George Osborne is refusing to add to overall tax burden in Autumn Statement but may change balance between richer and poorer Britons
By Tim Montgomerie
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The Times has an important report (£) this morning suggesting that Iain Duncan Smith and George Osborne are close to a deal that will make a significant contribution to the £10 billion of further savings from the welfare budget that the Chancellor wants to achieve by 2017. Many benefits paid to people of working age will be frozen in money terms for two years - equalling a cut of about 2.2% in real terms. The savings will be justified as not only necessary for deficit reduction but also to help ensure there is a real gap between a life on benefits and a life in work. Last year's big increase in benefits at a time of stagnant wages upset the Welfare Secretary, who is determined to increase incentives to leave benefits and take up work. If a freeze does go ahead senior citizens will not be affected as they are protected by the Coalition's 'triple pensions lock'.
The fear in Tory circles is that this IDS/ Osborne deal will be blocked by the Liberal Democrats if the Chancellor doesn't also use his Autumn Statement to raise taxes on the wealthy. Although George Osborne has ruled out a mansion tax he has not ruled out higher council tax bands on high value properties. A majority of Tory members in the latest ConHome survey said that such a move would be acceptable to them. The Communities Secretary Eric Pickles is not so keen, however, and is thought to be resisting the move.
What the Autumn Statement will NOT involve, according to ConHome sources, is a net increase in taxes. Mr Osborne has long vowed to cut the deficit by the OECD's recommended 80/20 ratio - 80% spending cuts and 20% tax rises. The deficit reduction package is now at or close to that ratio and the Chancellor is not willing to accede to some Lib Dem backbenchers who want a higher proportion of the deficit reduction burden to fall on taxpayers. Mr Osborne believes that increases in VAT, NI, CGT and extra levies on the banking sector are enough and extra taxes could damage the recovery.
The real hero of motorists is Tory MP Robert Halfon who has long led the campaign for a fairer level of fuel duty. Unlike Mr Balls, his is a longstanding conviction. I hope my friend Rob doesn't vote with Labour on Monday. Just a few weeks before what is effectively a mini Budget Tory MPs shouldn't be restricting the Chancellor's options. Robert and other fuel tax campaigners have made their position clear and shouldn't give Ed Balls a propaganda coup. I wouldn't be surprised if Osborne raises council tax on big properties next month and, perhaps with other measures too, funds lower fuel duty. A Tory Chancellor raising taxes on the haves to cut taxes on the have-nots. In these debt-ridden times that is about the best we can expect him to deliver.
Update: It has been pointed out to me that in the Mail on Sunday interview from 6th October in which George Osborne ruled out a mansion tax he also appeared to rule out new council tax bands too: "Adding a new tax band to the council tax for big homes is merely a sinister ploy to let tax snoopers get into people’s homes, he maintains. ‘You would have to send inspectors out [to revalue every home in the UK] and it wouldn’t raise much money,’ he says. ‘I’m not going to let the tax inspectors get their foot in the door.’"