Almost all the ‘good news’ in the Budget was leaked in advance. Lib Dems won a large increase in the personal allowance by 1,100 to within ‘striking distance’ of £10,000, Tories saw an end to 50p top rate, and there has been rewriting of the child benefit changes.
So the story of today’s budget is the detail of the news, the bad news anomalies and what wasn’t said.
First of all, there will be disappointment amongst Tories that there was nothing in the speech to suggest George Osborne intends to remove £150,000 band altogether. While these earners will see the top rate drop from 50p to 45p, there is nothing formal to suggest it will reduce it to 40p. After the Budget, the Chancellor’s spokesman signalled there were no plans for an early cut. He said the 50p highest rate had always been described as ‘temporary’, but this word was not applicable to the new 45p rate.
Secondly, a bear trap for Lib Dems. The Treasury has done some of the early preparatory work for the 2014 Comprehensive Spending Review. This is already a hugely difficult subject for the Lib Dems, because they must decide whether to match or reject the cuts. Now the Treasury has said that a further £10 billion will be needed from welfare bills between 2014 to 2016. Will they match this?
Thirdly, one of the biggest losers of the budget are pensionsers. Around 4.5 million - 48-53 per cent of pensioners - will see their personal allowance frozen. Branded a ‘simplification’ by Mr Osborne, they are spinning that there will be no cash losers, but they will be worse off than they would have been. Some will lose £63, new pensioners will lose £197.
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Fourthly a large part of the Budget is funded by ‘reforecasting’ done to reflect the end of military operations in Afghanistan which were due to come from the Special Reserve.
Finally, the number of higher rate taxpayers is going up starkly, to ensure higher rate taxpayers do not get the full benefit from the higher starting threshold for the personal allowance. Around 200,000-300,000 people will now be higher rate taxpayers as a result.