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George Osborne on the defensive after stealth tax criticism

The chancellor has denied unflattering comparisons to Gordon Brown.

by Rebecca Smith
Last Updated: 02 Dec 2015

Businesses weren't hugely impressed with the chancellor’s Autumn Statement, which was something of a mixed bag, but even they may have stopped short of likening his approach to that of Gordon Brown’s - the latest accusation from one of his colleagues.

Jacob Rees-Mogg, the eccentric Conservative MP for North East Somerset, said the chancellor was taking a ‘high tax and stealth tax approach’ towards policymaking that was inconsistent with the government’s pledge to create a ‘lower tax society’.

Osborne has been forced to defend his two biggest tax-raising policies – an apprenticeship levy (more here on whether this is actually good for business) which is predicted to raise an optimistic £11.6bn over the next five years, and £6.2bn in extra revenues drummed up from handing powers to local authorities to raise council tax.

He said these couldn’t be considered ‘normal’ taxes as firms were able to claim some of the money back, while local authorities have the option of whether to raise taxes or not, but this explanation didn't fly with Rees-Mogg.

The MP compared Osborne to former Labour chancellor and prime minister Gordon Brown, who developed a sterling reputation for masking stealth taxes. After Labour's 1997 manifesto committed to not increasing income tax rates, Brown found more creative ways of raising cash. The accusations of stealth taxes began to snowball.  

Osborne though, has told the Treasury Select Committee that many of his measures – including a crackdown on tax avoidance, had been ‘set out very clearly in the election manifesto’ and were ‘essentially for maintaining public support for [the UK’s] low tax economy’.

In an effort to further distinguish himself from Tony Blair’s longstanding foe, Osborne emphasised that total government spending was on course to fall from around 45% of GDP when he first became chancellor, to 36.4% at the end of the decade. ‘That is very much not Gordon Brown,’ was his point.

It wasn’t just members of his own party taking the opportunity to have a pop of course - Labour MP Helen Goodman said the apprenticeship levy would hit workers the hardest. Osborne responded by claiming his levy was ‘broadly welcomed’ by businesses (perhaps he just turned a blind eye to the CBI’s criticism that the levy consultation failed to tackle the most ‘critical issues’). He also suggested it would be wrong to pay for the apprenticeship training through higher corporate tax rates as it could have knock-on effect on the UK’s international competitiveness. 

Comparisons with the 'Iron Chancellor' may not be fair, but that doesn't mean all of Osborne's measures will be welcomed with open arms by the business world. 

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