After the Budget, the questions for George Osborne

George Osborne says he will set out more details of the Tory economic policy in the coming weeks. There are some key questions he needs to answer.

In his media round this morning after yesterday’s disappearance, George Osborne outlined that the Conservative party would set out more details on their economic policy in the coming weeks. With speculation already rife, there are some key questions he needs to answer.

First, Conservative Home reads the tea leaves this morning and speculates that Osborne will “cancel Labour’s NI increase as part of pre-election promises”. The National Insurance Contribution increase will kick in in 2011-12 and equates to a 1 per cent increase for employers, employees and the self-employed. According to Tables A2 and A11 of the Budget, the total rise will come to £9.0 billion in 2011-12 and £9.4 billion in 2012-13.

Will George Osborne cut Labour’s NICs rise? If so, will he pay for it with additional spending cuts or alternative tax rises, perhaps a further rise in VAT?

Second, on Sky News this morning and elsewhere, George Osborne attacked Alistair Darling’s stealth tax. But as Dharshini David of Sky News points out:

Tax allowances are traditionally linked to RPI (inflation) in the September before. In Sep 2009, RPI was negative (-1.4%) so there was nothing unusual about freezing thresholds for the coming year … inflation may now be rising by 3.7% but wages are only rising by 0.9%, according to the last figures..

But if the Tories had, as the claims infer, raised the tax thresholds by 3.7% now, it would have effectively have been a tax giveaway, with more money in our pockets – and bill to the public sector of £2.2bn.

Will George Osborne raise the income tax threshold by 3.7 per cent? If so, how will he pay for it?

Third, George Osborne reiterated again on the Today programme that a Conservative government would begin cutting in 2010-11 and would eliminate the “bulk of the structural deficit over the lifetime of the Parliament”. But he could not say how much further he would beyond the Government’s plans to bring the cyclically-adjusted deficit down from 4.8 per cent this year to 1.3 per cent in 2014-15. Ken Clarke gave more detail last week when he agreed with the European Commission that the Treaty Deficit, a separate measure, should fall to 3 per cent by 2014-15 (it is projected to hit 4.2 per cent).

Analysis by Left Foot Forward yesterday showed that achieving Clarke’s goal would require a fiscal consolidation of £78 billion by 2013-14, compared to Labour’s plans to remove £57 billion. Given Osborne’s indications that spending cuts would make up 80 per cent of the consolidation, there would be £62 billion of spending cuts compared to £38 billion under Labour.

Does George Osborne share Ken Clarke’s view that the Treaty deficit should come down to 3 per cent by 2014-15? If so, what else will be cut to make up for it?

UPDATE 11.32

Fraser Nelson has written a thoughtful piece on “Osborne’s weak response” for the Coffee House blog.

33 Responses to “After the Budget, the questions for George Osborne”

  1. House Of Twits

    RT @leftfootfwd After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  2. James Cowley

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  3. George

    RT @leftfootfwd @jamescowley ..Qs George Osborne http://bit.ly/azREQq <We are taking the caravan abroad & will decide when we get there.

  4. sophiaparker

    great post RT @leftfootfwd After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  5. MyDavidCameron

    RT @leftfootfwd After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  6. Ellie Gellard

    ABSOLUTELY RT @leftfootfwd After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  7. James Green

    Tough questions for the Tories RT @leftfootfwd After the Budget, the qs Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  8. Quietzapple

    RT @GeoOsborne: RT @leftfootfwd @jamescowley ..Qs George Osborne http://bit.ly/azREQq <We are taking the caravan abroad & will decide …

  9. zohra moosa

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  10. Kasch Wilder

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  11. Rezina

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  12. Political Scrapbook

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  13. Chris Paul

    RT @houseoftwits: RT @leftfootfwd After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  14. nam

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  15. Billy Blofeld

    So after Darling cynically failed to answer the questions that matter in the budget, all eyes are on Osborne.

    I fully expect that we will reach polling day without any politicians spelling out how they are going to repair the economy that Labour has so thoroughly destroyed.

  16. nam

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  17. Rob

    Why are all the comments in these articles just RT of the damn article. It gets really annoying after a while when you want to scroll down to get peoples views and all you get is a load of regualars RTing.

  18. Liz McShane

    Why did the Tories not let George Osborne respond to the Budget..? Or is that a rhetorical question?……

    Rob – I couldn’t agree more!

  19. bruthamyles

    Questions for Osborne from @leftfootfwd. http://trunc.it/6nswi

  20. Mr. Sensible

    In response to your question Liz, it is commons tradition that the leader of the opposition, rather than the shadow chancellor responds first to the budget in the house.

    Osborne’s comments are just a series of unfunded half-baked comments.

  21. Liz McShane

    Mr Sensible – thanks for the clarification – I am a bit rusty on Parliamentary protocol! Shame though, it would have been great to see GGO wobble like jelly!

  22. Tom Fox

    RT @leftfootfwd: After the Budget, the questions George Osborne must answer about his tax & spend plans http://bit.ly/azREQq

  23. El Sid

    Truly Will Straw is an enemy of the working class if he thinks a tax on jobs is a good idea. Just about anything would be better than increasing NIC, which will permanently deprive about 90,000 people of jobs in 2012, and a similar number in each of 2013, 2014, and so on. So by the next election this one tax rise could have put over 300,000 people on the dole. How can this possibly be a good idea?

    Wasn’t a great performance by Osborne, but at least he was prepared to be accountable to the people. And at least he’s basing the 80/20 cuts/taxes on proper research from the OECD. Will Straw seems to be ignoring the evidence base and seems to be basing his support for Labour’s 67/33 on nothing more than wishful thinking, when the evidence is that 67/33 will damage the economy unnecessarily. But then he has the luxury of not being one of those people who will be thrown out of work by that extra bit that gets taken out of the economy in the difference between 67/33 and 80/20. He might want to think of the people who will have their lives destroyed by his wishful thinking.

  24. Mr. Sensible

    Liz, I think DC did plenty of wabbling for Osborne.

    And El Sid, perhaps you can tell me how Osborne plans to fund reversing these tax increases?

    The trouble is they make a lot of noise and say nothing.

  25. Evidence based? Really?

    I love how it’s the view of a “non partisan blog” to lambaste a politician who has said that he will reveal plans within the next week, but their guy in Government, who in a BUDGET (once more for emphasis; A BUDGET) said next to nothing compared to previous budgets and for what is desperately required.

    If you want to be a partisan subsidiary of the Labour Party, at least be man enough to admit it.

  26. Budget winners? Small business & the role of the State | Left Foot Forward

    […] too great by Mr Darling and co. A shame, but no great political hit taken; Mr Osborne’s attempts this morning to distinguish his own vague plans from those of the government were even weaker than could have […]

  27. El Sid

    Mr Sensible – I don’t speak for Osborne, in fact I’m not even a member of his party. Given that he hasn’t even said that he’s going to reverse the increase in job tax, it would be surprising to hear him saying how he’s going to pay for this thing he hasn’t proposed yet. But no doubt he will have a modest proposal for single mothers to sell their babies to be eaten by hedge fund managers or something.

    Personally – I would reverse the increase. In fact, if I was Chancellor, we wouldn’t be looking for ways to inflict £9bn/year of extra taxes on a struggling economy, because I wouldn’t have wasted money from the structural deficit on a one-off reduction in the price of plasma TVs that created a boost of at most 30k jobs for one year. And I’m not just saying that with hindsight, at the time I had a list of several things that would have made for a more efficient stimulus with greater long-term benefits.

    However, we are where we are. I would treat this £9bn just like any other £9bn of the structural deficit. I think we can agree that the priority is to minimise the damage on the economy, no? In turn that means an 80/20 split of reductions in spending and tax. In some ways, I don’t care _where_ the £1.8bn of extra tax falls, just about anything would be better than taxing job creation. But the simplest way to do it would be to replace a penny of employer NIC with a penny on income tax, thus giving employers the flexibility to easily pass on their saving to employees or create new jobs as best suited their needs. I don’t like increasing income tax, but it’s still less bad than increasing the job tax.

    In fact if I was Chancellor, this would be small scale stuff, I’d rip up most of the tax system and redesign it from scratch. A long-term aim would be to get rid of employer’s NICs altogether, you could try to do it counter-cyclically, say 1% in each year that the ‘economically inactive’ number are forecast to be >7 million. I’d merge employee NI and income tax – these days there’s little to distinguish them so you might as well just be honest about it and call it all income tax – plus turn coucil tax into local income tax. Gets rid of another bureaucracy and matches tax better with the ability to pay. I’d increase the threshold to £8k-ish initially (and ideally ultimately to £10-11k) to reduce the marginal tax rate on those going from benefits into work, paid for by synchronising the VAT rate with France and Germany, up in the 19-19.6% range.

    And a whole load of other changes, but that’s really by the by. The question was asked about the £9bn of job taxes, a complete overhaul of the tax system is going a bit beyond a “mere” £9bn…. 🙂

    At the moment it would be better to tax just about anything than tax jobs. If you’ve got to raise £9bn from somewhere then even 2.6p on the basic rate of income tax would be less bad than increasing employer NICs. There’s certainly logic in synchronising our VAT rate with that of Germany and France in the 19-19.6% range. It’s not nice, but it harms the economy less than a NIC rise.

    In fact, the question would be

    Of course, it w

  28. Mr. Sensible

    El Sid, I believe Osborne has said he wants to scrap it, but hasn’t said how he would fund his pledges.

    And on VAT, I believe Ken Clark did support it and now the Tories have a go at it.

    That is how all over the place they are.

  29. Mr. Sensible

    I would venture to suggest that increasing VAT rates again might do more damage to retail.

    Without the VAT cut and the rest of the stimulous our economy would be in more trouble.

  30. Graeme Kemp

    Question 1 after the election (if Tories win): george now you’ve messed things up, how long do you intend to stay?

    Vote Labour……… !

  31. Jeremy Poynton

    Um, cutting a tax on jobs is not a “cut”.

    Beardy bloke on a bike. Is this the best Labour can come up with?

  32. Jeff

    It’s a logical mistake, nearly always made by politicians and their enthusiasts, to equate “reduced increase” with “cut”.

  33. Blogging the election | Left Foot Forward

    […] themselves “progressive conservatives” but does this stack up in practice? Do their economic policies genuinely help create jobs and reduce inequalities? Will their foreign policy, for example over […]

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