Budget 2014: Osborne's three clever tricks revealed

The chancellor is bashing the baddies - and taking money from your bank account
The chancellor is bashing the baddies - and taking money from your bank account
Alex Stevenson By

The chancellor's funding this year's giveaways by whacking the 'baddies' of 21st century Britain. If you're a tax-avoiding smoker with a penchant for gambling and a company car... well, let's just say this Budget might not be great news.

Yes, there are big giveaways. The personal allowance is going up to £10,500. Savings are getting boosted with improvements to individual savings accounts. And, most importantly, beer duty is falling. But where, you have to ask, is the money coming from?

The chancellor's strategy, summed up, is to take money from the baddies, even if it's not necessarily the baddies' money just yet, on the basis that if he only targets the unpopular no-one will hear them scream.

Stealing from the future


There's not much money around right now. That's a pretty firmly established fact in Westminster. So how about taking money from the future instead?

That's what the chancellor is doing to 33,000 very wealthy taxpayers who have 'fessed up to involvement in tax avoidance schemes.
The words 'tax avoidance' automatically make these people, who amount to less than 0.1% of the taxpaying population, villains of society. So they're not going to find may people who will stand up for them.

The idea is that rather than waiting for lengthy court disputes to be resolved, the Treasury will simply take their money immediately and have done with it.

This sounds just a little bit outrageous, isn't it? The government promises to pay back the tax if they end up losing the case. But as HM Revenue and Customs wins 80% of its cases, and even more are settled out of court, they're supremely confident that they won't be losing out much.

That doesn't mean there won't be some cases where it turns out the HMRC really ought to have never taken the money in the first place. Would you want to be in the position of trying to get the taxman to give you back a large sum of money, with interest? Good luck with that.

According to today's paperwork this cunning little ploy is going to bring in £3.9 billion over the next five years.

But the full extent of the Treasury's plans go even further than that. Osborne is even proposing giving the government the power to go into people's bank accounts and simply take their money.

Making money from nothing

Wouldn't it be clever of George if he could come up with a policy which raises Treasury income, while keeping voters happy?

He looks to have done just that with his move to allow pensioners who want more security the chance to use their savings to top up their national insurance contributions on a voluntary basis.

What a marvellous opportunity to get more cash into the government's coffers! It's expected to bring in a very handy £850 million over two years.

But this is nothing compared to the total benefits from an even more ingenious gambit along the same lines.

One of the most ingenious Budget measures on display this year relates to what happens if you want to get your hands on your pension pot when you retire. The Treasury had hated people doing this because it meant more of them would blow the money and then end up dependent on the means-tested pension later in life. So it slapped a 55% tax on the practice which had the effect of putting lots of people off doing it at all.

The coalition's introduction of auto-enrolment for pensions has changed all that. This means far fewer people will be dependent on the state for means-tested handouts in their old age.

So the suits in the Treasury have given the green light to a liberalisation of the rules surrounding pensions. The withdrawal tax rate is being cut from 55% to marginal income tax rates - ie, 'normal' tax rates. Twenty per cent for most people.

Of course, while the tax rate is being lowered the expectation is the amount of cash the Treasury will get from it will increase. As Osborne told the chamber: "People on this side of the House will understand that when you cut a tax rate that is punitively high, that can increase revenues."

That is what the Treasury expects is going to happen. In 2015/16 the change is expected to net the chancellor's coffers an extra £320 million. That rises to £600 million the following year and continues to increase until, by 2018/19, it reaches a very handy £1.2 billion. Not bad for a policy which is supposed to be good for voters, is it?

Whacking the unpopular

Finally, just take a look at the chancellor's approach to duties. He is employing a twin approach. When he has the opportunity to be popular, he is seizing it ruthlessly. Hence the continued fall in fuel duty, the 1p off a pint of beer and the freeze on cider duty. Drinkers of Scotch whisky should be especially cheerful - there was supposed to be a 42p increase in duty introduced today, but this has instead been frozen.

Smokers, on the other hand, are in for bad news. They'd been looking forward to the end of a 2p escalator on tobacco duty scheduled for next year. Today they are disappointed.

The annual 2p increase has been extended for a further five years until 2020, by which time the Treasury will be receiving an extra £135 million as a result. The idea that the Treasury will not continue grabbing more money from those nasty unhealthy smokers is, let's face it, laughable.

Gambling is also being targeted - but only the nasty kind. Fixed odds betting terminals are being stung with an increase in machine games duty to 25%. This will placate a growing political movement against them in Westminster.

But what about the nice kind of gambling? Conservative backbencher Robert Halfon had been campaigning for a freeze in bingo duty. Osborne got cheers in the Commons chamber when he announced, in gameshow host fashion, that "I can go further" than Halfon's request. The chancellor is actually cutting bingo duty by ten per cent.

What he didn't say was that this will only cost him £40 million a year - half the £80 million the machine games duty will be bringing in. He's going to be receiving twice as much from gambling duties as he is giving away in this Budget.

Osborne won't worry too much about that. He's worked out that there is money to be gained from the 'baddies' and is acting accordingly. Company cars will be hit with an increased tax - especially the vehicles which are bad for the environment. Migrants' reduced access to benefits brings in more cash.

In a sense, the chancellor is being perfectly sensible. He's taking money from those who don't have a foot to stand on and redistributing it more broadly with measures like the personal tax allowance increase.

In another, he's being more audacious than his predecessors. The idea of stealing from the future is nothing new and is just par for the course for a political class which is obsessed with the electoral cycle.

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