The Summer Budget
As you can imagine, the summer budget was not entirely to my liking. I’m not sure what my reaction would have been had it been.
But it’s not quite as bad as I expected, and contains some interesting and good surprises.
If I were Chancellor, I’d cut inheritance tax allowances, not extend them. But I’m relieved that his latest extension (“for the family home”) is going to be transferable when home is downsized. The biggest weakness with the proposal as leaked is that it would lock old people into unsuitable family homes when they should be downsizing to some form of sheltered housing. In the announcement, he’s recognised that problem and said he will allow for it.
The Northern Powerhouse is another good thing. I think these things should be done by a more deliberative constitutional process, rather than by the Chancellor freelancing. But however it’s done, it’s a good thing; and the announcement that there’ll also be a midlands powerhouse is very welcome. What we now need is proper devolution to these powerhouses – and devolution to London. Osborne’s politics has always been better than his his economics.
His attack on working credits however is a disgrace. What it does is increase the marginal effective tax rate for those moving off benefits and into work. The corresponding change to the minimum wage – the introduction of a new higher minimum wage, which he has disingenuously called the National Living Wage – will not be sufficient compensation.
This shows that resolving the problem of the poverty trap is expensive – we always knew it would be, and Working tax credit didn’t finish the job. But while its there, we will get both the social and the economic fallout of this glaring discrepancy in the marginal tax curve.