In both the UK and Canada, fiscal policy has been driven in recent years by the desire of the governing parties (Conservative in both countries, although in the UK the Tories are in a coalition with the Liberal Democrats) to win national elections that are due in 2015. How's that going?
Over in London, Chancellor George Osborne tabled his annual budget today. The UK economy seems to be performing well: the GDP growth forecast for this year has been raised to 2.7%, with an average rate of about 2.5% projected for the next half-decade. Even so, the budget deficit is falling only slowly. It's expected to reach 6.6% of GDP this year, and a surplus is not expected until 2018, even if the present course of austerity is maintained.
The fact that the deficit is set to take far longer to eliminate than the Government initially claimed did not stop Osborne from starting to lay out his party's wares for the next election. There were a couple of populist gestures -- a one penny cut in the duty on beer, a reduction in the tax on bingo (!) and yet another postponement of higher fuel taxes -- but the main measures, which seem to have caught the commentariat by surprise, showed very clearly whose votes the party hopes to attract, come polling day: seniors and savers.
Seniors looking to use their pension "pots" will receive more favourable tax treatment, and the much-loathed requirement to use the "pot" to purchase an annuity will be abolished. As for savers, the tax-free individual savings accounts (ISAs) will be simplified, and the annual contribution limits increased.
Osborne can be expected to table one more budget ahead of the election. It's unlikely to deviate far from today's themes, which Osborne characterised as a deal for "makers, savers and doers" -- as opposed, very evidently, to all the welfare recipients and assorted less fortunates whom the government has been enthusiastically caning in its last few budgets, and continued to squeeze this time, with the announcement of a ceiling on "structural welfare spending".
Here in Canada, Finance Minister Jim Flaherty introduced his remarkably event-free budget a month ago. Canada's budget deficit was not as entrenched or severe as the UK's to begin with, and Flaherty's enthusiastic approach to spending cuts has effectively eliminated it already, with a surplus projected for next year, paving the way for a pre-election extravaganza in next year's budget. Like Osborne, the Canadian Finance Minister can be expected to keep a tight rein on welfare spending, while doling out the goodies to the middle classes and seniors who are the party's natural base of support.
One small surprise is that it won't be Flaherty who doles out the pre-vote potlatch. Flaherty resigned yesterday, planning to return to the private sector. His health has been poor -- he has a rare and painful skin disease -- so it was always expected that he would leave politics at the next election. The new Finance Minister is Toronto MP Joe Oliver, who has extensive business experience but is new to politics and, most surprisingly of all, is 73 years old.
So the stage is set in both countries for a test of whether voters can be bought with their own money. And in both countries there's an extra wrinkle: Quebec holds a provincial election in about three weeks', and a PQ victory could start the ball rolling toward another sovereignty vote, while in the UK, Scotland holds its own referendum on sovereignty in September. Neither Quebec nor Scotland is natural Tory territory, so in principle their departures would only make it easier for conservatives to hold onto power in the rest of the UK or Canada. At the same time, it's a safe bet that neither David Cameron nor Stephen Harper wants to enter the history books as the guy who presided over the breakup of the country. Isn't politics fun?
No comments:
Post a Comment