George Osborne’s Budget was intended to soften his “austerity chancellor” image, but his decision to reverse cuts at the end of the next parliament refocused attention on what he would axe in the meantime.
Ed Miliband, Labour leader, claimed Mr Osborne would “bring public services to their knees”, while the Institute for Fiscal Studies said it was “frustrated” with the chancellor’s failure to say where the blade would fall.
This was not the script the chancellor had in mind. Mr Osborne used his sixth Budget to announce that austerity would end a year early and that £20bn of extra cash would be pumped into public services in 2019-20.
Mr Osborne hoped that by doing so he would fix a political problem: fending off Labour’s claim that public spending as a share of national income would fall to 1930s levels by the end of the next parliament.
Instead, he created a new problem. By boosting spending in 2019-20 he created what the Office for Budget Responsibility called a “rollercoaster” profile for public spending: a big drop followed by a big rise.
Alistair Darling, former Labour chancellor, said: “This is what happens when you try to be too clever by half. You now have a situation where a police force might have to lay off an officer, only to re-engage them a year later.”
Political and media attention quickly moved on to the downhill element of Mr Osborne’s big-dipper plan — a fiscal consolidation of £30bn by 2017-18 — and how he intended to fund it.
The chancellor told the BBC’s Today programme on Thursday that the planned cuts to departmental spending over the next two years would be “at the same pace” as the cuts in this parliament.
He said the OBR had assumed the axe would fall solely on public services and had not taken into account his plans to close the deficit partly by £12bn of welfare cuts and £5bn by closing tax loopholes.
Mr Osborne insists that voters should judge him on his record, and that he has shown he is capable of finding welfare savings. But by excluding pensioners from future cuts, the working-age poor will bear the brunt.
The IFS said it was “frustrated” that Mr Osborne could not give more details and concluded that planned spending cuts for 2016-17 and 2017-18 would be “twice the size of any year’s cuts over this parliament” — if Mr Osborne’s planned welfare cuts and tax avoidance measures failed to materialise.
Mr Miliband said: “Public services and the damage this government will do are on the ballot paper at this election.” Labour claims that Mr Osborne will raise value-added tax or cut the NHS to make the sums add up.
The renewed focus on Mr Osborne’s austerity plans for the first half of the next parliament will be frustrating for the chancellor, whose Budget did not affect by a single penny his plan to cut £30bn by 2017-18.
Indeed, the general conclusion at Westminster of Tory and Labour MPs was that Mr Osborne’s Budget was surprisingly cautious, given that an election is only 50 days away, and contained some welcome measures.
Ed Balls, shadow chancellor, claimed it was a “pretty empty” package, but admitted that Labour would support all of its key measures, including a cut to the personal tax allowance and new tax breaks for savers.
Labour had feared that Mr Osborne’s Budget would include a move to transform the terms of the economic debate. “It hasn’t changed the fundamentals at all,” said one Labour official. “We’re having exactly the same discussion we could have had last week.”
Although some Tory MPs had hoped for more ambitious tax cuts in the Budget, most said it reinforced the party’s key message of stable economic stewardship.
David Ruffley, a Tory member of the Commons Treasury committee, said it was “masterly”, adding: “It was economically grown up and in the national interest, but it was also excellent politics.”
Meanwhile, in an uncomfortable echo of Mr Osborne’s “omnishambles” Budget of 2012, the chancellor was accused by Labour of making a U-turn over a tax break originally aimed at full orchestras.
After Labour claimed the move discriminated against northern brass bands, Mr Osborne intervened to tackle the “trumpet tax” allegation and changed guidance to include musical groups that did not encompass all four main sections: string, woodwind, brass and percussion.
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