21/03/2012 Newsnight


Budget 2012 analysis and reaction. Jeremy Paxman is joined by politicians, business leaders and journalists.

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So, onwards to sunlight and farewell to darkness and debt, led


by our fearless guide, the Chancellor of the Exchequer, George


Osborne. He claims his budget today charts a path back to prosperity.


But is it a plan? Our political editor will be asking why the


Chancellor appears to think you incentivise the rich, by giving


them money, and incentivise the poor by taking it away, while our


economics editor wonders whether the Chancellor is just making a lot


of noise to compensate not much possibility of action. The Chief


Secretary to the Treasury is here to tell us why he's happy to have


George Osborne's speech written on his tomb stone, and his Labour


shadow to tell him why he's a disgrace.


The boss of the world's biggest advertising, we hope, is here to


join a head of an investment fund that looks after �47 billion. The


editors of the Times, the Financial Times and the London Evening


Standard are here too. They have seen a few budgets between them, we


convene our political panel to pass Maybe it was entable that this was


a political -- inevitable this was was a budget for differences.


The very rich are having their income tax cut, pensioners will pay


more tax, everyone has their tax threshold raised and benefits will


also be cut, the effect, a little indistinct. Let's hear what our


economics and political editor hear about it.


What is the stand out feature? What is the stand out feature?


has got rid of the 50p rate. stand-up feature is whether they


can prove the measures they are bringing in, heavy rates on stamp


duty, closing all sorts of well taxes, whether they will bring in


enough so at the next election 50p doesn't run and run as a big


givaway. For you? The Business Secretary, Vince Cable,


a few weeks ago, called on the Government to come up with some


sort of coherent growth plan. Is this it? A lot of the measures


in this budget are designed to stimulate growth, particularly the


tax pleasures. But the overall impact is -- tax measures. But the


overall impact is minimal, we will remember the roads, the planning


the railways, they are long-term, not short-term.


Let's first get a little more detail from David Grossman, who has


had the pleasure of spending the day in what fell from Mr Osborne's


lips. The only people at Westminster this


morning who didn't know exactly what was in the budget, probably


didn't much care, they were here for the history and the views. It


was a shame, plenty would view today's budget as historic. There


was certainly plenty to write home about. Not, of course, that anybody


needed to write home, they could have simply read about it in this


morning's papers. This budget, the subject of unprecedented pre-


briefing. Why? It is simple, the budget was the result of protracted


and difficult political negotiation between the coalition partners,


each side wanted to make sure their success stories were reflected in


the coverage. For once we were pretty sure what


was in the Chancellor's red box. The Chancellor didn't want


tomorrow's headlines for this budget to be "tax breaks for the


rich". First he laid out extensive measures to cut tax dodging. Under


the last Government it was the boast of some high earners that


with the help of their accountants, they were paying less in tax than


their lean cleaners. I regard tax evasion, and aggressive tax


avoidance as morally repugnant. a start, stamp duty on expensive


properties will go up from tonight .% on houses worth more than �2


million. Not quite a mansion tax but close to it. There will also be


a closing of the loophole where rich individuals can use a foreign


company to buy a house, if they want to do this in the future, they


will have to pay a stamp duty charge of 15%.


Unlimited tax relief will go, in essence, in the future someone will


only be able to offset 25% of their income. And, coming in, is a new


general anti-tax avoidance rule. In short, tax dodges will have to be


cleared with HMRC, in advance, who, might just close the loophole


instead of allowing it. The Lib Dems looked pleased at all of this,


they had insisted on these measures in return for cutting the 50p top


rate of income tax for people earning above �150,000 a year. The


Chancellor said it raised little, and sent the wrong message.


raises, at most, a fraction of what we were told, and may raise nothing


at all. So from April next year, the top rate of tax will be 45p.


Mr Deputy Speaker, no Chancellor can justify a tax rate that damages


our economy and raises next to nothing, it is as simple as that.


Thanks to the other new taxes on the rich, I have announced today,


we will be getting five-times more money each and every year from the


wealthiest in our society. What about the people who aren't


superwealthyo with offshore companies to complicate their tax


affairs? Well, the big headline is the rise in the tax-free allowance


to �9,205, creeping ever closer to the Lib Dem target of �10,000. On


the child benefit problem, the cliff edge will be softened,


instead of losing every penny of child benefit, for any household


with a higher rate taxpayer in it, it will only kick in at �50,000,


and tapered to �60,000 before disappearing all together. Overall


this budget is fiscally neutral, the winners offset by the losers,


the Chancellor says it is the right budget for the country. Together


the British people will share in the effort, and share the rewards.


This country borrowed its way into trouble, now we are going to earn


our way out, I commend the budget to the House. The assessment for


the Office of Budget Responsibility and the Treasury is the shift from


50p to 45p won't have much of an impact on the nation's finances,


that only covers the economics, the politics is far harder to call.


George Osborne is taking a huge gamble. Quite simply, he's handed a


massive dividing line to the opposition.


Let's have some tax transparency, hands up in the cabinet if you will


benefit from the income tax cut? Come on? And boy did the Labour


leader milk it in the Commons today. All he's doing for ordinary


families is giving with one hand and taking far more away with other.


It is the millionaire's budget that squeezes the middle, wrong choices,


wrong values, out-of-touch, same old Tories. And there was a similar


analysis from other opposition parties. You would imagine that


decision makers in Whitehall would have woken up to the fact that


there is an independence referendum happening in Scotland in 2014, and


not making a whole load of decision to make a "yes" result more likely,


people in Scotland will be asking why are we putting up with it.


Tories at Westminster may not have followed every aspect of the pre-


budget briefing, but one measure was a surprise to everybody. In


effect, the Chancellor is ending the more generous income tax-free


allowance for pensioners, over time, bringing them into line with other


tax-payers. Of course it is convenient to hide


behind the idea that this is simplification. But, in fact, what


it is is a tax increase for the middle group of pensioners. For


those earning between around �10,500, and �24,000 a year, over


the next year or two, they will face an extra �300 increase in


their tax bill. Over the next few years, the total amount of tax


taken from this group will be �3 billion.


By a strange coincidence, today was the anniversary of another


Conservative minister, abolishing another tax. Getting rid of the


poll tax turned out to be a vote- winner for the party. Nobody thinks


getting rid of the 50p tax rate will be anything like as popular.


Our political editor is still here. This surprise that David mentioned


there, how big an impact? Quite a big impact. It affects 4.5 million


pensioners. It doesn't affect the poorist or the richest. They have


already had their allowance -- poorest or the richest, they have


already had their allowances shrunk. They do vote and mostly


Conservative. It is one of the first things we have seen on the


cohort. They don't change their votes very much? They don't and


haven't been targeted up until now. We are all in this together is a


phrase that is supposed to have died today, but this is a mini-


example of it coming back. What do you reckon, is it fair?


the entire budget fair? There is all sorts of complicated graphs at


the back of the red book. If they manage to bring in the revenue they


think they will have the new measure, the new stamp duty,


various curbs on allowances, if they do, then they get the


appearance, certainly, of a new fairness, a sense that this wealth


tax has been brought in, where there were once rather useless


income taxes that didn't bring in much in the first place. If you


look further down, they are not doing very much at all for the


absolute bottom dessiel, that group was hit by -- decile, they were hit


by taxes. In the middle, as you go up, everybody has the change to the


personal tax allowance, which the Lib Dems fought for so much, it is


an odd thing, the middle doesn't look like it is actually that


squeezed. In summerry, it is good politics, in in a couple of years


time they can -- if in a couple of years time they can show they have


brought in revenue from the changes to the wealth taxes. It is not


clear at the moment. The Government don't like this idea of fair


capital "f" fairness. Changes to welfare, changes to schooling, they


are doing all sorts of other things that will help people that doesn't


show up in static measures of deciles. Paul Mason, we will hear


from him in a second, he was saying a second or two ago, he thought it


was an unmemorable budget, but would be remembered for actually


things that have not drawn any attention today. I think it is a


big budget, they have gotten rid of the 50p rate that they were warned


not to, they have gambled because they think the economics will stack


up and we will see in a couple of years time. Let's hear from Paul


Mason? Thank you from the outer darkness, tomorrow's headlines will


be about who gets what, the winners and losers, the idea is the big


picture hasn't changed much. It has, the Government is still on course


to wipe out the deficit by 2017, the way they are going to do it has


changed. Here is the graph showing the austerity plan, that is the mix


of tax rises in red, and spending cuts in blue. Now if we compare


this new plan with the plan published in the Autumn Statement,


during the current parliament we are looking at �4 billion more in


cuts, offset by �10 billion less in tax rise, overall there is �6


billion less pain in the economy. After the election, in the last two


years of the plan, the picture changes, these last two columns


here include �16 billion more in cuts, and only �3 billion more


pullback on the planned tax rises. That is a net of �13 billion extra


austerity. It comes after the next election.


George Osborne signalled today that �10 billion of those cuts would


come from welfare. If we stick to the big picture,


what is there about the Government's claim this is about


growth. By 2014 the 22p corporation tax will put British corporation


tax as the lowest in the developing countries. It has business leaders


smiling as they picked their way through protests throughout


parliament today. The impact is slight, business investment will go


up 1%, and growth will rise a barely measurable 0.1%, as the


result of these business tax cuts. You can look at this in two ways,


first of all, how much spending power you are injecting into the


economy and taking out. That is neutral, they are not doing much of


that in the forecast when you take away the give aways, then there is


the argument of making a difference to the long-term trend growth rate


to the economy. Things like planning reform could have a


significant impact over the longer term, but it is much too early to


bank some of those gains in future. Finally it is official, taxing the


rich is pointless. The Treasury, which thought the 50p tax rate


would raise �3 billion, two years ago, now thinks not. Here is the


If you add in more behaviour change because of tax breaks and cuts,


there is �760 billion by cutting the tax rate. Confused? So are they,


the economics are highly uncertain, some believe dubious, but the


political battle lines are very clear indeed.


The Chancellor sent out one of those irritating Spam e-mails


tonight, boasting how the budget was, in his words, radical and


reforming. We recall Gordon Brown and Nigel Lawson and various others


saying much the same thing. To try to throw some light on it now, we


are joined by the Chief Secretary to the Treasury, Danny Alexander,


and his shadow, Rachel Rhys. What makes you so certain that rich


people who avoid a 50p rate tax will pay a 45p rate of tax? We have


had those costings independent low audited by Robert Chote, the


independent Office for Budget Responsibility. A great deal of


work has gone in to quantify those figures. As the package earlier


said we wanted to replace a tax that wasn't working at that level,


with additional taxes on the wealthiests, that will bring in


five-times more from that group of people. That makes this budget a


shift from the wealthy to millions of low and middle income earners


benefiting from the largest increase ever in loans. You say you


will bring in five-times the money, is that certain, it is not, it


can't be? It is as certain as we can be. Is it as certain as your


predictions as to what will be raised from the 50p rate of tax?


didn't make predictions of what could be made from the 50p rate of


tax. Your predecessor did? previous Government did. They


didn't have an independent Office for Budget Responsibility checking


up on those figures. When the Chancellor says it will raise five-


times as much money, you don't know? What I do know is there is a


vast amount of stamp duty avoidance going on in the system, for example,


which no Government before has made an effort to crack down on. Where


the changes we are making in terms of punitive rates of stamp duty. An


annual charge on those people who try to squirrel their homes away in


companies to avoid tax. Those are things much harder to avoid. What


we know, because we are not just listening to the OBR, and to the


Inland Revenue, but to the academic consensus too. These numbers are


about right in this area. You don't know? You can't possibly know?


makes me satisfied with the budget, is we are raising substantially


more from the wealthy by this Packerage of measures. Labour said


it would raise billions. They also said it was temporary, can you tell


us the permanent rate of 45p, is it permanent or temporary? The rate of


45p is like any other tax now. It is something that we have put in


place, that is going to be part of the tax system for the foreseeable


future. Of course course, every other tax is kept under review. It


doesn't have the temporary status the 50p rate had. It is permanent


but under review? Every tax is under review. The 45p rate is the


decision we have made to reduce it to 45p, as part of a package to


raise more overall from the wealthy, in order to help fund the big tax


cuts for people on low and middle income.


You expect the next election to have a 45p rate of tax? I can't


make promises about what will be in the next three budgets. With what I


think is the 45p rate is a sustainable rate. It puts us right


in the mid-of what other European countries do at their top rate of


tax. Can you help us on this question of pensioners. When the


Chancellor said there will be no cash losers from this pension tax


arrangement change, why did he leave out the rest of the statement,


which is that 4.41 million people will be worse off in real terms,


with an average loss of �83, and further and further? Well, it is


absolutely true to say that there are no cash losers from this policy,


it is a simplification of the system to try to make sure


that...Hold On. 4.14 million people, older people, will be worse off?


you look at the measures we are taking for pensioners, the largest-


ever rise in the state pension today. Moving to a triple lock to


protect the state pension, rating up much faster than the previous


Government. In 2013/14, under Labour's uprating policies for


pensions, people would have benefited to the tune of �66,


that's the cost of the decision that we have made. We are doing


more on uprating to the tune of �130. In net terms, in 2013/14,


pensioners will be better off. is the case in the words of the


HMRC briefing, that 4.41 million people will be worse off? It is


absolutely right that those people who were connect ex-ing their


allowance to rise will see it froze -- expecting their allowance to


rise will see it frozen. How much will they raise from that? By the


end of the period the costings and the documents show it rises to, by


the end of the year, �250 billion. All of these changes will net you


an improvement in the economic growth of this country, of how


much? 0.12%? All of these measures are designed to support the economy.


The big measure in this budget is a tax cut for people on low and


middle incomes, that is money that will be spent in the British


economy. As Paul Mason said, we are making significant supply side


reforms, dealing with red tape. These are all things that will lift


the growth potential of this country's economy over the next few


years. By how much? I'm not going to put numbers on that. You have


put numbers on everything else? Office of Budget Responsibility


today says...0.1%? Says we will get 0.8%. Is that pathetic or New York


llity? It is an -- nullity? It is an economic forecast of our growth.


This country has been through the deepest financial crisis we have


seen. Labour made a mess of the economy, with the crisis in the


eurozone and so on. We have to make a lot of changes to the way the


British economy works to get us back to prosperity. You have


expressed great anxiety about getting rid of the 50p rate of tax,


and replacing it with a 45p rate of tax, would you restore it? If it


was a Labour budget today we wouldn't have got rid of that rate


of tax. If there was an election tomorrow, we wouldn't be going


ahead with this tax cut for the rich. If there was an election


tomorrow, you would restore the 50p rate of tax? That is absolutely


right, yeah. I suppose you will tell me, you won't write the


manifesto for the next election now? We don't say we will do this


or that with tax, we don't know what the economy will look like in


three weeks time, let alone three years time. If there was an


election going ahead we would have that rate there.


Will this 45p rate of tax be as permanent as any other tax?


wouldn't be cutting that tax, we would leave it at 50p. It will


happen, because you are not in Government. When we come to the


next election, there will be a 45p rate of tax, all things being


equal? When it comes to the next election, in 2014, 2015, we will


have to make a judgment. At the moment we don't know what the


economy will look like. He can make the judgment, why not you?


hasn't, he has said it will be in the next Liberal Democrat manifesto.


He told us last time he was in here, they were promising all sorts of


cuts at the next election? couldn't believe the last manifesto.


I'm not sure I will promise any more, but what we set out today on


the spending side is the same figures as in the out dumb


statement last year, we still have to make further savings to do --


Autumn Statement last year, we will still have to make stpurt further


savings. -- further savings. There is more cuts envisaged than now?


The figures today were on the same basis of the Autumn Statement.


Theing has shifted? No, we are still aiming to balance the


structural deficit, by 2016/17, the same as when you and I discussed it


in November. You are still committing to go into the next


election promising further cuts in Government spending? I'm also


committed to a further Spending Review to work out how we work out


the numbers deliberately set out. That is something that the Liberal


Democrats will be committed to. What about the further �10 billion


to be found in welfare spending? have not committed to a further �10


billion in welfare. What the Chancellor was doing, rightly, is


expose some of the trade-offs and make some spending decisions. The


point being made is because of the rise in debt interest, because of


the continued growth in the welfare budget, we will face some difficult


choices, as a country when that time comes. We want to start that


debate about what the right choices are. I thought George Osborne made


an explicit statement today, that there will be a further �10 billion


in wealth cuts? He said if we were to be sure that departmental cuts


were the same as the last Spending Review, that is the amount of


savings in annually managed expenditure, most welfare, that


will be required. We haven't made that decision because we haven't


conducted that spending decision. We would have a different balance


to tax increases to spending cuts. We would reinstate the bank bonus


tax, and use the money to fund job creation. We wouldn't have the same


policy. Also, I think you need jobs and growth to get the economy back


on track, what we have seen in the budget today, the Office for Budget


Responsibility from said that all the measures that the Government


have introduced won't make a blind bit of difference to their


forecasts for unemployment and growth. You have to support the cut


in corporation tax, don't you? think the best way to support


businesses would be a national insurance holiday for all small


businesses taking on new workers. Do you or do you not support the


cut in corporation tax? That is not the right way to support business.


Do you support or not? No, I think it would be better to have national


insurance holiday. You are in favour of a higher rate of


corporation tax? I think the right thing to do is cut national


insurance, that would help small businesses, they are really


struggling. The budget has to be about choices, and Labour will make


difference choices but we wouldn't cut the 50p rate tax. You wouldn't


cut the 50p tax, or the corporation tax? We wouldn't have cut


corporation tax, we would have cut the national insurance holiday for


all small businesses taking on new workers. We think that is the


priority right now. Do you agree with the cham's statement that tax


avoidance is -- the Chancellor's statement that tax avoidance is


morally repugnant? I would. Would you say someone using their company


to reduce their income tax liability was unfit for public


office? If you look at Ken Livingstone, he is using a company


to pay for people to work for him. I don't know if all the details of


individuals' tax returns are there. Would you say it is tax avoidance?


Not if you are using it to pay other people. Otherwise you would


be taxed twice. I don't know the details of individuals' tax returns.


But you do find it morally repugnant? Tax avoidance is wrong,


I don't think people should avoid and evade tax. If you are going to


cut down on loopholes in the tax system. That money should be used


to support ordinary familiar hely not as this Government have done,


get rid of the loopholes, but then give people a tax cut at the same


time to compensate. I think if you are going to close tax loopholes,


that is the right thing to do. You should use that money to give a


break to ordinary working families, struggling right now, with stagnant


wages and rising prices. If Labour had been doing the budget today, we


would have had a reduction in VAT down to 17.5%, to support ordinary


families, reinstated the cuts to working tax credit families.


Vince Cable said if he was doing the budget he wouldn't have done


this. Was it a Liberal Democrat budget in any case? Our top


priority was a very big tax cut for people on low and middle incomes.


We have delivered that, with the largest increase in the personal


allowance, that is worth a lot of money to 21 basic rate tax-payers.


There were two million people paying tax under Labour who are no


longer paying tax. All the Conservatives saying it was there


idea, they are lying? I wrote the Lib Dem election manifesto, the


commitment. Great minds think alike, you would say in other


circumstances? The commitment to reaching a 10,000 personal


allowance was on the front page of our manifesto, and now in the front


rank of Government policy delivering benefits to millions of


people what I have learned tonight is Labour's policy is increase tax


on business, spend more, borrow more, have more debt. It is a


recipe for Labour repeating the disaster they committed last time


in office. We are saying under your Government, a flatlining economy,


unfloiplt rising month after month, I think -- unemployment rising


month after month. Young people not working. Get those young people


back to work, pay the taxes, not getting welfare payments, that


would help reduce the deficit and get the economy growing. The Office


for Budget Responsibility is saying that nothing in the budget today


has changed their view on growth or unemployment, or on borrowing.


At political moments like this, we open the cat at that koom where the


political team are -- cat koom, where the political koom are still


there. We are seeing if they are able for speech.


Daniel Finkelstein, writing a column for the Times, Miranda Green


worked for Lloyd George and Paddy Ashdown. And James puorn nel,.


-- You said this was like Paul Daniels doing a magic act? People


are always amazed somebody has to pay for the tax cut. That is what


you will have. Of course, if you are going to have a large tax


allowance rise, there will be a tax increase on someone, and it has


turned out to be on the age-related lads. The whole thing is how you


orchestrate that. Because the coalition has had this big


discussion about every other aspect of the budget, that was the one bit


of news. It got on the front page of the papers because of that.


What do you think? I remember in the Liberal Democrats you used to


struggle to get one line in the coverage the next day. The chamber


would empty as the Lib Dem leader got up to respond to somebody


else's budget. It is extraordinary the party being in Government and


having this influence. Are you happy with the abolition of 50p


rates of tax for wealthier people? Absolutely not, if it was a Lib Dem


Government it wouldn't have happened. There are some big ones


for the Lib Dems, as Danny said, what is interesting about this


whole process, has been the public negotiation going on between the


two sides. That has resulted in winning the argument on taking


people on low and middle incomes out of tax. The politics of it.


They claimed it was a Lib Dem budget? The politics are difficult,


it is difficult to argue against the policy. Let's let James Purnell


get a word in? It is the taxes, it may not be a mansion tax, but


people with mansions will be taxed. What did you make of of it?


reminded me how difficult fiscally neutral budgets are. You used to


announce what you spend money on, Government do it every two years,


and there is not much to a nouns. The 45p meant there was a risk to


having something with not much news in it. He had to have an argument


abouting something, and have a big issue about something. It has


turned out to be the 45p, whether that turns out to be God or bad,


politically, we will wait and see. It is politically risky? It is, but


it is something. Politics abhors a vacuum. There were good things in


the budget, things I wouldn't agree with, but they would be small


without the 45p. It is interesting politic clo they have decided to go


for it. I remember when -- politic clo they have decided to go for it.


I remember serving under Tony Blair, he said his job was to look after


the voters, he was thinking of the people who had got him there. It is


not clear to me that David Cameron has been thinking about how to look


after his voters in the budget today. His probably is he can't


look after them, as everyone will be getting poorly, and growth being


so low you have to be able to look at that. The policies I thought


what was significant, is we reached a point now where sudden low it is


going to happen the cuts, the fact there is low growth, the question


is how you play it. This is a big risk, I would put it higher than


you. It is a big risk. It will pay off if it produces growth. The OBR


can't model that yet, but if there is a production of growth. Because


there is relative low small things other than the 45p, his --


relatively small things other than the 45p. Ed Milliband's line, it is


the end of "it we are all in this together". He had a powerful


argument, a good speech with good jokes. Before we analyse his


performance, you were trying to make a point? Ed Milliband did have


a God day, as did Ed Balls, it is not enough. If you look at the


background to this, the opinion polls, people don't trust Labour on


the economy. In a ens is, we have to see what happens from this, this


Labour can turn themselves from people commentating gleefully on a


potential mistake by George Osborne to a potential Government. There is


no evidence of them doing that. one political problem he has is it


is not a good policy to move from 45p to 50p. Politically I can see


the argument against abolishing it, in policy terms a tax that raises


virtually no money simply can't be justified. So the problem that Ed


Milliband has got, is how to make the Labour Party not looks a though


it is tokenistically anti-business for a policy that brings no money.


The Tory gamble is bigger, that is his problem.


What is the point you wanted to make? He had a really good day, he


had an argument, it is really, really noisy, that speech. I don't


think people get it from the TV. The Chancellor is always listened


to carefully. Suddenly there is a wall of noise. I have sat there


with nowhere near that many people in the chamber, and that first 10


seconds is vital. He hit it really well, it is the end of "we're all


in it together", he had good gimmicks, trying to get people to


put their hand up, you feel like a banana to ignore them. The front


bench ended up looking a little...As Far as the public is


concerned urban nanas. The fact that he performs well in parliament


is not here or there. This Downton Abbey thing. This is a


weak point for the whole coalition, story and Lib Dem. What is this


Downton Abbey thing? The idea they are not like ordinary people


feeling the pain, cabinet. That is a vulnerable point. This is a Tory


weakness that people think the Conservative Party is for well off


people. If they will do this it has to work and produce growth. It is


difficult to defend the policy of having a 50p tax rate when there is


no money. I can see why they did it. It is certainly a political issue.


Do you think, as Tory Prime Minister, Tony Blair would have


done it? I think most people wanted him to be. Most time he would be.


In 1997 he wouldn't have done it, and in 2006 he would have got it


done. Grey-gate, they are calling it, a


lot will be made of it in tomorrow's papers, is it damaging?


I think inevitably, pensioners are very sure about what they gain and


they will be militant about it. It is not taking cash sums from people,


it is always worse, people are risk adverse, it is through fiscal drag,


and inflation. They will get more money in other ways, it will be


limited, but everybody will be losing in one way or another. This


will make them more. You are grimacing? I think it will be


unfavourable for them. You saw what happened when Gordon Brown was


derisory about the state pension. They are militant, and they vote in


marginal constituencies, it is not clever to irritate them. This used


to be your thing? If you are sitting in the thresh you look at


it and think, we have -- Treasury, and you look at all the money and


you have protected the free TV, the problem is they have had all their


goodies, and people didn't know about it in the budget. There is a


bigger issue for Labour and the Tories, which is paradoxically, is


the Tories need more seats in the north, and they haven't a clear


story there. The Labour Party needs to get votes outside the public


sector, they have a public sector story, but not the private sector


stories. They have the wrong stories at the moment. What about


the idea there is another �10 billion to be found in the welfare


budget? I think it is much worse than that. The political class is


slightly in denial that they have promised to end child poverty,


increase aid, deal with emission, they have made all the promise and


need to raise taxes more than they say they would do to avoid that.


you think it is feasible? I think actually the country will either


have to drop all those promises, all the things they have all voted


for, all the parties. Or they will have to make much bigger cuts.


Things like having the same role in defence around the world and


welfare. Everyone is complaining, they are paying more, everyone will


be paying more if we are going to have low growth and reduce the


borrowing. That is just the mathematics. It is really


interesting this idea that people will be told where their taxes are


going, and how much precisely they are paying towards welfare, or


defence, or whatever it is. That could change human behaviour,


couldn't it? It will make clear to people how much tax they are paying.


It will breakdown welfare, it will show you a lot of welfare is going


to pensioners, it will also show for example things like aid doesn't


cost much money. It will be cross cutting, it won't be as people


think, it will make everyone be more anti-tax. I think it will be


more subtle. It is good to flag up there needs to be a national debate


about the future of welfare spending. It it is politically


important to prepare the ground, so you have the support to do


difficult things. With the pensioners they haven't prepared


the ground, that is why it will hurt them.


If we disregard important initiatives such as changes to the


tax regime on Lucozade, and chicken, and caravans. The thrust of the


budget is about allowing the economy to grow by helping business.


Did it? If the top rate tax cut were to fail to reignite the flames


of British entreprenurial, the Prime Minister turned up with a


bevy alternative fuels. Corporation tax tumbled from 24p to 22p, with


no pen fits for the banks. Small firms had the carrots of simplified


tax daingled in front of them. George Osborne wants to let shops


open all day on sunds during the Olympics. There was big pick -- on


Sundays during the Olympics. There was an argument for new


runways in the south-east. And backing for better rail services in


the north. What will they find about to complain about now. Here


to discuss the impact of today's budget on business, are Martin


Sorrell, the boss of the world's biggest advertising agency. And


Helena Morrisey of Newton Investment Managment. We offered to


some of of the biggest unions to come on today, none wanted to do it.


There are two alternative issues of looking at the 50p cut, begun is,


it genuinely is something that will transform the country, eventually.


What do you think? At the risk of sticking my head in the lion's


mouth, I wouldn't do it. Indicating you might do it in a couple of


years was electionly a better thing to do. It seems if you are trying


to stimulate entree pent nuerism, things they did -- ent prepen you


are inism, entrepeneuralism, those are more important issues than this.


If you are going to stimulate entrepeneurs, taxation is the way


to go. I'm glad he had the courage, and the headlines will be horrible


for him tomorrow. I'm glad he did it, the point they made about the


G20, the 50p is the highest top rate of tax. The total of the 20


countries. It plaiks us uncompetitive. -- makes us


uncompetitive. You move among these people, are they likely to make


decisions on the basis of a 5p tax here and there. The fact we were at


the top, it is a disincentive forepeople. Coming from Dublin, as


we will do, on the basis they impli amounted CFC things they are


talking about, those are more important about the income tax rate.


People understand the needs for it, certainly from a political point of


view, for the next couple of years. You decided to do that before the


budget? Not before the budget. We were given indications that the CFC


changes, mooted by the previous Government, wouldn't, and would not


be there. This is a tax change? is the taxation of overseas profits,


not the corporation tax rate, there is a lot of misings information.


You do think corporation tax matters? Do I think it matters, yes


I, I think it does. I'm bringing it down to 20% over a period of time,


that will be very important. What do you think he missed a trick on


what should he have put in the budget? There were some gaps. We


are talking about pensioners and all of that. We do need 0.5%


interest rates to be precise, we need something to encourage more


saving and more investment by households. And I was disappointed


they didn't even stpart. They had loads of consultations a-- start.


They had loads of consultation, but nothing about childcare and


investigating tax breaks, that would encourage more women back


into the Labour force to get more talent out there. We can't afford


it now? We can't. But I thought they could kick off a consultation.


They are kicking off a lot of consultations, that would be an


obvious one. Given the fact there was a neutral budget, and the


Chancellor being fairly inventive. If you go through all the measure,


infrastructure, investment measures, stimulating investment in small


companies, tax simplification. Given the fact they had sill little


wriggle room at this point in time. In the political and economic cycle


I think he has done a good job. What has pushed him off track and


will be a problem tomorrow. We see in the front pages of the papers,


the called granny tax, and the 50p rate above the head. You could


argue that pensioners and insipient pensioners are almost the only


group in society that haven't had to pay something towards all of


this. He said this is a budget for working people? I that is a


problem? You apyre to think that old people


were a bit too dim and con-- we were implying that old people were


a bit dim to get hold of what you were doing. That seems to have been


lost in the reporting so far. They haven't really covered that at all.


That hasn't been covered. The granny tax is the only thing that


wasn't leaked of significance. Apart from the stamp duty going to


7%. It was a last-minute change. that significant? All this


protection about what they will recoup from called avoidance.


Thrafs all precated on -- that was all pri decated on people changing


their behaviours. Somebody is buying a �2 million plus house,


trying to close the deal tonight. had to confess we had exchanges


contracts on houses, I was a bit worried is would affect us. In


annexe A, I was the only person who read it, there is a transitional


arrangement. I had one person ask me about that. We can't people out


to avoid things. You have to find a house to buy. You can't pop to the


shops for of the Is it a good idea? I think, we have seen other


countries, several Scandinavian countries have most people renting


and a frozen housing market, I don't think that is particularly


encouraging of business and development. Just increasing wealth


generally. Wasn't it rather depressing for both of you, as


people who care about how the economy functions here, that the


end result of all of these changes, big ones and little ones, is that


there might be 0.1 of a per cent added to the growth figures? I did


have difficulty in understanding why the growth rate would go from


0.7 this year, to 2.1 next year. I think it will increase, but I'm not


sure the gap will be as great. I think in mitigation, the coalition


have tried to dole with spending issues and debt issues, we see the


glimmer of a long-term cable. I hate to put myself in the same camp


as Vince Cable, but I do think we do need a long-term plan, and I see


glimmers of it in the Budget Day. In terms of enterprise, tax yaix


simplification, investment, -- taxationismcation, investment, all


these things he has touched on, or fundamentally, he has helped.


Growth has to come from the household sector. He has targeted


companies, and the points and the list you have given, is the right


list. It will take a longer time. That is exactly right, the message


that Timothy Geithner Sunday scored again, 24hoirs ago, this is a tough


slog, it will take -- 24 hours, this is a tough slog, and will go


on to the next election and beyond. Let's talk through the impact of


this budget, with three figures we usually send out to do the tough


stuff, taking cabinet ministers to lufrpbl. Three editors, not a


single green eye shade between them. Brendan Barber, the eminence editor


of the Thames, the first to speed, mandarin, Japanese French and


Germany. And Jonathan Sandler, alum nigh of the Sevenoaks courier and


now the London Evening Standard. The way to do this is to look at


some front pages. The Times, you went with the 50p gambler.


It is a bit old, isn't it? It is a story, this will be the story that


dominated. I think our point clearly was that on the one hand


this was Osborne's big bet, you could say it is a bet he made with


small change, 50p. The truth is, it will be the thing that defines him


and the Tories for a while yet. is a political gampbl or economic


gamble? It is clearly both. A political gamble, they will stake


their party's reputation and lose a bit of that compassionate


Conservatism. The thing is can they send a signal to business, meaning


from cutting to 50p 045p, there will be a return on investment.


What do you think of the 50p, is it a gamble? I think he has already


cleared it, pretty well. I'm maizeed he has got away with it,


three months ago people were saying it was inconceivable, he has done


it. He has everybody on side, he has an independent auditor to say


it is the right thing to do. It schemes to me a skillful managing


of expectations. Your peace processer, the Financial Times --


paper, the Financial Times, I can't see the headline? We are working on


it! What have you gone with here? Business budget faces backlash.


What does that mean? How much of a gamble is this? The answer is the


biggest gamble of all was taken at the beginning of the coalition


Government, which was to embark on a really serious deficit reduction


plan, which has led to very cheap bore lowing for this Government, --


borrowing for this Government. It has given the Chancellor room to


take a smaller political gamble on cutting the top rate of income tax.


In a year's time. We wouldn't have supported this at this particular


time, but we can see consistency, from the coalition, in cutting the


top rate, and taking a large number of people, the working poor, out of


this tax band. They have sent some important signals in corporation


tax, reduction of corporation tax for companies a little along the


lines of Ireland, which is doing a lot better than you might expect.


Your paper, the London Evening Standard, you didn't use the word


"gamble", you used "gambit", you went on the child tax benefit.


had been very heavily leaked, child benefit was something that was new


to us. The fact that the threshold was higher. It was new, new, new.


The other thing we have tried to get across in that headline, is


that it is politically neutral. It is also, I think, interesting low,


a very London centric budget -- interestingly, a London centric


budget. Boris could have given it, it is pro-workers, and you get


extra train carriages. The sort of budget Boris would like to give,


that is another matter. We still have one or two other front pages.


The Guardian Telegraph have gone with this regard attack upon


pensions and peingers, and there is the front page of the Guardian,


pensioners to fund tax cut. The Telegraph call it is a granny tax.


How politically difficult do you think that is? Pretty difficult.


Maybe on the scale of increasing or introducing the tuition fees, this


is a very powerful lobby, one, by the way, which has been well


protected in the first two years of this Government. They have got good


index-linked pension increases, so, I'm afraid, it is their turn, we


are all in it together, this is going to upset a few people. But it


is true. The coalition Government could have sat on its hand and had


a budget and done nothing. Actually it has made hard, tough political


choices and taking on some lobbies, in order to get some movement, and


in general, set a path towards lower taxes. We do have a young


columnist writing tomorrow, who take as tough line on the


pensioners. A shameless plug for your paper? It is the quit moaning


granny, the baby boomers have had it easy, if you are young and


saddled with the debts, they are complaining. There you see the


front page of the Telegraph, read by lots of pensioners, you know,


these people vote, unlike a lot of the young people who are make --


making the point you appear to sympathise with? Where is the real


big cost in this budget? It has come from raising the threshold up


to �9,205. That cost �4 billion, you have to find it from somewhere.


The one thingly say on the pensions point. What has happened -- the one


thing I will say on the pensions point, is the money they had is


taken away from them. It is painful for everyone, even if you are at


the top end of the income scale, in theory your taxes will rise. Lower


income people should see their taxes reduced. They have had to


find �4 billion from it. We get so obsessed with the tinkering around


the taxation we miss the two bigger stories. The economy is growing at


0.8%. We have a fragile economy, that is driving everything


happening, the big fight we will have will be around this �10


billion in welfare cuts. I think if you think it this argument will be


bloody, wait until the rest of the year. You need it look at the


international environment here. Obviously if the world economy


starts to get up, and pick up steam, there is better news out of America,


growth will change all the budget calculation. You were putting Danny


Alexander on the spot, and saying how can you, he can't prove it, but


things will get better if the world economy gets better. No European


Government could have delivered a budget like this. They have no room


for manoeuvre, all they are doing is cutting, cutting, cutting. With


just austerity, you won't get growth. This gives us a glimmer, a


glimmer of hope. Setting a path for lower taxes in the future. Which we


need in this country. You sound rather upbeat? I'm always prudently


upbeat. With a purpose? I do think it is


important it is very easy to second guess politicians. The coalition,


just two years ago, people said if there is a hung parliament or


coalition, interest rates will go through the ceiling, they won't be


able to do anything. Actually, this Government has done something.


is your sense of the public mood? One of the reasons why it was a


good budget. I don't think the economy is in good shape, I think


it is a good budget. It is the sense that we are a country that is


drifting, we are essentially unable any more to make the weather, we


are just going to have to live with it, live with what happens in


Europe live with a long period of slow growth and austerity. At least


this growth had ambition, it started saying we will deal with


the scandal of stamp duty avoidance and take that on, and deal with the


problems we have an airport problem in the south-east, we will say


there is businesses that go. Things will have to happen in the economy


that go beyond financial services in the south-east. What was your


sense? I think raising the threshold for low paid workers,


that was a good thing. That goes down well, the mood is very


realistic, that is something that George Osborne has been skillful


about, that people aren't expecting great things to happen, that they


just think if we just keep ploughing on, maybe eventually


there will be green shoots. It is easy to make fun of the


Churchillian flourish of the Chancellor today, he he is's


setting a course, some small steps -- he's setting the course, some


small steps in the right direction in a difficult environment. That is


all from Newsnight tonight, more from us tomorrow, until then good


from us tomorrow, until then good night.


A chilly night in store, clear skies, a touch of frost away from


the major towns and city centres into the morning. For most sunshine


overhead. A bit more cloud in the south west, one or two showers, a


stiffening breeze, the cloud north of Scotland clears. 16 or 17, a


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