Experts round on chancellor over ‘scattergun’ budget, saying he ducked big tax and spending decisions
John Healey has backed away from cutting the cost of welfare this parliament, amid dire warnings his first budget could lead to brutal spending cuts because of a £28bn shortfall in public finances.
Experts rounded on Healey’s steady-as-she-goes budget on Thursday, with the Institute for Fiscal Studies saying he had left himself a mountain to climb by ducking big tax and spending decisions.
The Guardian’s money and economics editors Hilary Osborne and Heather Stewart answered your questions on energy prices, tax thresholds and the global events pressuring the economy.
FelonMarmer asks: What is going to stop landlords just transferring their tax increase onto tenants, while complaining about how hard done by they are?
Heather says: Unfortunately, there’s nothing to stop landlords passing their higher tax bills onto their tenants, aside from what the local rental market will bear. Indeed, the Office for Budget Responsibility did suggest one result of this and other recent policies (the 2p rise this year followed another 2p last year) could be “a steady rise in rents,” as some landlords whack up rents and others leave the market altogether. I think John Healey’s answer would probably be a fairness one - that income made through renting out property should be taxed more heavily than that earned through work.
Heather says: That’s a really good question: Labour strategists are adamant that they wouldn’t. I can’t help thinking that voters were so convinced the public services were in a dire state, they could have accepted the argument that taxes needed to rise. Certainly, the Tories didn’t seem to get much electoral credit for Jeremy Hunt’s desperate cuts to national insurance contributions in his last couple of budgets. But we’ll never know.
Another question is whether Labour should have bust the manifesto promises - either when they first got in, on the basis the public finances were worse than they thought; or at some point in the last year, given the impact of the Iran war (which has added £14bn to the government’s interest costs this year alone).
John Healey raised taxes on banks and landlords to fund a £100 winter handout for 20 million families as official forecasts made clear there is no end in sight for the cost of living crisis.
In his first budget, the chancellor blamed “global economic storms” for the grim outlook, as the war in Iran drives up oil and gas prices.
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