In Depth

Naked George: fans and feathers can’t hide bad borrowing news

Chancellor pulls a rabbit out of the hat with stamp duty reform – but hides one crucial forecast

The Mole

Chancellor George Osborne went in for naked electioneering in today’s Autumn Statement, announcing a raft of measures – led by a reform of stamp duty on house purchases - designed to benefit families, pensioners and middle-income earners.

But he also issued some harsher measures in a bid to persuade voters that the Tories are not just friends with the rich.

“Britain faces a choice – do we squander the economic security we have gained; go back to the disastrous decisions on spending, borrowing and welfare?” said the Chancellor. “I say we stay on course to prosperity.”

The reform of stamp duty was the big rabbit he pulled out of his hat. Osborne said it would start at midnight tonight and would sweep away a system that is hated by home-buyers caught in the housing crisis. 

Buyers of averagely priced homes will enjoy savings of thousands of pounds in some cases. But because houses priced around the £1m mark and above will now attract more duty, the reform is also designed to answer the Opposition's plans for a mansion tax on larger homes. The new duty payable on a £5m house, for instance, will be a stunning £500,000.

So, despite all the bluster of recent months, the Chancellor and Prime Minister David Cameron have decided to squeeze more tax out of the wealthy – both individuals and corporations – in a bid to answer the challenge by Labour’s Ed Miliband and Ed Balls that the Tories are being too soft on their millionaire friends while low-income earners have seen their living standards fall by record levels.

As well as the higher stamp duty on millionaires’ new homes, Osborne also promised to crack down from midnight on global corporations who have avoided paying taxes in the UK by being based abroad. He mentioned no names but everyone knew who he meant – Google, Apple, Amazon, Starbucks and so on.

There were other modest “giveaways” to reward middle-income voters. Air passenger duty is to be abolished for children under 12 – a boon to the so-called “EasyJet mums”. The tax on the transfer of pensions after death will be abolished – nice for pensioners, a powerful voting bloc for the Tories. And the duty on fuel at the pumps is frozen rather than increased following the fall in global oil prices – welcome news for motorists.

Underpinning this package, the Chancellor said the British economy was forecast to surge by three per cent this year, making it the fastest growing economy in the developed world.

However, he gabbled over the bad news - just like Gordon Brown used to do as Labour Chancellor: namely that growth figures after that are predicted to go down to two per cent for five years.

And behind the feathers and fans, Naked George was concealing even more bad news. 

The deficit will be £91.3bn this year compared to the forecast in the Budget of £86.4bn – a rise of £5bn. And for all the headlines grabbed in the last few days with elaborate spending plans - £15bn on roads, £2.3bn on flood defences, £2bn on the NHS - the fact is there is no new money.

Indeed, Osborne admitted that there will have to be “very substantial savings in public expenditure” in the years after the general election, if his plans are to come anywhere near adding up.

The Chancellor wrapped up his package with a rhetorical flourish against Labour – announcing that Britain was taking the lead in a new space mission to see if there is life on Mars, “the red planet”. But he faced an unexpectedly powerful response from the Shadow Chancellor.

Ed Balls made a far better fist of his reply to Osborne than he managed this time last year, by being more forensic in his instant analysis of the Chancellor’s plans. He was already on his feet when aides passed him the details from the Autumn Statement book showing on page 15 that borrowing is forecast to rise by £12.5bn over the next two years, a figure that Osborne had failed to give MPs.

“We all know he has changed the way he styles his hair but he cannot brush away the facts,” said Balls. “For all his strutting, for all his claims to have fixed the economy, he promised people would be better off but working people are worse off.” 

Osborne’s fan dance was alluring and may convince many. But there are still five months to go before the election, time enough for his promises, complete with fans and feathers, to unravel.

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