Budget day: battle over UK’s economy begins
It’s a crucial day in the countdown to the UK election, as the chancellor outlines how a Conservative government would tax and spend. Is this ultimately what politics is all about?
Today is Budget day. After much speculation, the man in charge of the UK’s finances will lay before parliament the government’s spending plans for the coming year.
The Budget is one of the anticipated events in the political calendar. It is the moment when the entire population discovers how they will be taxed and what will be done with the money raised. These are momentous decisions, both for the country and for each of its individual citizens.
But this year’s announcement is significant for a different reason: it comes just 50 days before the most tightly-contested general election in a generation. Chancellor George Osborne’s announcements will give voters their first, crucial insight into what their future with a majority Conservative government would look like. His hope, as one journalist puts it, is that this speech will ‘electrify the general election campaign’.
So what will be in this vital speech? Leaked papers show that Osborne plans to reduce inheritance tax paid on properties worth up to £2m, and scrap tax on those under £1m. He is expected to announce increases in these hourly rates: 40p in the minimum wage, and 57p for apprentices. Measures to see Osborne’s plans for a ‘Northern powerhouse’ will also be included in his statement.
On their own, each of these measures will matter to only a small proportion of the electorate. But they are part of a much wider plan. The Conservatives are committed to eradicating the budget deficit in the next three years by means of spending cuts that the Institute for Fiscal Studies calls ‘colossal’. Osborne doesn’t deny this: ‘we still have difficult decisions to make,’ he says.
Labour, the Tories’ main opposition, has retaliated by announcing a very different vision, including promises to cut taxes for millions of working people and scrap the bedroom tax. Shadow chancellor Ed Balls says his party will tackle the deficit with a more ‘balanced’ plan. It is the start of a bitter economic struggle that will dominate much of the coming election campaign.
Micro or macro?
The Budget has a reputation for being dull and technical: on the surface it seems like a tangle of digits that add up to little more than tweaks in the way the state does business. What really grabs people are big issues of ethics and identity, like equality, immigration and climate change. Voters want personable and honest politicians who care about things beyond the money.
But some would say that the Budget represents everything that truly matters about politics. Whatever you care about, be it health, education or Britain’s place in the world, anything of substance that the government can achieve requires money. The rest is just a side show.
- ‘The economy is at the heart of everything important that a government ever does.’ Do you agree?
- Should balancing the budget be the government’s number one priority?
- What changes would you make to the economy if you were chancellor? Write down five key announcements you would make today.
- ‘The UK’s economy is on the right track.’ Debate this statement as a class and put it to a vote.
Some People Say...
“It’s the economy, stupid.”President Bill Clinton
What do you think?
Q & A
- Will the Budget affect me?
- It certainly will. It affects how much you pay for things, such as transport. It will also affect your family, whether you have family members who receive income support, or through any changes in taxation. And if you were to work as an apprentice, you may be able to enjoy a bit more money in your pocket.
- Do all parties just say the same about the budget?
- No, not exactly. Labour and the Conservatives have different ideas about the economy. The Tories are accused of wanting to sell off and shrink the state, achieving a budget surplus mainly through cutting public expenditure. Labour wants to reduce the deficit, too, partly by raising more tax from the wealthy, and thinks there should be a wider responsibility not just on the individual but on business, too.
- In the past we wouldn’t know anything about the budget until the exact moment it was announced. Today, however, the press is often given details of what will be included in the days leading up to Budget day. While leaks can be damaging to the government, these are usually intentional, designed to add to the speculation and build-up.
- Inheritance tax
- Inheritance of money or property above a certain value requires tax to be paid to the government. Under current law, inheritance tax is is paid when a person’s ‘estate’ – the value inherited – is worth more than £325,000.
- The difference between government spending and income can be a surplus or deficit. When spending is more than income, as now, it is a deficit. The last surplus the UK had was in 2001.
- Bedroom tax
- This policy was introduced in 2013, restricting the amount of housing benefit of those living in council and housing association homes if they had spare bedrooms. It introduced a 14% cut on those with one spare bedroom — an extra room that no one uses as a bedroom — and 25% for two or more.