Budget verdict: not too bad

George Osborne may not have delivered the radical Budget we dreamt of, says Merryn Somerset Webb, but there was still quite a lot to approve of.

This week's Budget was well trailed. We knew George Osborne would introduce a few policies of which we thoroughly disapprove. The new inheritance tax (IHT) allowance for houses, for example. The British are quite obsessed with houses enough already. Any rise in the IHT allowance should have been a general one: what makes a "family house" more important than a favourite picture or classic car? It's silly, to say nothing of mildly unkind to those who haven't indulged in the UK's top hobby of constantly upsizing and hoping to make tax-free capital gains.

Then there is the cut in pension tax relief allowance for those earning over £150,000 (tapered from £40,000 to £10,000). This will be an administrative nightmare for high earners (many of whom won't know how much they earn in a year until that year is nearly over) and for their accountants. It's a complicated crowd pleaser of the kind I wish governments would have the confidence to give up. And of course there are the changes to dividend tax. Why so complicated? Why not just tax dividends as income at the same rate as income and be done with it?

That said, we also find quite a lot in the Budget to approve of. We have long campaigned for a rise in the minimum wage to stop the taxpayer subsidising the profits of big corporations via tax credits. So we like Osborne's new living wage policy.

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We have also often noted that it is not possible for productivity in the UK to improve without a shift from high welfare (that creates an incentive for part-time work) to higher wages. So we think we like Osborne's reform to child tax credits, housing benefit, the benefits cap and the new obligation for the young to "work or learn".

Finally, we're very interested in the cut to the tax relief buy-to-let investors can claim. Read Andrew MacNally's column and you'll get a sense of just how wrong it is for us to use our tax system to create an incentive for using debt over equity. Buy-to-let investors will complain, saying that they are businesses and should be able to write off interest as other businesses do. We hope things are moving the other way that future budgets will stop all businesses claiming tax relief on interest and that our economies will become more stable as a result.

This wasn't the radical Budget we allowed ourselves to daydream of on Wednesday morning. No huge shift towards taxing unearned wealth over earned. No cancellation of all taxes bar a land value tax. Not much simplification at all. No sweeping away of government departments we don't much need (see my interview with Douglas Carswell next week for more). No caps on the total amount of all tax reliefs anyone can claim. And no solutions to intergenerational inequality, the democratic deficit inherent in modern central banking (see cover story), the over-reaching of the NHS or the (entirely related) vast public debt. But in all, it moved enough things in the right direction to have been worth watching.

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.