Last week the House of Commons voted on the Budget, presented by the Chancellor of the Exchequer against the backdrop of an ongoing pandemic and spending in excess of £340 billion so far of taxpayers’ money in support schemes for those affected. This has been necessary spending and, while not covering everyone, has been generous by international standards and has offered vital help to many businesses and families at a very difficult time. The Budget also reflected, however, the need for this massive spending to be paid for. Although interest rates are low at the moment, it cannot be right to carry on borrowing forever and leave the problem to future generations. Sooner or later, taxes have to go up. If it were done now, it would clearly cause great hardship as we are still feeling the immediate effects of COVID-19, so I think the Chancellor is right to focus on freezing personal tax thresholds in coming years and, when considering corporation tax, on the most profitable companies. However, the yield from these tax rises will depend on the broader recovery of the economy and on this, the Budget forecasts from the Office for Budget Responsibility were more optimistic, suggesting that GDP will return to pre-pandemic levels in the first quarter of 2022. This is based largely on an expectation of strong consumer spending, but even if it is right, I wonder how predictable the profile of such spending really is.
Our economy has not just taken a hit from COVID-19 but has also changed shape, with working from home having a significant impact on transport, coffee and sandwich shops, and online retail having a significant effect on even those shops on the high street allowed to open. We do not know how many of these new patterns will be retained when restrictions are lifted, and perhaps it is harder to guess than we think. The conventional wisdom is that many of us will continue to work from home, at least part of the time, and that may well be right, but it often strikes me that those saying so speak from homes with quiet places to work and good broadband connections which, sadly, we do not all yet enjoy. For some, being productive at home has been hard, and for many more, innovation, creativity and problem solving are still best achieved by being in a room with other people. I suspect it is too soon to announce the death of the pre-COVID workplace or to define the post-COVID economy.
