Osborne’s Budget bribes

George Osborne started off well in his final Budget of this government, says Merryn Somerset Webb. Then came a list of mini bribes.

When Chancellor George Osborne stood up to give the last Budget of this government this week, he described a country I really want to live in. One that is working on cutting its risk by bringing the size of the state back to a level that can be financed by its tax take.

One with an economy rebalancing away from financial engineering and towards productive business; away from the south towards the north (apparently a job is being created in the Midlands every ten minutes); and away from humouring the non-productive via the overblown welfare state in favour of rewarding the productive.

And one in which budget gimmicks and giveaways have been dumped in favour of fiscal discipline. The sun is starting to shine on the UK, he said, "and we're fixing the roof". It was a pretty good start.

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But the actual Budget didn't live up to the promise. First, look at how much the UK still overspends. In 2014, central government expenditure per person was around £10,000. But revenues came in at only £9,235 per person. So, even in Osborne's new world of fiscal responsibility, we spend £765 per person more than we get in tax revenues, says the Economic Research Council.

That doesn't include the state's unfunded liabilities, and at some point we have to pay down the actual debt too. Osborne has made a good start, but as several commentators have noted, even as he fixes the roof he needs to remember our foundations are still pretty shaky too.

Having been less than 100% clear on the UK's debt woes, Osborne moved on to the tweaks and gimmicks we hoped we wouldn't see. He cut the pensions lifetime allowance to £1m, introducing yet more complication and guesswork into pension savings.

Then he announced the help-to-buy individual savings account (which tops up the cash of a first-time buyer saving for a deposit on a house with taxpayers' money).

This is a shameless attempt to buy the votes of the young rather than actually help them. The policy not only screams administrative nightmare (what if they change their minds?), but is useless for its stated purpose.

If Osborne really wanted to help first-time buyers, he wouldn't be handing over free money to compensate for rising prices. He'd find a way to cut prices by giving retirees an incentive to downsize, by doing something to bring small housebuilders back into the market, or by getting interest rates up. That would be real help to buy. This is just help to bubble.

Then came a list of mini bribes the flexible Isa, the £1,000 savings income allowance, and the reiteration of the attempt to offer pensions freedom to annuity holders.

The end result? Osborne leaves behind a "longer and more complicated tax system than he inherited", says Gary Richards of Berwin Leighton Paisner. That seems a shame after such a good start.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.