As I mentioned earlier this week, this is an unusual Budget day for me. I will be at a funeral and will not be able to comment until much later in the day on what is actually said by Rachel Reeves at 12.30pm today. I could apologise for that, but being with a close friend as we say farewell to his wife means more to me.
That said, I will be discussing what is announced later today and thought I would set out now what I might be looking for. Given the leaks, the expectation is that Reeves has not much more than detail to come, but I presume that at least one headline item has been left for the day. I am not expecting that to be a tax cut.
So what criteria will I use to assess what she as to say? Using the methodology I outlined in this morning's video, it will be what she does not say that will matter to me as much as what she does say. So, in no particular order, these are the issues I will be looking for comment on:
The environment
So far we only know about carbon capture and storage, which is about environmental destruction by allowing carbon emissions form big fossil fuel to continue. Will there be anything meaningful?
The nations of the UK
Will Scotland, Wales and Northern Ireland even get mentioned, let alone get the additional devolved tax and borrowing powers that they need?
Which departments will be hit by cuts? I suspect the list will include:
- Housing
- Local authorities (and so social care)
- Environment
- Transport
- Justice
Good luck with persuading us that public services are going to improve in that case.
In contrast the following might do well:
- The NHS
- Defence
And education will probably break even.
Bit all this depends on how the national insurance increase payable by these departments is managed. Rumour has it that she will rebate these charges, built off she does await the massive media backlash that this will only hit the private sector and private sector pensions: that is going to happen.
Investment
What in? Will this just be about addressing the backlog of repairs (which might well be the best use of the money in many cases) or will there be:
- Real environmental investment for a green transition
- New schools to replace those falling down with RAACs
- Similarly, new hospitals for those now held up with scaffold piles
- Tidal defences and other flooding measures
- Core skills for the green transition, in energy, retrofitting, new transport systems and more
- Transport Transformation, which most definitely does not mean new roads.
I worry that this money will be frittered on what big business wants. GB Energy, for example, is just a private equity fund to partner big business. Will any new money be recycled back in top the City in the same way? I sincerely hope not.
Poverty
I am giving high marks for the announcement on the minimum wage, but that was easy because most of the cost will be paid for by the private sector. What is Reeves really going to do about:
- Child poverty
- Pensioner poverty
- The precariat - or those who just about survive from month to month? How will she helped them?
- Staggeringly high rents that are absorbing far too much of the cost of too many vulnerable households, many of whom do not get support with them.
Interest rates
Reeves will most certainly say nothing on this, but the Officer for Budget Responsibility probably will. Where do they think these are going? Will, in other words, the Bank of England continue with its policy of crushing the economy?
Deposit taking
The government does not borrow. It takes deposits from savers. If she insists she cannot borrow from the Bank of England - and I am not expecting change on that - what is she going to do about securing new deposits? The sectoral balance chart published by the OBR might gives us clues. Will it show increased household saving? If not, where are the funds coming from?
Employment
Reeves says she is on the side of the working person. What, then, will forecast employment rates be? They have not looked good in Bank of England forecasts of late. So what is she expecting? The OBR will report.
Growth
We do not need growth in GDP: it is destructive of our well-being as currently defined. But Reeves does not agree. What is she going to forecast? A string of numbers will be produced, but be warned that these numbers are usually the most unreliable amongst the myriad of misinformation that most budgets announce, where the aspic rate of income tax is one of the few things you can assume to be right.
Tax and inequality
Will Reeves show real courage and equalise income tax and CGT rates as most people think would be fair?
Will inheritance tax loopholes be closed?
Will there be additional taxes on investment income to compensate for the growing tax charges on wages, which investment income does not bear?
What will the deal for the self employed be? I am expecting increases in NIC.
Will business really get the offer of a five year tax deal with no increases in corporation tax? Why?
And will fiscal creep continue?
The big picture
I am expecting this to be ‘a budget for growth'. If so, I have heard that many times before. Will she manage anything better than that given Labour's inability to weave together any narrative?
I am critical, but let's see.
To be avoided
And these are the bombshells she might best avoid:
- Increasing tax on takeaway food (it did not work for George Osborne)
- Changing tax relief on gifts to charity (I think it important, but she would have to do better than. George Osborne, again)
- Changing national insurance for the self-employed, which laid Philip Hammond low.
I will be back later this afternoon or this evening to discuss what she actually did. No doubt some of these issues will come up.
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Pinning all on growth was always a dumb move, as was cast iron fiscal rules, and ruling out changes to specific tax rates. Regarding growth, what it amounts to us a requirement more people to consume more, spend more time consuming and more time earning money to consume more. But “growth” is used instead because “we want you to spend more time working and burning through what you’ve earned” isn’t nearly so palatable. I’ve come to realise that political parties deal in reified and meaningless abstractions, for the “good of the country”, or the “economy”, or “nation”, to create “order” and so on. It’s gibberish, but sounds good. They always speak euphemistically, what they mean is: us (the STP and the people paying us). We end up with decontextialised ideas like “work”, or “education”, but none of these terms have meaning except in their lived reality. They become, however, useful political slogans, because who would argue against “education” and so on.
Condolences Richard sorry for loss of a good friend
Thanks
I am not an admirer of Rachel Reeves. The Telegraph and Times newspapers have, however decided to go down the Trumpist route of politics as specious personal insinuation (the ‘Press’ is little better than the more reprehensible sections of the social media, and quite often more insidiously malignant). These newspapers have decided to exploit that fact that Ellen Wilkinson (a Labour wartime/post-war Minister) has now replaced Nigel Lawson on the wall of Reeves’ office; early in life was a member of the Communist Party (“Are you now, or have you ever been a member of the Communist Party” as they follow the mantra of McCarthyism).
Ellen Wilkinson served in Churchill’s wartime Government – in National Security, for heaven’s sake! Here is what Winston Churchill said about Ellen Wilkinson when she died, exhausted and in ill health in 1947:
“Active, courageous, competent, accessible, she had many of the traits at which Ministers of every Government and of every party have been taught to aim. She had a very warm sympathy for social causes of all kinds, and was fearless and vital in giving expression to them. But she also had a great pride in our country and in its flag. This was very noticeable in several of her speeches and actions, not only during the crisis of the war, but later. She always wished to see this Island great and famous, and capable of offering a decent home to all its people”. (https://www.parliament.uk/about/living-heritage/transformingsociety/electionsvoting/case-study-radical-politicians-in-the-north-east/introduction/about-the-case-study1111111/)
We must assume that following the Daily Telegraph current precepts, Churchill was a Communist fellow traveller.
“Active, courageous, competent, accessible, she had many of the traits at which Ministers of every Government and of every party have been taught to aim. She had a very warm sympathy for social causes of all kinds, and was fearless and vital in giving expression to them. But she also had a great pride in our country and in its flag. This was very noticeable in several of her speeches and actions, not only during the crisis of the war, but later. She always wished to see this Island great and famous, and capable of offering a decent home to all its people”.
Would the Labour front bench please note?
One thing I would like to see is a large increase in funding for HMRC. It’s a shambles–speaking as someone who left the UK and struggled for the best part of two years to settle my capital gains tax liabilities. It would pay for itself many times over.
As for making Brexit work, again speaking for myself, I used to buy things from the UK all the time and since it left the single market I have bought nothing whatever. Recently, my wife found a particularly appropriate birthday card for a friend which she felt had to have. When she showed it to me (online) I pointed out it was being sold by a UK company and wouldn’t be worth the hassle. She didn’t believe me: “plenty of time; only a card”.
Today an invoice arrived for VAT and an administration fee which amount to more than the cost of the card and need to be paid before the card will be delivered (for a friend whose birthday has now passed–it all just took too long).
My wife is British (now with an EU passport). She doesn’t shop online very often but I don’t expect to see her bother buying much from the UK in future.
We’ll be looking forward to seeing how Labour plans to “make Brexit work”. What are the chances it might involve driving the dirty money out of London and shutting down the UK’s offshore tax havens? If even Labour continues the business of being, as Oliver Bullough called it, “Butler to the World”, I expect those who dance at the feet of oligarchs for coins will be in/back in office next time around and Brexit still won’t be delivering anything useful.