Treasury blames coalition tax cuts for deficit increase
Today the government announced that instead of reporting an expected £2.5bn budget surplus, it is instead facing a £557m budget deficit.
This news won’t come as much of a surprise to anti-cuts campaigners and academics who have long argued that the governments’ austerity policies are massively counterproductive. What is surprising is that in their official statement, the Treasury effectively blamed the surprise deficit on the coalition’s own tax cuts.
According to the BBC, “The Treasury blamed disappointing corporation tax receipts, especially from North Sea oil production.” The Guardian goes on to report that nearly two thirds of this drop, £1.7bn is due to falling corporation tax receipts – with about £1bn of this drop coming from oil and gas.
A long way from blaming hot weather, cold weather, weddings or anniversaries, the Treasury are now putting the blame for the deficit directly on the coalition’s tax policies. In the budget earlier this year Osborne announced that corporation tax would be cut further, down to 24% from 28% when the coalition entered office. The budget also gave a £3bn tax break to North Sea oil and gas to encourage more drilling.
So, the coalition’s own tax cuts make up the majority of the drop in government revenue and the increase the government deficit. I’m still not going to hold my breath for Osborne to u-turn on his plans for more tax breaks for North Sea oil or dropping corporation tax to 22%. After all the coalition is engaged in an ideological project that’s got almost nothing to do with cutting the deficit and everything to do with cutting the state.