Pensioners put on a tight Budget

The Budget commended to the House by George Osborne, whatever it may be economically, is politically savvy.  To accommodate changes to income tax, Osborne came down relatively hard on pensioners (smokers and alcoholic drinkers too but they are seen as responsible for reducing or quitting their habits).  By freezing the tax-free allowance for OAPs, five million pensioners will be worse off.  However, older people are more predisposed to voting Conservative than for other parties, so while they may grumble and grind their teeth at this hit, they won’t be driven into voting for Labour in forthcoming elections.  Also, pensioners tend to save money in their bank accounts rather than splash out on it and spending is one component of what the economy needs to return to robust growth.  Essentially, despite all the hoo-ha about a ‘Granny Tax’, this section of the population can be taken for granted by the Chancellor (up to a point).

The Liberal Democrats got part of what they wanted with a raising of the threshold for income tax.  Not that this will benefit them at the ballot box as the young and the poor have notoriously poor voting records.  They may be grateful at having extra moolah in their pockets, but they won’t be taking their hands out of them to put a cross on the ballot sheet next to the Lib Dems at elections.  The party will bleat about social justice and hope to twang the heartstrings of their erstwhile middle-class support.

After the ‘Granny Tax’ (which despite the soundbite is a masterstroke), the headline was the reduction in the top rate of income tax from 50 per cent to 45 per cent for those earning above £150,000 per annum.  John Cridland, Director-General of the Confederation of British Industry, other business leaders and a large section of Tories, were all pushing for a cut, primarily because they and their friends were having to pay it.  There is also an economic theory that it encourages entrepreneurs to innovate as if these nebulous individuals would just stew in their garden sheds or conservatories at the prospect of having to pay into a partially progressive tax system.  There wasn’t enough evidence to say that the 50p in the pound rate had failed.  There was an initial exodus of high-fliers to Switzerland but this year they have started to crawl back, finding the land of Heidi not as culturally vibrant as London and the south-east.  Up to the late 1980s, the top rate was 60 per cent before being cut to 40 per cent by Nigel Lawson, so there were higher rates in the Thatcher era.  It would have been a travesty had Osborne followed suit.  Giving over half your earnings to income tax alone is symbolically a heavy blow and so just as symbolically, I would have found a drop to 48% acceptable, so top rate taxpayers aren’t crying into their whisky and sodas at losing exactly half their income but still they are funding a decent rate and it feeds slightly into that economic theory.  45% looks like a halfway house arrangement, a Janus-like sop to both the bankers and corporation executives who fund the Conservative party and the wider electorate – Osborne after all is a Machiavellian, two-faced sod.