Firstly, he needed to placate his Conservative colleagues. Scrapping inheritance tax for homes under £1m is a manifesto commitment that had to be delivered. It is undoubtedly true that this move will help better-off home owners and is not among the list of the public’s tax priorities.
However, the policy sent a clear message to Tory backbenchers – many of whom see Osborne as too much of a metropolitan liberal – that he is on their team.
The same could be said of the decision to raid the BBC’s funding by transferring the cost of free TV licences for the elderly to Aunty. There is nothing like a bit of Beeb bashing to fire the bellies of Conservative MPs, activists and the right-wing media.
His second aim was to pave the way for fiscal austerity to become the norm in British politics. His plan for a continued Budget surplus is aimed at producing a permanently smaller state.
The Labour leader in waiting will be faced with a dilemma in the autumn – vote with the Government’s fiscal rules or make an alternative case for why borrowing to invest in capital infrastructure is a better way to achieve growth.
While he sensibly slowed the pace of welfare cuts, the most controversial element of today’s Budget was slashing working tax credits for those on low pay.
Osborne is well aware that his party’s biggest weakness is being perceived as being the party of the rich, which leads to his third strategic aim. Putting himself in pole position to take over from David Cameron as leader of the Conservatives.
Slashing top-ups for those on low incomes was always going to be dangerous from a brand perspective. That is why the move to cut this £30bn part of the welfare bill was accompanied by a commitment to raise wages. A National Living Wage along with plans to raise the rate at which people pay any income tax to £11,000 will rightly dominate the headlines in tomorrow’s papers.
Offsetting this additional cost to employers by lowering corporation tax and National Insurance for smaller firms allows the Chancellor to demonstrate that a Conservative Party under his leadership is both competent and fair.
Osborne’s transformation has much to do with his intellectual curiosity and the formidable team around him. The appointment of James Chapman, the political editor of the Daily Mail, as his comms director was a smart move.
His ability to foresee bear traps will be critical to Osborne’s future success and alongside his chief of staff, Thea Rogers, his policy guru Neil O’Brien and a wider spad team that I understand may be further strengthened with the appointment of a financial policy expert, the Chancellor has the firepower to become Britain’s next prime minister.
Today’s Budget certainly set the bar high for all the other candidates.
Nick Faith is the director of WPI
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