The contents of the Budget presented to Parliament at the end of last month are still being digested but some observations can be made immediately.
It is apparent that the Government is going to persist with its argument that it has been constrained, unexpectedly, by its economic inheritance from the last Government and that its less popular choices should really be blamed on that Government, not this one. You may have heard about a ‘£22 billion black hole’ once or twice. As a tactic, blaming the last lot for what you describe as an economy in a terrible mess makes political sense, but there are two problems with it. The first is that it isn’t a fair characterisation. I would not pretend that the last Government got everything right, but in fact inflation was coming back under control after the Ukraine-inspired price increases for food and fuel and, for example, unemployment was lower than when the Conservative Party took over from Labour in 2010. The second problem is that if you tell the world, for domestic political reasons, that your economy is in a terrible state, the world may listen. Investors in the UK may decide to invest less and businesses may make more cautious plans to expand and employ more people. For a Government relying on higher economic growth, it’s a bad economic strategy.
However, let’s assume for a moment the Government had as little money as they say and that they had been left with huge unfunded liabilities. If that were so, I think we would not expect a responsible Government to make the sort of budgetary choices which this Government is making. They say they have £22 billion to find but have raised taxes by nearer to £40 billion. They have offered generous pay rises to public sector workers like train drivers without asking for productivity improvements in return, essential to making our public services sustainable in the long term. Handing over money now without conditions and then asking for productivity gains later is not smart negotiation.
There are other troubling aspects to this Budget, several of which I voted against in the House of Commons last week. Decisions to increase National Insurance Contributions for employers (the effect of which will largely be felt by the ‘working people’ Labour said would not be taxed more) or raising tax on the passing on of family businesses or family farms (making it harder to keep, in particular, younger people in farming, with obvious dangers for food prices and food security) are not just bad decisions but are also things Labour either suggested or said plainly that they would not do when asked during the General Election campaign a few months ago. Beyond economic impact, this has an effect. Let’s face it, the election of a Labour Government in July was not a huge surprise, and all the polls told us they would likely have a large Parliamentary majority. Labour alleged Conservative economic mismanagement routinely during the election campaign and must have been planning what they intended to do in their first Budget. Claiming things were much worse than expected is not convincing, and Labour Governments generally believe in higher tax and higher spending, so doing both in their first Budget, as they have, wouldn’t shock many.
Criticism of the last Government for damaging trust in politicians was not wholly unfair. What a pity that a new Government, claiming to want to restore that trust, couldn’t have been more honest about its plans when it asked for our votes.
