Chancellor Of The Exchequer George Osborne was forced to cut his holiday short, not because of rioting but due to economic concerns. Given that he was reported to be staying in a £1,000 a night Beverly Hills hotel, it would appear that his economic choices have not been curtailed.
But rather than respond to the lack of economic growth with measures to stimulate the economy, Osborne claimed that events justify the austerity programme and savage cuts that he has overseen.
In the last year the British economy has grown by just 0.2%. Even the US economy, which recently lost its top rated AAA status, has outperformed ours, growing by 1% over that period.
Osborne is increasingly becoming marginalised outside his own millionaire circle as the economy stagnates. Jonathan Portes, who was chief economist at the Cabinet Office and is now director of the National Institute for Economic and Social Research, said “The UK economy is weak. The sensible thing to do now … would be a modest loosening of fiscal policy.”
In May, the chief economist of the Organisation for Economic Co-operation and Development, often cited by Osborne in support of his austerity measures, warned that the chancellor may have to slow the pace of his cuts if growth stayed weak. And the IMF has said he will struggle to meet his 2015 target for deficit reduction.
But the Chancellor has asked his civil servants to look into one issue – the 50p top rate of tax.
A succession of newspaper stories quoting often unnamed Conservative and government sources culminated when the Independent said a Treasury analysis suggests the 50p rate – introduced by Labour in 2009 – was generating only marginal returns for the exchequer.
Some of these sources have claimed that tax avoidance and evasion mean the rate is raising less income than expected. But the solution does not appear to be the obvious one of ensuring that all tax due is collected. Instead we hear that the rate may be cut next year.
But the Tories coalition allies, the Liberal Democrats, are reportedly unhappy at all this talk of a tax cut for the rich.
Chief Secretary to the Treasury Danny Alexander has previously claimed that wanting such a cut was living “in cloud-cuckoo land”. And a senior Liberal Democrat sources told the paper that any attempt to cut the tax burden of the very wealthy would be opposed by the party.
“At a time when we are asking everyone to make sacrifices, this sends out totally the wrong signal,” said the source. “The 50p rate was never our policy and we are not wedded to it – but any cut must be offset by other measures.”
It’s no great shock to hear that the Chancellor’s main concern isn’t the public service cuts that are causing pain and hardship throughout the country, or even the need to create jobs.
Cutting the tax bill of the most well off in society is always a Conservative goal – however that affects the rest of us.