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What Osborne didn’t say in the Commons Budget debate

It emerged in the Budget debate which ended yesterday in the Commons that the need for spending cuts is far from the inevitability that Osborne has always claimed.   The independent OBR estimates of growth for the next 5 years, albeit recently scaled down, are still 1.7% this year, 2.5% next year, 2.9% the year after that, 2.9% again the following yeat too, and 2.8% in the fifth year.   That will produce, on the Government’s own estimates, an increase in national income of £185bn.   Governments always take about 40% of that in taxation.   The extra revenues therefore accruing to the Government over those f years is £74bn.    That is half of the current Budget deficit of £146bn and nearly three-quarters of the Government’s estimated structural deficit of £109bn.   What that means is that the Government, on its own estimates, will halve the Budget deficit in 5 years without making a single public expenditure cut at all.

The reason the Government has chosen to focus so obsessively on benefit and public expenditure cuts is not that they are economically necessary, certainly not on anywhere near the scale the Government is determined to impose.   It’s because the Government’s overriding ideological motive is to chop back the welfare system and shrink the State.

The second way to reduce the deficit is obviously through tax increases.   Here Osborne has ostentatiously avoided any tax rises which might impact on the rich.   The non-dom loophole has not been closed, which would raise £3bn.   The promised £2bn reduction in tax avoidance is small potatoes when even HMRC admits tax avoidance/evasion is now running at £16bn a year and independent experts think it’s nearer £50bn.   The tripling of the Government’s bank levy, which the IMF has recommended and which would bring in an extra £6bn, has been ignored.

And Osborne has quickly averted his eyes from any fiscal innovativeness which would make for a fairer Britain – one in which we were ever so slightly all in it together.   A Financial Transactions Tax even at the very modest rate of 0.05% would raise about £30bn a year.   An empty property tax would probably raise some £5bn.   A land value tax, which would be a great deal fairer than the Council Tax which it could replace, would raise over £30bn.   And a minimum tax levy for high earners which would put a cap on avoidance could raise over £10bn.

Osborne really shouldn’t be so timid – the public want taxes that hurt the rich and particularly the bankers.   Any permutation of these taxes could well raise at least £30bn a year or even more if Osborne chose.   But of course he won’t when the Tory Party, as is now known, gets half its funding from the bankers.

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