Because he failed to take the tough decisions on spending before the election, there will be higher taxes and higher interest rates if Labour win the election.
The central measure was a tax on jobs that hits everyone earning over £20,000 – well below the median wage. That is Labour’s definition of the “well off”. Of all Labour’s tax rises this will be the one that it is the Conservatives’ priority to avoid.
Because Labour is weak they failed to deal with the £178bn deficit, cancelled the pre-election Comprehensive Spending Review, and instead said that a Labour victory at the election would mean:
- £7.8 billion higher taxes – £370 more per family – after the election
- Of this £6.5 billion – £310 more per family – is a rise in National Insurance – a tax on anyone earning over £20,000.
- Labour’s planned tax on jobs is now £200 a year on someone earning £30,000 a year, or £60 on average earnings of around £23,000
- And the ring fencing means a real terms 10% cut in all other Departments over just two years
Other tax increases include:
- A £440m inheritance tax rise
- A new £440m phone tax
- £220m on workplace canteens
- £500m pension tax rise
- No help on business rates; and failed to abolish small corporation tax rise
Yet even with the tax rises there is no credible plan to deal with the deficit:
- Still no honesty on spending as the Spending Review has been cancelled until after the election
- No credible plan to deal with the deficit. Debt stabilises in 2015/16 – a year later than at the Budget
- Borrowing £789bn over the next six years – doubling the national debt again to £1.5 trillion
- The pledge to halve the deficit in four years has already been dismissed as not enough by Mervyn King, the CBI and the OECD – it would leave the deficit higher in 2013/14 than when Denis Healey went to the IMF
The PBR has been slammed by business:
Richard Lambert, Director-General of the CBI: “The Chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile. Increasing the National Insurance contribution will hold back job creation and growth. He has also missed the opportunity to increase the UK’s credibility by reducing the public deficit earlier. We are no clearer today as to how the Government plans to reduce public expenditure.”
David Frost of British Chambers of Commerce said that the National Insurance rise is: “Terrible news…It’s an additional cost for business when they can least afford it.”
Miles Templeman, Director-Generaleneral of the Institute of Directors: “The key theme of this year’s PBR is prudence postponed… A further tax on jobs at a time like this is madness.”
John Wright, FSB National Chairman on the tax on jobs: “this is extremely damaging for employment in the UK.”