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Sunday, December 02, 2012

Autumn statement to hit the rich

Reading this morning's Observer I was overcome by a sense of déjà vu. Wasn't it the last budget when all the good stuff was leaked out in advance only for the announcement itself to contain a series of own goals?

I really hope that the Government has learnt from their error. So that when I read that the Chancellor is touting about that the wealthy will have to make a larger contribution and admits that cutting the deficit is taking longer than planned, I must assume that he has more good stuff up his sleeve for Wednesday.

Nevertheless, what morsels we have been thrown are welcome although a mansion tax would have been nice. The paper says that George Osborne will limit tax-free contributions by the rich to their pension pots whilst he will also compromise with Liberal Democrats on his plans to freeze welfare benefits, and will announce a below-inflation rate rise of around 1%:

Osborne refused to say explicitly that he would be unable to meet his target of ensuring debt as a proportion of GDP would be falling by the end of the parliament, saying it was taking longer than planned to bring the debt down.

He has already had to put back by two years the date by which he will meet his commitment to eradicate the structural deficit. The Office for Budget Responsibility is likely to say it will take another extra year, meaning it will have taken eight years overall to eradicate. But he said it would be a catastrophe to turn back now.

Liberal Democrats say they have seen off plans backed by the prime minister and by the work and pensions secretary, Iain Duncan Smith, to remove housing benefit for those aged under 25.

The bulk of the £10bn welfare savings are not due to be enforced until after the election, but Osborne wants a downpayment on the cuts now, partly because some reforms will require new laws in this parliament for implementation in the next.

Trying to show he would be balanced in distributing the pain, he said: "It's got to be done fairly, and that means yes, the richest need to bear their fair share – and they will. That means more than they're paying at the moment … but there is another conception of fairness, the fairness of the individual who goes out to work and lives next to someone who lives on benefit; we are also going to tackle welfare bills, and that is the Conservative approach to fairness."

It is not ideal but it is a start. It is also clear that Liberal Democrats influence has once more been effective in moderating the worse excesses of Toryism.
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