Yesterday, George Osborne comprehensively failed the credibility test – and a basic test of fairness. His plans fail to meet Labour’s pledge to halve the deficit over four years. He claimed “we are all in this together” – but his first priority remains a tax cut for the richest families.
The Credibility Test
People expected George Osborne to set out by how much he would cut the deficit, just as the Government has done by committing to cut it in half over four years. We heard nothing of the sort.
The Tories told us that George Osborne’s speech would set out clearly how they would pay for their long list of unfunded tax and spending commitments – “by this time tomorrow you should know just about everything”, Eric Pickles said on Monday.
But the speech doesn’t even pay for itself, let alone make any progress on their irresponsible plans for tax and spend, or matching the Government’s plan to halve the deficit over four years.
First, people were expecting the Conservatives to drop the tax and spending pledges they have already made – just six of which were estimated in The Independent to cost £54bn. Yet all the uncosted pledges stayed.
Second, the Tories were expected to drop their pledges on inheritance tax and marriage tax allowance. Yet it stayed.
Third, Osborne’s new idea to reverse the dividend tax credit change would cost £3-5bn a year – far more than the concrete savings he outlined. Fourth, Osborne’s plan for a tax cut for small business, announced last night, that would undercut existing firms, remained unfunded – in fact it wasn’t even mentioned in yesterday’s speech.
Worse, their plans on raising the retirement age completely unravelled.
Last night George Osborne briefed that he would save £13bn a year by raising the retirement age for men and women to 66 by 2016. But the Shadow Chancellor’s new policy has already been downgraded, by David Cameron, to an independent review without even a chair to put a name to it. And the firm 2016 date for implementation has disappeared for women and been watered down for men.
Even before the u-turn it was clear the savings figure didn’t stack up. And even once they’ve got their costings right, the change still won’t raise a penny in the next Parliament when we are halving the deficit. To get anywhere near £13bn of savings would require much faster increases in the retirement age for everyone, including women. If that is the Tories’ plan they should come clean on it.
The Fairness Test
Mr Osborne’s fairness failure was even worse. His credibility failure left him simply attacking the middle class to pay for the Tory tax cut for the richest few. He stuck by his plans for an inheritance tax cut of £200,000 for the richest 3,000 families, for which the mainstream middle will have to pay. His plans would mean:
* 900,000 children would miss out on Child Trust Funds. Providers would stop offering accounts at all in some cases. For families earning over £16,040 with two children they would lose £1,000 in direct payments for their children.
* The removal of tax credits from those over £50,000 would hit 130,000 families and only raise £40m – the Tories’ promise to save £400m would mean affecting families on much lower incomes than £50,000.
So, bad maths. And worse morals.