The truth about George Osborne’s Budget - Ed Miliband

Ed Miliband MP, Leader of the Opposition, responding to today's Budget, said:

“It’s not the Chancellor that’s rescuing the country. It’s the country that needs rescuing from this Chancellor.”

This is a no growth Budget. One fact says it all: growth is down last year, this year and next year.

What we learned today is that George Osborne's plan to cut too deep and too fast is hurting, but it's not working.

On the cost of living, it’s the same old Tory con. As the IFS said today he’s “giving with one hand... and taking away with lots and lots of other hands”.

He’s promising a £45 tax cut next year, but he’s taking away £450 from families with children in higher VAT this year. And he’s cutting fuel duty by 1p, but VAT is adding 3p to the cost of a litre of petrol.

So it’s hurting. But it’s also not working. The independent budget watchdog's verdict on today’s Budget is clear: this so-called growth plan won’t work.

Growth is down last year, this year and next year, inflation is up, unemployment is up and that's why the government will be borrowing £44.5 billion more over coming period.

So this plan will actually make it harder to get the deficit down.

Instead of giving the banks a tax cut this year he should have repeated the bank bonus tax to create over 100,000 jobs, build 25,000 affordable homes, rescue construction apprenticeships and boost investment in businesses.

These cuts are too deep and too fast, they’re hurting families, they’re damaging our economy and George Osborne needs to think again before it’s too late.

The Truth: Growth down, borrowing up, and unemployment up.GROWTH DOWN LAST YEAR, THIS YEAR, AND NEXT YEAR

GDP (% change)
	2010	2011	2012
Autumn Forecast	1.8	2.1	2.6
Budget 2011	1.3	1.7	2.5
Change	-0.5	-0.4	-0.1

BORROWING UP BY £43.4

Public Sector Net Borrowing (£ billion)
	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16
Autumn Forecast	148.5	117	91	60	35	18
Budget 2011	145.9	122	101	70	46	29
Change	-2.6	4	10	10	11	11

HIGHER DEBT INTEREST PAYMENTS AND £17.6bn HIGHER DEBT INTEREST

Central Govt Gross Debt Interest (£ billion)
	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16
Autumn Forecast	42.7	44	48.6	53.5	58.9	63.1
Budget 2011	43.1	48.6	50.9	56.6	62.4	66.8
Change	0.4	4.7	2.2	3.1	3.5	3.6

UNEMPLOYMENT UP EVERY YEAR BY UP TO 200,000 PEOPLE comparison of Supplementary Forecast Data from November and today’s OBR forecasts shows that in both A Q1 2013 and Q4 2013 ILO is revised up by 200,000.

See http://budgetresponsibility.independent.gov.uk/econ-fiscal-outlook.html and http://budgetresponsibility.independent.gov.uk/econ-fiscal-outlook-march.html.

ILO Unemployment (% rate)
	2011	2012	2013	2014	2015
Autumn Forecast	8	7.7	7.2	6.7	6.1
BUDGET 2011	8.2	8.1	7.6	7	6.4
Change	0.2	0.4	0.4	0.4	0.3

HIGHER UNEMPLOYMENT MEANS A HIGHER BENEFIT BILL
SOCIAL SECURITY BENEFITS UP BY £12.6 BILLION OVER THE PARLIAMENT

Social security benefits (£bn)
	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16
Autumn Forecast	169.3	174.5	177	176.5	181.2	188.1
Budget 2011	169	174.3	179.4	178.9	183.2	189.3
Change	0.6	0.6	3.2	3.2	2.9	2.1

The truth: How few people benefit from this Budget

It will do nothing to help first time struggling first time buyers.

According to Shelter the first time buyer announcement benefits less than one per cent of people struggling to get on the housing ladder:

“Today’s announcement will help less than one per cent of people struggling to get on the housing ladder, leaving them more likely to win the lottery than be helped through this small-scale scheme.”
Campbell Robb, Chief Executive of Shelter, 23 March 2011 - http://england.shelter.org.uk/news/march_2011/budget_offers_little_help
It will do nothing to help small businesses:

R and D tax credit changes benefit fewer than 7,000 (http://www.hmrc.gov.uk/stats/corporate_tax/rd-numberofclaims.pdf) small businesses out of 5 million (4.8 million to be exact: http://stats.berr.gov.uk/ed/sme/).

The increase in entrepreneurs’ relief benefits just a few hundred people. (Just 2,000 people make cgt gains of more than £1 million: http://www.hmrc.gov.uk/stats/capital_gains/table14-3.pdf)

It will do nothing to benefit charities:

The Inheritance Tax change on donations will benefit hardly any charities at all because fewer than 16,000 people pay inheritance tax (16,000 taxpayers each year: http://www.hmrc.gov.uk/stats/tax_receipts/table1-4.pdf).
It will do nothing to help reduce youth unemployment, which currently stands at historic levels:

New apprenticeships help just 12,500 young people each year (Budget 2011, p.33) out of nearly 1 million youth unemployed (http://www.statistics.gov.uk/pdfdir/lmsuk0311.pdf p2).

The Truth: A Budget of smoke and mirrors
This was a Budget of smoke and mirrors designed to deflect from the reality that the Tories are breaking their promises and hitting people hard.

George Osborne said today that he didn’t need to ask the British public for any more and that this was “not a tax-raising Budget”.

“But we have already asked the British people for what is needed, and today we do not need to ask for more. So this is not a tax-raising Budget.”

George Osborne, Budget statement, 23 March 2011
But this ignores the fact that his decision to index direct taxes by CPI from April 2012 is a tax rise - netting the Treasury £1bn by 2015-16 and hitting hardworking families up and down the country.

Looking just at direct taxes, even taking account of the personal allowance changes, the Chancellor today raised more than he is giving away Personal Allowance: - 1230, CPI Switch +1080 and NICS +610 (Budget 2011, Page 42).
Pensioners get no benefit from the increase in the personal allowance:

George Osborne is raising taxes by more than he is increasing the personal allowance.

But what he didn’t say in his Budget is that pensioners won’t benefit by a penny at the same time as they’re having to deal with a higher rate of VAT.

The idea that drivers should be grateful for a 1p cut in fuel duty when George Osborne’s VAT rise is adding 3p to the price of petrol is laughable.

When people fill up their cars this weekend, they should remember £1.35 of the cost is because of the Tory VAT rise.

Figures from the independent House of Commons Library show the VAT rise has added nearly 3p cost of a litre of petrol – around £1.35 to the cost of filling up a 50 litre tank with fuel.

House of Commons Library figures also show that under the last Conservative government between 1990 and 1997 the tax take from unleaded petrol rose 16 percentage points from 59% to 75%.

The table also shows that under the last Labour government – between 1997 and 2010 – the percentage tax take fell from 75% to 65% The table can be found on page 11 here: http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/snsg-04712.pdf.

George Osborne knew he didn’t have a Budget for growth which is why he panicked at the last minute. The OBR have let slip that he added the corporation tax cut at the final moment and have cast doubt on whether this measure will affect growth:

“B.13 The OBR was notified of the change to corporation tax and the 1p cut in fuel duty from 1 April 2011 too late to incorporate any indirect effect of these measures in the economy forecast. However, we believe any such effects would have been minimal.”
Budget 2011 Policy Costings, (p.75) - http://cdn.hm-treasury.gov.uk/2011budget_policycostings.pdf