Squeezed

Until yesterday the “squeezed middle” was a term that although we were familiar with, we could not define it. Yesterday, with help from the Tory Chancellor of the Exchequer, it became clear that it was everyone aside from the very poor, and those earning £150000 or more.

The squeezed middle now also includes pensioners, who must be added to the long list of those for whom the future looks a grim land.

Taking the threshold at which tax is paid up to £9205 is welcomed, although the poorest are hardest hit by increases to indirect taxation – which is why the VAT rate must go back to 17.5% as a priority.

The increases for beer and fags will not be welcomed by those for whom these form the bulk of their few luxuries. Not welcomed either will be the threatened rise in fuel duty; and I cannot understand why George Osborne has not unequivocally ruled out the August increase. For the low earners the real story is of giving with hand whilst taking away with the other.

The public sector is to take another hit as regional pay is promised. I wonder whether this will affect London Weighting, an allowance given to those working in the capital. With London Weighting I thought we had an element of regional pay already. The knock-on effect of regional pay will be what it does to pensions, and to any prospect of mobility. Who will choose to make themselves poorer by moving north, for southerners will undoubtedly be paid more? Or, for that matter, what northerners will choose to come south and face the increased cost of living? I expect the north-south divide will be entrenched by the Chancellor’s decision.

Lowering the threshold at which 40% income tax kicks in effectively means that those for whom this affects are subsidising the tax cut for the high earners. The repatriation of money from the squeezed middle to the very richest strikes me as the stupidest of political acts. Whilst it will be argued that this impacts only at the margins in real terms, it sends out a clear message as to whom the Tory chancellor is seeking to help.

This budget will only hit the statute books with the connivance of the Liberal Democrats. Whilst it was a Conservative Chancellor who uttered the words, it will be the Lib Dems who guarantee that this regressive budget takes effect.

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George, can you hear the pips squeaking?

Listening to the budget I think any sensible person would agree with the soundbites coming from the Chancellor of the Exchequer. As a reminder, George Osborne talked of rewarding work, committing to dealing with the debt, making the tax system simpler, and lifting the poorest out of tax; all very laudable, and, superficially at least, entirely supportable aims.

Talk is cheap, it is action that counts, and here is where the Chancellor failed. The middle has been squeezed, pensioners are worse off, and yet the very wealthiest are made wealthier. The detail will be discussed in much better places than this blog, but I think as a brief summation Ed Miliband got it spot on: we now know that we are not all in it together.

There has got to be a moral dimension to taxation policy. When the 50% tax rate is derided as not collecting as much as predicted I see this as largely irrelevant. The evidence I have gathered in doorstep conversations over the years is the people want fairness. I see no fairness in cutting taxes for the rich, not when the rest of us are hurting.

Whilst those who earn more than £150000 will be grateful for the boost to take-home pay, those who now find themselves paying 40% as this threshold kicks in earlier will wonder why the incentive argument does not apply to them. George is squeezing the middle until the pips squeak.

Tax is used to modify behaviour. Tax on tobacco, aside from the revenue considerations, is also seen as a tool to wean nicotine addicts from their drug of choice. I am an ex-smoker; I had my last cigarette on 19th February 1982. Knowing this date so well is testament to the draw of this enjoyable, if ultimately destructive, habit. I gave up as an aide to increasing longevity. I cannot recall the price of a packet of 20 in 1982, but one of the headline figures from today’s budget will doubtless be the 37p hike in the price of a packet of fags.