Osbourne Increases Deficit by 1% in Pre-Election Giveaway to His Supporters

The aim of this blog is not to be political.  But I cant avoid pointing out obvious economic humbug when it raises its head.

For a chancellor to run on the basis of reducing the deficit when just before the General Election he has undertaken two major measures which will substantially worsen teh deficit in order to raise the wealth of  demographics which are mainly Tory supporters.

Firstly the stamp duty land tax – beneath the simplification and elimination of the daft ‘slab’ structure- based on Scotland’s reforms

The OBR have estimated the cost of the changes to be over £800 million per year, or almost £4.5 billion out to 2019-20, all of which will go straight into the pockets of property sellers.

Whilst on pensioner bonds.

Which interest rate would you rather borrow at – 4% or 0.6%? It sounds like a moronic question. Not if you’re the Chancellor, it’s not. In launching pensioner bonds yesterday which pay 4% pa over three years, he is choosing to borrow at a much higher rate than the 0.6% charged by the gilt market.

This is costing the tax-payer money. If, as is likely, all of the £10bn bonds on offer are bought, the government will be paying almost £300m a year more in interest than it would if it borrowed in the gilt market*.

To put this in context, it is three times as much as the government is saving from the cap on benefits. And it is almost as much as it is saving from the bedroom tax….

What’s going on here is simple. Osborne is channelling tax-payers’ money to a favoured client group. There’s a word for this – corruption. This is the sort of thing we expect in Uzbekistan or Nigeria, not a western democracy.

So these two measures are net costing the taxpayer 1.1 billion a year – which goes straight on the deficit, indeed its dds almost exactly 1% to the deficit.

By all means run an affordable deficit if it helps support the spending power of the poorest or funds infrastructure and essential services, but what is the case for it supporting the incomes of rich pensioners and property owners?

If we had not had these two measures in the next parliament we could scrap the bedroom tax and benefits cap and restore the housing budget to a level able to support building of around 150,000 houses a year, and without needing to borrow to do so as Balls plans. Why isn’t this blatant give away being picked up by the papers or any political party?



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