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George Osborne at the dispatch box yesterday at times had the air of a stern headmaster. He told children to cut out the sugary drinks, study maths up to 18 and work longer school days.
That characterisation is perhaps unfair. Osborne’s focus at the Budget was to ‘put the next generation first’, an explicit departure for a chancellor who has often been accused of prioritising the ‘grey vote’ above others. The introduction of a tax on high sugar drinks was framed in terms of tackling childhood obesity whilst the announcement of Lifetime ISA is intended to provide a way to encourage younger people to save (either for their first home or for retirement).
The ‘sugar tax’ once again highlights that the current Conservative leadership are not averse to intervening strongly when they believe it to be necessary or to achieve a desirable outcome. Arguably, this is one of the defining fractures in the party; between those MPs of a purer free market persuasion and those who tend towards a more ‘what works, works’ approach. The debate on whether imposing a tax on high sugar drinks is effective or regressive is likely to create concern on the Conservative backbenches.
The Chancellor’s decision to announce further reductions in corporation tax (to 17%) can be viewed as an attempt to ease the burdens he has previously placed on businesses through the introduction of a national living wage and the apprenticeship levy. A substantial part of the Chancellor’s speech focused on measures to target multinational organisations (given the protracted rumblings over Google’s tax treatment, for example) whilst reassuring the business community that the government remains on their side.
Largely, however, the Chancellor was undertaking an exercise in expectations management. With growth forecasts this year being revised down from 2.4% to 2%, the largesse that fell into the Chancellor’s lap in November has disappeared, resulting in a potentially dramatic fiscal squeeze towards the end of this parliament if the government is to achieve a Budget surplus in 2019/20. The Chancellor’s attempts to reduce public spending have (and will continue to) come under close scrutiny. Arguably, were Osborne to face a stronger and more united opposition, he may find himself in a somewhat more uncomfortable position.