Budget

Jim Pickard

David Cameron made a passionate speech last autumn where he claimed that it was a scandal that thousands of low-paid workers could only keep a few pence of every pound that they earned. This phenomenon, for the fiscally uninterested, is called a “marginal deduction rate”.

So what is the impact of today’s Budget on these folk? Perhaps alarmingly, people with a marginal deduction rate of over 90 per cent (they keep less than 10p in the pound) is set to nearly double – although not entirey as a result of today. 

George Osborne’s team are particularly proud of cooking up this chart.

The gap between the black line and the green line is basically their representation of the BROWN BOOM. 

Nick Clegg was apparently obsessed with the chart below, which shows the impact of the Budget measures across the income scale. The coalition have bet the ranch on “progressive austerity” and they think these statistics vindicate the claim that this is a tough but fair fiscal medicine.

The trouble is that this chart showing the spread of pain from the tax rises and benefit cuts is just a snapshot of 2012. It won’t look as fair after that. 

Jim Pickard

Harriet Harman made unemployment the focus of her shrill but effective riposte against the coalition, claiming that tens of thousands of people would lose their jobs as a direct result of the Budget. Her lack of a concrete figure, however, stems from the rather ambiguous picture painted by the Treasury’s Red Book.

If you compare the OBR’s new unemployment forecasts with the June pre-Budget forecasts there is a slight difference but it is not as stark as Harman would have you believe. For the current year, employment, ILO unemployment and the claimant count remain the same. 

George Osborne sits down at 13.28 – that’s it, the Budget has been delivered. Now Harriet Harman will respond, but thank you for comments and for joining us.

Jim Pickard, political correspondent: Osborne’s promise to return to “financial prudence”… Could this be a dig at Gordon Brown by any chance? This was in happier days his favourite expression.

Jamie Chisholm, FT Global Markets Commentator: Gilts back to where we started, down 8 basis points at 3.45 per cent. Sterling little changed.

Child element of tax credit to be increased

Matthew Vincent: The chances of exchanging contracts on your second home by 5.30pm today look a bit remote. Best phone your solicitors and give them the hurry up…

Robert Shrimsley, editor of FT.com: Is it my imagination or is George Osbrone saying “coalition government” much more now that he’s got to the nastiest parts.

 

Update: follow our live coverage of the Budget here.

The Westminster blog will host a line-by-line summary of George Osborne’s Budget statement, featuring commentary from FT writers, from 12.30pm (or just before the Chancellor stands up). Jim and Alex will then return to the blog. 

The unions, Ed Balls, the Taxpayer’s Alliance, Tim Montgomerie and Guido have all come out against a rise in VAT.

The possible flaw in their argument is taking the tax rise in isolation. They’re assuming every option for spending restraint is an alternative. The brutal fact is we’re probably going to implement all the cuts they can think of, dream up a few more, and raise taxes. That’s how big the hole is.  

Our economics team ran some tests to show the regional impact of cuts and illustrate the challenge of eliminating the deficit without punishing the poor.

If you cut social security payments by 10 per cent, for instance, they found the poorest areas were hit hardest. Household disposable income fell by 3.6 per cent in Merseyside and only 2.1 per cent in Berkshire and Buckinghamshire. 

There seems to be a growing appetite to cut the cost of public sector pensions. A year ago, it was basically off the cards — no party would have dared take the political risk. But the coalition are now slowly making the case. There is a strong chance of a levy being imposed, if the government holds its nerve.

The stats in the OBR report today, which for the first time breaks out the annual cost of public sector pensions until 2015, are genuinely concerning. 

Cameron has made some striking pledges on how he will cut the deficit. The trouble is that most of them are at odds with his promise to protect the vulnerable.

As this excellent Social Market Foundation report contends, it is hard to see how any of his pledges on ring-fencing middle class benefits, limiting tax rises and increasing health spending will survive, at least if Cameron really isn’t going to balance the books on the backs of the poor. 

This is one for the geeks but a telling sign of how power gnarls bold promises on transparency.

For several years, Chris Giles, the FT economics editor, has tirelessly pushed the Treasury to come clean over their fiscal forecasts so the country is told the severity of cuts expected to total departmental spending.