There is an amusing graphic in yesterday’s Sunday Times:
The (full page) article is mainly about the presentation of policy. The thesis, based apparently on contacts with ministers and backbenchers, is that George Osborne was incompetent in dealing with Lib Dem demands. Facing electoral disaster, the Lib Dems have decided to be much less Tory-friendly in their behaviour. So Clegg demanded a package of soak-the-rick measures to balance the 5% cut in the top rate of income tax (50% to 45%). His preferred option was the “mansion tax” for which the Lib Dems lobbied hard. Osborne resisted that, but accepted a mish-mash of substitutes worked out on the “back-of-the-envelope” at the last minute, including the limit on tax relief for charitable donations by the rich. He failed to think through the political implications, and to make matters worse swanned off on an overseas trip just before the budget.
I am in no position to judge how factually accurate these kind of leaks/briefings are, but it sounds uncomfortably plausible. Certainly Osborne started with a terrific reputation for sound political judgment, but it has never been entirely clear what basis that had. Since he became Chancellor it seems to have been one fumble after another.
Much of the article is full of endless special pleading by the rich and their advocates. But it is hard to quarrel with the comment (emphasised in large type at the top right of the article) that
The government has made philanthropists out to be tax dodgers.
The problem is that objectively what Osborne did was thoroughly sensible. A well-known subset of the rich decide after making their pile that it would be nice if people liked them more. So they set about giving away money in return for a reputation as a philanthropist. The paradigm is wanting their name on a public building or a wing of a national art gallery in return for providing part of the funding.
So far so good. It is probably better for society at large for part of their fortune to be spent that way rather than the usual route of slow dissipation by their descendants.
But it is much less clear that the government should match their donations (as explained in the earlier article).
Moreover, the Osborne proposal was extremely modest: he wants to limit the tax relief to donations up to the higher of £50,000 and a quarter of your taxable income. The suggestion that
this debacle could cost the charitable sector £300M a year
made by David Bull, director of Unicef in the UK, sounds overblown – a classic lobbying tactic.
Osborne hedged his bets by announcing that the measure would not be implemented until after a consultation period. But that is certainly politically inept. The likely outcome is that after months of bad publicity he will cave in.
This is not an argument against consulting on government policy. Consulting on the right way of dealing with the banks after the 2007/8 banking crisis was clearly essential. The public may have been baying for blood, but investment banking is an important sector of the economy and probably the only sector in which the UK is a world leader. Hasty action would have been unwise.
The situation here is totally different. No one in government believes for a moment that either the 5% tax cut or the package of compensating measures will make much difference to how much tax the rich pay. It is all about assuaging public anger whilst not upsetting the rich too much. That kind of exercise derives no benefit from elaborate consultations. What is needed is astute political judgment and careful consideration of the details before it is announced as settled policy. This case seems to have had neither.