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Wednesday, March 19, 2014 

Very much a country for old men.

Well, now we know.  The Conservative plan to get re-elected is devastatingly simple: bribe older people, bribe them now, and bribe them often.

To give George Osborne some credit, today's budget was far smarter than just throwing money in the general direction of the 55+ vote.  It was also the work of a politician who still wears the scars on his back from the 2012 omnishambles, when he put into action almost every old suggestion made by the civil service, many previously rejected by Labour as being either a nightmare to enforce or liable to result in an almighty backlash.  Add on the scrapping of the 50p rate, something most people aren't attached to in the long run but was symbolic of the well off needing to pay their fair share, and the Tories still haven't fully recovered.

Whether it will have the desired effect is far more difficult to predict.  Where Osborne gives with one hand, he takes with the other.  He makes much of his new "pensioner bonds", where those over 65 can wedge a cool 10k of their savings and on a three-year deal expect a return of 4%, while those who want to take advantage of his doing away with the need to take out an annuity and instead take a cash lump sum will be heavily taxed for the privilege, a measure predicted to raise a very handy £1.2bn by 2018/19.  This is especially clever for the reason that it looks as though everyone with a pension or significant savings is a winner: as Rick pointed out last week, it's arguable that in some areas it's been spending by pensioners keeping whole towns afloat.  Making this cash even easier to access makes sense, at least in the short term, especially when the much trumpeted recovery has been been reliant (so far) on consumer spending.  That simply can't continue for too long, unless you make it attractive for those who previously haven't splashed out to do so.  Little wonder the more cautious are expressing concern at how this could mean the state having to step in should things go wrong, but this obviously doesn't worry Osborne when he's relying on an immediate gain.

Then there were the utterly shameless measures.  There's very little reason why the tax on bingo should be reduced by 10% while that on fixed odds betting machines should be increased to 25%, unless we're falling for the out of date stereotype that only little old ladies play bingo while just those who can't afford to shove their pounds into slot machines.  There's an arguable case that bingo halls offer a wider community benefit, but this ignores how most will now offer both side by side. By the same measure, it also bewilders why the alcohol duty escalator is being scrapped while the one on tobacco remains, especially when counterfeit tabs and tobacco are far more abundant than knocked off booze. Taking another penny off beer is the kind of gesture that costs money while not being passed on to the consumer, making it worse than useless. Makes for a good headline, though.  Just as dubious is yet another scrapped rise in fuel duty, making it all but unthinkable the next government could restore the polluter pays principle.

For pretty much everyone else there was very little to cheer in George Osborne's screed. We heard once again about how this was a budget for the makers, the march of the mallards makers previously announced having not yet materialised, with the Office for Budget Responsibility later setting out how the sector was likely to continue to decline. A further, belated £2bn was found for investment, the coalition having first cut it, without it being explained where the money was coming from. Welfare spending excluding pensions, JSA and linked housing benefit is to be capped at £119bn, rising with inflation, which while not as draconian as feared is only likely to be the first assault on tax credits and housing benefit for those in work, the Tory proposal to exclude the under-25s from claiming it a spectre in the background.

Unless Osborne is planning something truly spectacular for next year, by which point many will have already made up their minds, the reasons for why the young and the low to moderately paid should even consider voting for either coalition party continues to diminish. The reality is unless you're married, have children, you both work and can afford to save you might as well not exist in Osborne's "resilient" economy, as any gain from the further rise in the personal allowance is swiftly snatched back through the withdrawal of tax credits, while middle earners gain more. The Lib Dems seem to have realised their cherished policy isn't all it's cracked up to be, just too late to do anything about it.  There was nothing to help ease the housing crisis, just re-announced old pledges to build. Any hope the much heralded "surprise" would be cutting VAT was soon dashed.

Which leaves just the recovery itself. Delayed thanks to Osborne's austerity fetish, we are still 5 years from the elimination of the deficit he promised by the end of this parliament. As welcome as the continued drop in unemployment is, it masks how those on the various workfare schemes are counted as in work, while those sanctioned are removed from the JSA figures. What it can't hide is the massive rise in self-employment, which far from suggesting entrepreneurial zeal suggests desperation, as well as exploitation on the part of companies, locking new workers out from the usual benefits. 60% of the cuts are still to come, ones which look all but impossible in the timescale without the collapse of services, and while there are reasons to doubt Labour's figures, there's probably much truth in their claim that most people will be worse off in real terms come the election.

Who then can blame the Tories' gambit? It ought to be their only hope. The fear has to be of the most likely alternative: another hung parliament, another coalition. 5 more years of the Lib Dems pretending not to love the cuts. Should it happen, can someone please put me out of my misery?

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It's worse than that. A lot of the pension money will probably go into buy-to-let housing, driving the housing bubble, giving young people higher rents and making it harder for them to buy. When the pensioners die, property will be left to their relatives, so the gulf between the poor and those who have wealthy parents and inherit money will get even bigger. The savings benefits are also aimed directly at the well-off - how many people can save £15K per year? When Osborne talks about those who work hard and save, he simply means the rich.

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