Property experts declared last week’s budget a “missed opportunity” to further help first-time buyers, for example, while industry voices concluded that the chancellor had missed the chance “to accelerate the growth of the live music sector”. The Conservative Environmental Network complained that Jeremy Hunt had missed an opportunity for “green tax cuts to unlock private investment”, while UK Hospitality dubbed the budget a missed opportunity to, er, “unlock hospitality”.
So numerous were these complaints that we might nickname the budget “The Great British Missed Opp”. The Society of Motor Manufacturers and Traders decried Hunt failing to provide fiscal incentives to fuel demand for electric vehicles. The Local Government Association complained about the chancellor not allowing councils to retain 100 per cent of right to buy sales receipts permanently. Charity groups were disappointed that the budget didn’t help them with all the irrecoverable VAT they pay.
The list goes on. Peruse the press releases and you’ll find Hunt apparently missed opportunities to encourage sport, make farming resilient, upgrade the Bakerloo line, maximise offshore wind capacity, increase schools funding, better fund community pharmacies, build and encourage investment in new homes, pursue racial equality, tackle poverty, reinstate duty-free shopping, better fund the court system, provide economic justice to victims of austerity, “invest” in nursing, avert climate breakdown and boost “living standards on a longer-term basis”. The power one man has!
Now, it’s natural for interest groups to lobby and pressure for policy change, but this exhausting list highlights two truths about government budgeting. First, for all the complaints about HM Treasury’s power and stingy “orthodoxy”, the finance department “holding the ring” on tax and spending decisions (as the Institute for Fiscal Studies’ Paul Johnson puts it) is necessary. Otherwise, the budget deficit would explode. All these demands would expand borrowing. Only the Treasury can adjudicate them according to the government’s priorities.
Second, despite this, we must move away from the budget being seen as an all-singing, all-dancing economic policy spectacle. MPs and commentators talk as if £10 billion of tax and spending changes can transform a £2.7 trillion economy from doom to greatness. So hyped is the event and so expansive the issues considered within its remit that outside lobbying is highly incentivised. Indeed, chancellors encourage this. Hunt name-checked dozens of MPs and 15 different non-parliamentary groups or individuals for advocating policies he announced this time. Everyone wants that type of recognition.
The problem is that the resulting spectacle is economically harmful. The bi-annual frenzy in the build-up to budgets and autumn statements fosters economic uncertainty, diverts resources into speculative lobbying and precipitates hasty, under-examined tax legislation and spending decisions.
We’d be better off having one traditional budget per year, in which the chancellor simply stands up and outlines the tax rates, allowances and borrowing requirements necessary to deliver on government spending. All other change should go through departments as normal legislation, albeit with the Treasury holding the purse strings. The result would be more scrutiny, lower economic uncertainty and less incentive for this circus of lobbying and special interest pleading.
