Britain had become accustomed in recent years to coalition budgets. The return of a single party Conservative government was marked by a package with a somewhat clearer focus, even if the reality of the package did not match the rhetoric of its delivery by the chancellor of the exchequer, George Osborne. For all the talk of moving to a lower-tax economy, Osborne faces similar constraints as many other ministers for finance across Europe. He was thus forced to match tax cuts in some areas with hikes in taxes and charges elsewhere and to accompany these with plans to cut spending further, notably welfare. The budget did offer some more to lower-paid workers through income tax benefits and a new “living wage” – effectively an increased minimum wage. However changes in child benefits and other welfare and tax credit cuts will leave many less well off, particularly larger families.
The chancellor underlined, in the context of the Greek crisis, the need to keep spending and borrowing in check. His projections, however, show the budget deficit will not now be eliminated until 2019-20. Cuts will be less than previously planned, but £12 billion (€16.65 billion) in welfare cuts during this parliament will still hit many families hard, and wider reductions in public spending will keep services such as health and education under relentless pressure. One notable measure from an Irish viewpoint was a further reduction in the corporate tax rate to 18 per cent. This rate has fallen from 28 per cent at the start of the last parliament and reflects, in part at least, an increased drive to attract foreign direct investment.
The Conservatives will say they are delivering what they promised, and to an extent they are, even if the total amount of new taxes raised exceeds the planned cuts by a considerable measure. As governments across the developed world have found, there is no easy way to reduce budget deficits, and doing so is a long slog. However there are choices, too, in the timing and shape of the adjustment and the tax and spending measures used. The chancellor has eased up on austerity, but his budget was still far from a giveaway.