Budget 2015: delivering the spirit of the Conservative manifesto

First on his overall fiscal plan, the Chancellor has given himself a bit more time. He will look to have the budget in surplus by 2019-20, rather than in 2018-19. This may or may not make sense economically, but I was personally surprised that the Treasury had loosened its fiscal plans so early in the parliament. The second (semi-) surprise was on tax. The Chancellor has followed his predecessors by introducing tax increases in the first budget following an election. So we saw increases in the taxation of dividends, insurance, buy-to-let property and cars amounting to around £6bn. The Chancellor will, of course, still pass the declaratory legislation against changes in the rates of income tax, NI and VAT. I’m sure we’ll point out the meaninglessness of such legislation for a good while to come. Listening to the speech, you might have thought all the tax increases came from the £5bn of anti-avoidance measures that the Conservatives promised at the election. And there is indeed a line on the main budget table labelled “total receipts from avoidance and tax planning, evasion and compliance, and imbalances in the tax system” which shows £5bn raised by the end of the Parliament. Of course, as you might expect, there are a whole rag-bag of measures in there. Very few of them count as tackling specific forms of tax avoidance or evasion. The Chancellor still managed to make the £12bn in benefit cuts he promised, and unlike his anti-avoidance measures, there is little of the “smoke and mirrors” about these figures. But he did give himself more time – until 2019-20 rather than 2017-18. This allows cuts through inflation (freezing benefits) and turnover (cuts only applying to new claimants) to take most of the strain. In the end, this was probably an inevitable political decision, which may reinforce the perception that the £12bn figure was originally included in the Conservative manifesto as negotiating capital for a possible coalition. As a result of this summer budget, there will be less pressure on departmental budgets in the coming autumn spending review. Tax increases and a slower pace of reductions should remove a large sense of the burden. That said, with the defence budget now guaranteed 2% of GDP and the health budget securing an extra £8bn during the general election campaign, the worries about the future of smaller, less high-profile departments will continue.