Budget 2011 - an exercise in smoke and mirrors?
25th Mar 2011
"The Chancellor, George Osborne MP, delivered his Budget this week, against the backdrop of worsening economic news. Inflation is rising, there is increased borrowing and slower rates of growth. However the Chancellor’s reaffirmation of his commitment to reduce the structural budget deficit and his surprise tax cuts were greeted with support by the media.
As expected, the Office of Budget Responsibility downgraded their growth forecast for 2011 and 2012 from 2.1% to 1.7% and from 2.6% to 2.5% respectively. Yet this depressing prediction of our country’s finances was toppled off the front page of Thursday’s newspapers by Osborne’s tax cuts for motorists.
The Chancellor announced a rise in the personal allowance by £630 in April 2012, while keeping the higher rate threshold unchanged, he reduced corporation tax by 2% on 1st April and, his pièce de résistance, he cut fuel duty by 1p per litre and replaced the fuel duty escalator with a fair fuel stabiliser.
Newspapers accepted that the Chancellor had a difficult job to do, but congratulated him for doing it so well. Osborne’s communication’s team had done their job.
Yet on Friday, after the euphoria of the tax cuts had passed and the small print had been read, it become apparent to some that the Budget and tax cuts were a smoke and mirrors exercise to distract the public from the difficult years to come. The Institute of Fiscal Studies has estimated that the average household would lose £750 this year as a result of higher taxes and benefits cuts.
The communications challenge for the Chancellor is to convey to the British people he understand their concerns and is doing what he can to alleviate them and that his plans to reduce the budget deficit will not cripple families, business or the country."