him in the mean time.

In terms of keeping the coalition sweet, Osborne announced a 'mansion tax' in everything but name. People who buy properties over £2m will be seriously whacked on stamp duty with a rise to seven percent if the property is transacted personally, but a whopping 15 percent if a company is used as loophole. In real terms that is £300,000 for every house sold. Not only does this keep the greedy hoarders on the left of the Liberal Democrats sweet, it also blunts attacks that this budget was helping the rich. Our housing market is probably strong enough to take the hit, especially in London, but I would not be surprised if there was a bit of stutter in the coming years.

While keeping the Liberal Democrats happy, Osborne was not afraid to set them, along with Labour, a few traps as well. The Chancellor has promised another £10bn in cuts to welfare over the next decade. That means a pledge to continue slashing this overblown cash drain over the next election. Will the yellows back it? You can bet the reds will make a mess of whatever decision they make on the issue.

In many ways Osborne’s political trappings style, as well as the odd bit of illusion, was very similar to some of the tricks pulled by his predecessor and nemesis Gordon Brown.

Having shadowed him for so long that he seems to have picked up a few moves. Take for example the unpopular move  that will see pensioners personal allowances frozen at £140 week. Osborne described this blow as “simplification.” Cheeky.

Though the comparisons to Gordon can only really stretch to style, lets not forget that the very people that Brown increased tax on - the 10 pence rate payers - have now been taken out of tax all together with the personal allowance rise to just shy of £10,000. Two million people will now have money in their pocket to spend. This budget will apparently bring in five times more money every year despite the top rate tax cut. If the Gordon analogy is to continue then this will unravel in the coming hours, but Labour are going to have try harder than simply calling it regressive.

The one and only gag did hit the spot. In reference to tax breaks for film, TV and video game producers Osborne quipped while staring Balls and Ed directly in the eye: “This government wants to keep Wallace and Gromit exactly where they are".

They didn’t laugh, but everyone else certainly did. The gag was almost worth the millions of pounds it cost in bungs to the entertainment industry that will be required in order for him to have been able to make it.

One lingering question remains, if the 50p tax rate damages the economy then why isn't it being cut this April of this year rather than waiting until 2013? The hit has already been taken so why not go for it immediately? Told you the politics was never far away...

Harry Cole is the UK Political Editor for The Commentator and UK News Editor for the infamous Guido Fawkes blog. You can follow him on Twitter at @MrHarryCole

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