I did tell you last week it wasn’t what the Chancellor said, but what was in the Red Book and pile of documents he kept back until he sat down.
However, before I comment on some aspects of what he didn’t say, but will do, let me start with an apology. I misled you in this column last week, when I said that big business companies were sitting on £70 billion they won’t invest. That figure is the amount they are, in the words of one economist, “squirreling away” each year. The true amount they have planked in the banks is £750bn. Unknown to most people, big business has been having a very profitable time while the rest of us are squeezed.
You would think with the Chancellor’s boast that he would “unashamedly back business,” and having responded to their cries of torture due to the 50p tax by reducing it to 45p, not to mention the drop in corporation tax to 22 per cent by 2014, those £750bn would be released in an investment torrent that would sweep the economy back into growth and millions of jobs. You would be wrong.
“We should be aiming for 15 per cent” corporation tax said a grumpy Simon Walker, director general of the Institute of Directors. According to the Office of Budget Responsibility, so unchuffed are all those companies with all those billions in the banks, that the strike of capital remains in place. Last November, the OBR expected investment to grow this year by 7.6 per cent. It will, instead, be only 0.7 per cent.
The difference for families across the land means no jobs for our young people, and more cuts. So far, out of every £10 of cuts aimed for, we have suffered only £1.
A strike by public sector workers attracts great attention. We see them on the street, and we hear from the Tories just how much the strike is costing the economy. But the strike by capital, the key source of economic growth, never gets a mention on TV, radio or in the popular press. You have to dig into the business pages, and only some of them report it.
So, this silent, but much more deadly strike than any by dustmen, cleaners, civil servants, goes on and on; with big companies knowing that the pressure they are placing on a Chancellor desperate for growth, increases their bargaining power over corporate and personal taxation.
The lowering of corporation tax is no small beer. Neither is the drop to 45p instead of 50p for very top earners. A senior lawyer or banker earning £250,000 a year will enjoy a net gain of £5000. An investment banker on £500,000 a year will gain £15,000. The average paid worker reading this newspaper is in the PAYE system. No wriggle room on income tax or national insurance (which is a tax, not an insurance against anything). It is taken from the pay packet before you get it. There is no pressure you can bring to bear on the Chancellor of the Exchequer to lay off you. He controls you. But if you are the mega-rich, it is very different.
How was it that the 50p didn’t bring in the amount Labour, who introduced it, anticipated? Quite simple. The mega-rich have enough money not to draw their full salaries in a financial year, thus taking them outside the 50p limit. They could keep doing this forever, always a year behind in drawing their money. Their message to the Chancellor: get our tax rates down or we shall continue to dodge them, and you won’t get the cash you expected. Result? Cave-in by Osborne.
A rich Russian banker is shot in London, and we immediately think: “Yes, all part of the corruption surrounding Putin’s Kremlin.” But what about here? Sue Cameron, a journalist with inside contacts in Whitehall, wrote on March 22, before the Sunday Times’ “cash for access” revelations: “The Budget leaks are partly the result of coalition . . . But there may be a more Machiavellian reason. Insiders say that when it comes to taxing the rich, David Cameron and George Osborne find leaking a useful way of discovering what their backers think – not least party donors. If too many ring up to complain about, say, a plan for a mansion tax, it can be quietly dropped.”
Give loads of cash to the Tories, and you can dine with the PM or ring them up about the Budget. Not something the PAYE worker, the pensioner or the unemployed can do.
As for Osborne’s claim about the biggest pension rise ever coming in April, it was a classic piece of falsehood. What he would not admit is that the rise is to compensate pensioners for the inflation last year – that is the money that has already been drained from their pensions. In fact, “pensioner inflation” is always higher than the government figure, because pensioners pay a higher proportion of income on gas, electricity and food.
Oh yes, we are all in it together, except, of course, those who are not.