FEARLESS GEORGE SLAYS THE DRAGONS
Osborne puts Left to sword with £9 living wage He takes £9bn axe to bloated tax credit system But high earners’ pensions and super-rich are hammered too
GEORGE Osborne fearlessly slayed a string of dragons yesterday with the most radical Budget in years.
He stunned the Left by introducing a £9-an-hour living wage, saying Britain ‘deserves a pay rise’. He also took his sword to tax breaks for nondoms and high earners.
But the Chancellor tempered the surprise moves – and delighted the Right – with at least £12billion in welfare cuts.
Pledging a ‘ new settlement’ from a one-nation government, he said the hard-working would be rewarded with lower taxes and higher wages.
Alongside modest cuts to personal taxes, the Budget small print detailed overall tax rises totalling almost £50billion in five years. The Chancellor also:
Risked strike action by extending state pay restraint for another four years;
Confirmed £20billion in spending cuts while slowing the pace of austerity;
Hit benefit claimants with another four-year freeze;
Hacked £9billion from the £30billion tax credits bill;
Pledged to meet Nato’s target
to spend 2 per cent of national income on defence after months of uncertainty; Increased tax on insurance; Cut tax perks for buy-to-let investors; Unveiled modest tax cuts for 30million workers;
Confirmed plans to raise the inheritance tax threshold to £1million;
Mr Osborne will go further tomorrow when he unveils details of a plan to drive up growth and improve Britain’s dire record on productivity. He will aim to set out the domestic agenda for the next five years, with sweeping reforms to planning, infrastructure and education.
Mr Osborne said: ‘Britain still spends too much, borrows too much, and our weak productivity shows we don’t train enough or build enough or invest enough.’
Casting himself in the tradition of great Tory reformers, he enraged Labour by claiming the Conservatives were now ‘the party for the working people of Britain’.
To backbench cheers, he said: ‘It was Conservatives who first protected working people in the mills, it was Conservatives who introduced state education, it was Conservatives who introduced equal votes for women.
‘It was Conservatives that gave working people the right to buy, so of course it’s now the Conservatives who introduce the national living wage.’
The announcement of a £9 living wage for the over-25s wrong-footed Labour, who had been planning to attack the Budget as an assault on the working poor.
Frank Field, a former Labour minister, acknowledged the move was a potential game-changer because the Conservatives have struggled to shed their reputation as the party of the rich.
The cost of the living wage will be met by business, which will gain from further cuts in corporation tax. The CBI branded the move a gamble that could cost jobs. But the Institute of Directors said it was time for companies to increase pay.
Six million people will see their pay increase as a result of the national living wage – and those now on the minimum wage of £6.50 an hour will be £5,000 a year better off by 2020, the Treasury said.
The Treasury insisted a typical family on the minimum wage would be better off, even after cuts to tax credits. Labour described the living wage plan as a con.
In one of the most controversial reforms, Mr Osborne announced that, in future, child tax credit payments will only be available for the first two children.
He said the benefits system ‘should not support lifestyles and rents that are not available to the taxpayers who pay for that system’. The Chancellor said those on tax credits should face the same life choices as other taxpayers, who do not qualify for the annual payments worth £2,780 a child.
‘It’s important to support families, but it’s also important to be fair to the many working families who don’t see their budgets rise by anything like that when they have more children,’ he insisted.
Mr Osborne echoed Margaret Thatcher by warning there was no alternative and that backsliding could leave Britain like Greece: ‘Having come this far, there can be no turning back.’
He challenged Labour to back his plan to force governments to pay down Britain’s towering debts in ‘normal times’ – defined as when economic growth is above 1 per cent. Despite the low tax rhetoric, the Budget hid a string of significant hikes.
Families face a rise in the cost of insurance for items like cars, homes and pets. Individuals who pay themselves through dividends also face big tax hikes, as do wealthy non-doms. And buy-to-let landlords will have the generous tax breaks cut on their mortgage interest payments.
Mr Osborne announced an end to permanent ‘non-dom’ tax status. From April 2017 anyone who has lived in this country for 15 out of the past 20 years would be forced to pay tax like a normal British resident.
And, from next April, workers earning more than £150,000 a year will have the amount of tax relief they can receive on their pension savings scaled back.
The BBC has been stitched up by the Government. In a matter of days, a grossly inequitable deal has been imposed on it by ministers who secretly hate the Corporation, and may even want to get back at it in return for its allegedly unfriendly coverage of the Tories during the election.
This is what many on the Left believe after the news, confirmed in yesterday’s Budget by the Chancellor, that the Beeb has been forced to take on the cost of free television licences for the over-75s, which will eat up about a fifth of its annual income.
even former BBC chairmen such as Lord Patten and Sir Christopher Bland, not obviously paid-up Lefties, have complained about the lightning raid on the finances of the public service broadcaster, and asked why it should be paying for social provision for the elderly.
The critics are right — but only in one respect. This was — to use Lord Patten’s words — a ‘quick and dirty deal’ in which Corporation executives were virtually told to sign a piece of paper, while the BBC Trust, the governing body, was completely side-lined.
But in almost every other respect the Government’s critics are wrong, and they are either being disingenuous or boneheaded in insisting that the BBC has been cruelly eviscerated by Tories who long to cut it down to size.
For this deal is in most ways much better than the BBC had any right to expect. Despite the caterwauling of its supporters, it’s not even clear that the Corporation will be any smaller, or less well-funded, in ten years’ time.
Let’s first examine the cost to the BBC of funding television licences for the over- 75s. The Corporation’s outraged defenders say that when it assumes full responsibility for this in 2020, it will suffer a budget cut of £650 million.
I agree that the plan to make it pay for a Government subsidy to the elderly is somewhat bizarre. But there is no reason to suppose it will continue to shoulder the full burden for many years.
As the proportion of television licence holders over 75 increases because people are living longer, the BBC will argue that it should restrict the perk to the over 80s or even, some years down the line, to the over 85s. Who is to say the Government of the day could or would stop such a move?
In other words, the Corporation will be able unilaterally to reduce its commitment to meet this financial obligation. This decision might earn it some unpopularity with older viewers, but I imagine it could live with that.
LeT’S look at the other side of the ledger. By way of compensation for accepting a burden likely to be less onerous than it looks, the BBC has been offered the prospect of an annual increase to the licence fee (at present £145.50 a year) from 2017 in line with inflation. Since 2010, it has been frozen.
In addition, the Beeb will be able to force viewers who are at present using its iPlayer without paying the licence fee to cough up. This might give it a further £ 150 million a year. The Government has also agreed that after 2020 the BBC will no longer have to pay its share of the roll-out of rural broadband.
Until it finds a way of reducing the cost of shelling out for free TV licences for the over-75s, the Corporation will probably be a little worse off, though not by very much. In time, it may be no worse off at all.
No wonder Tony hall, directorgeneral, and Danny Cohen, director of television, have seemed so chipper about the agreement over the past few days. Unlike the critics who have huffed and puffed in response to the headlines, they have examined the detail carefully, and realise that the BBC has secured a pretty favourable settlement in light of the cutbacks that will be visited on most government departments.
What is so extraordinary about this apparently cast-iron deal is that it has been made a year before the so- called Charter Review is due to take place. That process, in which the future of the BBC and the best method of funding it is supposed to be considered, appears to have been pre-empted.
Much that should have been discussed has been booted into the next- door field. The Corporation has grown too big, and should be encouraged to concentrate on its indispensable core services, for example Radio 3 and Radio 4, which the broadcasting market left to its own devices might not be guaranteed to supply.
And yet all such arguments have been put on one side, as has the question of the BBC’s dominance as a disseminator of news, sometimes with a notably Leftist bias. According to various surveys, it accounts for around half of all the news coverage consumed by the general population, which gives it unrivalled influence.
SOME us have argued in favour of replacing the licence fee — a blunt and anachronistic charge in the modern world — with a subscription whereby viewers would pay for those parts of the BBC which they use.
When John Whittingdale was appointed Culture Secretary after the election, there was every reason to suppose that — as a reputed Thatcherite who only last october described the licence fee as ‘worse than a poll tax’ — he would orchestrate a robust and far-reaching review.
I suppose it’s still possible that next year’s Charter Review will chew over some of these issues, but to judge by what Mr Whittingdale said in the Commons on Monday, and the response of BBC mandarins, it would seem the BBC’s future has already been mapped out.
No doubt one is supposed to draw comfort from George osborne’s assertion on Sunday that the BBC should curb the ‘ imperial’ ambitions of its website, which is in effect an online newspaper funded by the licence payer, and supported by thousands of journalists.
Yes, but how? The BBC has undertaken to rein in its website in the past, without doing so. There is nothing I can see in the latest deal that will prevent it from continuing to devote its enormous resources to its website, which sometimes contains Leftist comments by its specialists.
one of Mr Whittingdale’s colleagues suggests to me that, for all his reputation as a Thatcherite, he is actually a fairly emollient and consensual fellow. If so, is he really likely to undertake genuine root-and-branch reform of the BBC?
I hope I’m wrong, and that robust discussions about the future of the BBC lie ahead, but I fear they don’t. I’m afraid that in return for the quick fix of forcing the BBC to accept £ 650 million of government expenditure on its books, ministers have shelved longterm plans to adapt the organisation to the modern age.
Ironically, they have acted in a way that pays scant regard to the independence of the BBC. They have bullied Auntie shamelessly, but not so as to achieve anything worthwhile.
There has, indeed, been dirty work at the crossroads. But it is those who have argued and pressed for change — and not the BBC — who have been well and truly stitched up.