GEORGE’S TICKING TIME-BOMB LEGACY

Insidious stealth taxes. Deeply flawed gimmicks. Failed savings schemes. George Osborne was fired months ago — but on the eve of the Budget, a damning analysis exposes the poisonous inheritance he left Britain

REFERRING both to his weight loss as Chancellor and his reputation for erratic policy-making, george Osborne once joked that he had adopted a special diet. ‘It’s called the 5:2 plan. After two out of every five Budgets, I have to eat my own words.’

Despite the humour, this was a moment of insight. For during his six years in charge of Britain’s finances, Osborne became notorious for his U-turns as many of his policies unravelled in dramatic fashion.

Some mistakes unfolded immediately, such as the infamous ‘ omnishambles’ Budget of 2012, which featured hugely unpopular tax hikes on heated takeaway foods (nicknamed the ‘pasty tax’), static caravans and charitable donations. After public outcry, he was quickly forced to abandon all of these measures.

Just as flawed was his 2015 Budget, with its cack-handed plan for £1.3 billion-a-year cuts to disability payments and working tax credits to low- income groups. Again, widespread protests compelled him to drop both schemes.

But other pet Osborne policies have been like bombs on time-delay fuses, primed to detonate long after he announced them.

As his successor, Philip Hammond, prepares for tomorrow’s Budget, the sound of explosions must be ringing in his ears.

The incendiary legacy left by Osborne includes brutal increases in business rates, a foolish tax assault on the property market, crippling rises in insurance premiums, a relentless squeeze on private pensions and punitive changes to death taxes.

That is not to discount Osborne’s achievements as Chancellor. Having taken over in 2010 at a time of profound crisis after the years of Labour’s epic profligacy, he brought a degree of sanity back to public finances.

The public payroll was reduced by almost one million, welfare was reformed, vast numbers of low-paid workers were taken out of taxation and unemployment fell significantly.

But the job was half-done. Chronic weaknesses remain. Britain’s overall debt continues to grow and now stands at a shocking £1.8 trillion, while the annual deficit — the gap between spending and revenue — is still stubbornly high at £68 billion (that’s £1,060 for every adult and child in the country).

It was a failure that stemmed partly from Osborne’s obsession with headline-grabbing changes that also involved social engineering and spoke to his wish to play tribal politics.

He often dreamt up complex wheezes without thinking through all the potential consequences. The fact is the long-term national economic interest was regularly sacrificed to short-term partisan gain, or the hope of cheap instant applause that might boost his chances of succeeding David Cameron as PM.

Osborne’s inexperience and youthful naivete was certainly a factor in this. But just as damning was his reluctance to act like a proper Conservative. He ought to have been driven by the determination to uphold the principles of sound money — to support enterprise, encourage wealth creation and reward hard work.

Instead, he seemed unable to see a successful area of the UK economy — such as the property market or pension funds — without trying to exploit it for his own purposes.

At heart, he epitomised the affluent, liberal metropolitan Cameroons and Blairites who championed fashionable views on everything from mass immigration to a devotion to large amounts of foreign aid.

Tellingly, when Theresa May dumped him from her Cabinet last summer after the failure of his misguided Project Fear during the EU referendum campaign, she suggested he might like to spend some time ‘getting to know your party’.

Instead, Osborne has spent more time boosting his bank balance. Last year, his extraparliamentary earnings — mostly thanks to speeches to financial fat cats across the world — were £628,000.

Meanwhile, his successors have to defuse all the explosive devices he planted and fight the fires he started.

Here are some of Osborne’s worst failures, and other problems he left . . .

INSURANCE

TARGETING people who play by the rules and show personal responsibility by taking out proper insurance, Osborne punished them by treating insurance premiums as yet another lucrative source of State revenue.

He put insurance premium tax up to 6 per cent in 2011, then to 9.5 per cent in 2015, followed by yet another rise to 10 per cent last year.

Philip Hammond maintained the trend by hiking the levy to 12 per cent in the last Autumn Statement. As a result, this stealth tax rakes in more cash for the government than taxes on beer, wine, spirits and air passenger duty.

One study by the AA showed that the average cost of car insurance rose by more than £100 because of Osborne’s changes in 2015.

What’s more, premiums could soon rise further after the Ministry of Justice’s decision to alter the way lump-sum payments to badly injured claimants is calculated. The change will impose huge costs on the insurance industry, which will inevitably be passed on to customers unless there is a Treasury climbdown.

CAR TAX

LIKE other modernisers, Osborne always liked to parade his attachment to ‘green’ causes. Yet his environmental credentials were undermined by his change to Vehicle Excise Duty (car tax) announced in his 2015 Budget.

It meant that as of next month, a new banding system — based largely on vehicle price rather than polluting habits — will hit 70 per cent of new car buyers who will pay more tax, including those who purchase the most ecofriendly vehicles such as the Prius Hybrid.

Even owners of the zero- emission Tesla Model S will have to pay £930 over four years. Yet, perversely, drivers of gas-guzzlers that cost less than £ 40,000 will pay less because the flat-rate annual charge is £140.

STAMP DUTY

THE property market is one of the great engines of the British economy, yet Osborne’s flawed approach has hindered its dynamism.

In December 2014, he announced a major reform of stamp duty (the tax paid on property and land purchases over a certain price), reducing rates at the lower end, but heavily increasing the charges on high-value properties.

On homes worth more than £925,000, the duty went up to 10 per cent of the purchase price, and rose to 12 per cent for those buying above £1.5 million.

The Left cheered those changes as hitting ‘ the rich’, but they have led to a serious — and unpredicted — fall in government revenue.

The total amount of stamp duty collected by the Treasury between April and November last year fell by £440 million to £635 million, largely as a result of a 40 per cent decline in sales of properties worth more than £1.5 million.

The milch cow is proving less lucrative than Osborne cynically expected.

BUSINESS RATES

British business owners already pay more tax than those in any other European country, but many face a massive rise in the rates paid to local authorities due to next month’s revaluation of property values on which these charges are based.

Once more, Osborne is partly to blame. the last revaluation (normally done every five years) was due in 2015 but he ordered a delay, supposedly because he wanted to avoid subsequent economic ‘volatility’ — but in truth because he did not want to damage the tories’ chances in an election year.

Now the Government is paying a high price for this cynical prevarication. As of next month, 500,000 firms are due to be hit by punitive rises of up to 300 per cent — a hammer blow at a time when 15 independent stores are closing every day on our high streets.

Yet the Government seems reluctant to budge, given that £29 billion-a-year is raised through the rates.

BUY-TO-LET

EAGER to court popularity, Osborne treated buy-to-let landlords as baddies rather than as enterprising investors (many of whom were the middle class who had turned to property instead of shares and pensions).

he tried to dress up his attack in the language of social responsibility. Even though they were desperately needed — to help increase the housing stock — Osborne excluded buy-to-let landlords and secondhome owners from his capital gains tax cuts (from 28 to 20 per cent) last March.

Previously, he had landlords in his sights by signalling that he would stop them being able to offset mortgage interest payments against rental income as a way of helpfully reducing their income tax bills.

Even more harshly, he imposed a 3 per cent surcharge on those buying second homes or investment properties. From next month, any buy-to-let purchaser will have to pay 8 per cent in duty on a property costing £250,001, as opposed to 5 per cent for any other buyer.

some may welcome this move as an attempt to open the market to first-time buyers, but there will be two unforeseen consequences: first, many investors will pull out of the market, thus dampening the market; and, second, rents are likely to rise to meet the landlords’ extra costs.

PENSIONS

IN his 2015 Budget, Osborne announced that, in pursuit of his policy of so- called ‘pensions freedom’, millions of older people would be able to sell their existing annuities in return for cash sums.

the measure was due to come into effect next month.

But ministers have had to scrap Osborne’s plan because the market for such annuities is too limited and cannot offer ‘sufficient consumer protections’.

Welcoming the U-turn and saying ‘common-sense has prevailed’, one asset- management boss said Osborne’s scheme ‘ had the potential to be the next mis-selling time-bomb’.

the shambles fitted a pattern of disdain for any concept of nurturing private pension provision. Under Osborne, the Government cut the amount that people can save taxfree into their pension pot to £1 million throughout their lifetime, while the annual allowance was reduced to £40,000.

Critics argue that the plethora of changes and complex reliefs deters personal savings. Last autumn, the Office for Budget responsibility warned that a £5 billion hole could be blown in the public finances by the Government’s pensions reform.

FOREIGN AID

At A time when the Nhs and social care are under intense financial pressure, much of the electorate finds it extraordinary that £12 billion of taxpayers’ money is spent annually on overseas aid, much of which is wasted on bureaucracy, corruption or politically correct projects.

Yet Osborne was one of the chief advocates of foreign aid as a political tool in a bid to show the tories were ‘the compassionate party’.

he ensured, in 2013, that the Government met its target of devoting 0.7 per cent of Gross National income to foreign aid, the first member of the G8 group of highly industrialised nations to do so.

‘We take pride in this historic moment for the country,” he said, even though the 0.7 target is arbitrary and was decided upon by a few Left-wing UN ideologues in the late-sixties.

the aid budget is due to reach almost £16 billion by 2020, despite massive cuts elsewhere.

More pertinently, at a time when social care is in crisis and Britain’s defence budget is being slashed to the bone, foreign aid is a subject that triggers deep anger among the tory faithful — and has probably been a very effective recruiting-sergeant for Ukip.

MINIMUM WAGE

THANKS to Osborne, many small businesses’ costs have increased as a result of his decision to raise the minimum wage in a series of phases.

it went up from £7.20 an hour to £7.50 last spring and is due to reach £9 by 2020.

the inevitable knock-on effect has been that the extra expense has also led to some firms employing fewer staff. Also hard-hit are local councils which must cover the cost of wages for lowly paid home helps and care-home staff. Further rises in the minimum wage will kick in at a time when the British economy will be dealing with the vagaries of a post-Brexit world. the great risk is that Osborne’s controversial national living wage could attract even more migrants to the Uk, dealing a blow to Government promises to reduce immigration.

in addition, there are fears that foreigners, happy to be paid at even lower rates, will fuel the black economy and take jobs from the indigenous population.

HELP TO BUY BONUS

this was a classic example of an ill- conceived Osborne policy. in 2013, he launched his help to Buy scheme for first-time buyers, providing them with guaranteed mortgages even if they only had very small deposits.

two years later, Osborne offered another new form of assistance. this was the help to Buy isa, by which the Government would give a 25 per cent bonus of up to £3,000 on savings towards the deposit for a home.

‘For every £200 you save for your deposit, the Government will top it up with £50 more,’ said Osborne.

But there was one big technical flaw: the hand-out wouldn’t be paid until the sale was completed — meaning it could not go towards the deposit. this made the subsidy very unattractive.

On a deeper level, critics said that the help to Buy scheme made life harder for first-time buyers as the cheap credit culture Osborne had helped to create simply pushed house prices higher. significantly, hammond shelved Osborne’s help to Buy programme.

LIFETIME ISAs

OSBORNE wanted the under-40s to be able to put up to £4,000 a year in an account with a bank, building society or investment firm, and qualify for up to £1,000 a year in top-ups until they reach the age of 50.

however, in a huge embarrassment to the Government, hardly any firm is on track to launch these so-called Lifetime isas next month.

Experts have told Money Mail they fear the whole scheme could be a flop.

PROBATE

WHEN in Opposition, Osborne outfoxed Chancellor Gordon Brown by pledging that a tory government would raise inheritance tax thresholds — something that had not been done for many years and which was badly affecting millions of Middle Britain families. Yet when he became Chancellor himself, he backtracked.

Also, in one of his last major acts as Chancellor, he meddled with death duties — imposing extra charges. he raised the cost of probate fees. instead of a flat-rate fee of £215, from May, there will be a sliding scale.

in the most extreme cases, estates worth £2 million or more will have to pay £20,000 to execute the wishes of the deceased’s will.