The Budget

I always find that it is best to reserve one’s thoughts on the budget until the Commons has finished debating it, and that was only on Tuesday evening – although there will be another thrash when the Finance Bill begins its parliamentary proceedings.

Normally votes on the budget resolutions keep us till late into the night. This time however, there were only two divisions: Labour voted against the reductions in pension taxation and the Scottish Nationalists voted against the freeze in alcohol duty (what were they thinking!).

Personally, I much preferred the short-lived proposals in Kwasi’s Autumn statement. His mistake was to announce his intention to implement them all at once, and at the same time as a very generous scheme to subsidise all our gas and electricity bills.
By contrast, the tax increases in this budget will hurt, particularly the increase in corporation tax for businesses and the freezing of personal allowances for the rest of us. Nevertheless, our addiction to public expenditure and the expectation that the state will take ever greater responsibility for ‘looking after us’ has to be paid for somehow.
And we must kick the habit of borrowing: I am alarmed that the government debt that our pension funds and other institutions have acquired may now be crowding-out productive investment opportunities.

There were two ‘give-aways’. First the abolition of the lifetime-limit on pension savings. This is a very sensible measure to remove the incentive to retire early for so many professionals, especially highly skilled doctors.
Labour, by opposing the measure, because they say it is only of benefit to ‘the rich’ have, first got their sums wrong, and second, they’ve lost all sense of proportion. 27% of those who will benefit are doctors, 5% are teachers, 13% will other public sector employees such as senior police officers and many will be skilled technicians, scientists and entrepreneurs. It is in all our interests to encourage them to continue working and earning.
In any event, for all labour’s confected rage, I recall that, as Treasury Lord Commissioner, I signed into law ‘The Pensions Increase (Pension Scheme for Kier Starmer QC) Regulations 2013’. I believe the advantages extended to Sir Keir should also be available -for all our sakes- to keep skilled operators in the workforce when we are so desperately short of them.

The second big announcement was the extension of free childcare provision. I understand the rationale – clearly the affordability of childcare is one of the major restrictions that prevent parents from working. However, I do have reservations. First, there is a structural problem: The providers are in the private sector but the price is determined, not by the market, but by government. The problem hitherto has been that the price government has set is insufficient for the providers and, consequently, supply has diminished; It’s no good having a right to hours of free childcare if you can’t find people who will provide it.
Whether the extended childcare that the Government is offering can be delivered, will depend entirely upon the price that it sets.
As we have the highest childcare costs in Europe we should attach a higher priority to reducing some of the bureaucratic impositions that bind the providers.
Also, there has to be a amelioration of the very substantial tax disadvantages experienced by single-income families when one parent looks after the children full-time. It just isn’t fair.
And finally, nothing is free. The Government’s hands will be in our pockets to pay for it one way or another.