Ed Miliband descended into nothing more than political point-scoring today, and while his narrative may prove to be a success for this evening's news bulletins, the brutal fact is that his primary argument is encapsulated by an absurd economic argument – that today's budget was one for Britain's millionaires.
Taxation is simple in my opinion. It should pay for state expenditure, it should be as low as is reasonably possible and each method of taxation should provide a net benefit. The 50p income tax rate does not make the Exchequer any money, it restricts business and it deters aspiration. These aren't whimsical statements made on the back of my own political ideology. They are economic facts supported by independent bodies such as the Office for Budget Responsibility and HMRC.
In 13 years of Labour Government, the 50p income tax rate for earnings over £150,000 per year was in place for a mere 37 days. Why then is Ed Miliband saying it should remain when Alistair Darling himself said it should be temporary?
In times of austerity, everybody must share the burden. Under new measures introduced by Osborne and his Chief Secretary, Danny Alexander, the Treasury will get five times the amount of money from the richest people in the country than they would have done if they upheld the 50p rate. Surely that is a good thing.
Many parts of George Osborne's budget should be welcomed. He has increased the personal allowance, significantly reducing the tax burden on the lowest earners, cut corporation tax to stimulate investment and resisted the temptation to increase the tax on alcohol.
What should we be disappointed about? A deeper cut in corporation tax, maybe to 20% as opposed to 22%, would have been a real policy for growth. Also, a reform to mean-tested pension payments means some sections of the elderly community will be worse off.
The headline however can be seen on the BBC website this afternoon: "Osborne Cuts 50p Top Rate Of Tax". It is a huge political gamble and inevitably Labour will experience a bounce in next weeks' polls. Crucially though, it is the sound economic decision. Osborne and Cameron will be hoping that benefits will be seen in the long term and before 2015's election. If they aren't, today will go down as a pivotal day for the Coalition and quite possibly a central factor behind a Tory electoral defeat in three years time.
For a comprehensive outline of the detail in George Osborne's budget, read the BBC's point-by-point guide here.
Update 15:20
The HMRC report on the 50p rate can be found here. It is interesting to note that they believe the Treasury will receive £130m extra in indirect tax as a result of the cut to 45p.
Furthermore, one pivotal question to arise from today surrounds the long term standing of the top rate. Is it now permanantly at 45p or will it drop back down to its original 40p in years to come?
One comment Label Online has received from Economics student, Joey Carbonaro is below. Do you agree? Email labeleditor@lufbra.net.
"Certainly a radical yet definitely conservative budget, aimed just as much at stimulus of the economy, with the tax breaks, as the damage limitation of the budget deficit.
Personally, I think the Chancellor did well to target the use of coalition fiscal policy to areas of the economy which need urgent restructure and aid such as pensions, whilst not affecting taxes on commodities or people too much (bar tobacco) with also understanding the need for the tax breaks to ensure the investment in privatized industry. All hopefully resulting in achievement of short term targets for the long term aim of boosting national output and subsequently reducing the deficit, whilst ensuring steady progress along side economically powerful countries.
As with all policies and economics by nature however, things can change quickly, and if or not these policies are carried out effectively, only time, as always, will tell…"
Max Turner's budget views:
"There are a lot of positives to the budget, particularly the corporation tax reduction/bank levy increase combination, which will encourage business growth. As an upcoming graduate, the concept of a higher personal allowance is reassuring, though makes me wonder where that money is coming from, considering 800,000 will be taken out of tax entirely.
However, the pension changes and child benefits changes are politically dangerous and the latter is outright unfair.
A household earning £99,998 – with each partner earning £49,999 each – will see no change to their benefit allowance. A family where one partner earns over £50,000 is then penalised, regardless of how much under this barrier the other earns. That's just not well thought out.
As for the pensioners, I can't give exact figures, due to all the numbers flying out, but most agree that on average pensioners will be worse off, and as a big voting demographic, this is dangerous for Osborne.
All in all a fairly mundane budget, economically sound, but I just don't see how borrowing is going to fall and how the deficit is going to fall drastically either."
