Was the budget really this week?
Usually the Sunday paters would be full of commentary unpacking it.
It has been crowded-out by Covid19, but when the pandemic is over, the budget’s implications may be profound.
Budget day is misery for the Opposition. I know- I spent 13 years of it. The Government has the initiative, all the popular announcements, and the ability to disguise any bad news.
Last week the Opposition’s misery was compounded by their belief that it was their own manifesto’s large expenditure proposals that the Chancellor was stealing.
To be fair, there was a little nervousness on the Government side as some of us felt that people had not necessarily voted Conservative in December in the expectation that the Tories would bring in a Labour budget.
In reality, the budget wasn’t quite like that. Whilst there was more money for the NHS, it was by no means John McDonnell’s drive for increased day to day expenditure across the board, paid for by taxing business and the better off.
The Budget’s emphasis -aside from vital help to deal with Covid19, was on investment to address Britain’s low productivity and to ‘level-up’ those areas that have been in long-term relative decline.
This incentive to borrow in order to invest is hard to resist: currently the Government can take a ten-year loan in the markets with a zero, and even negative rate of interest.
Nevertheless, I do have reservations.
I believe in a smaller state and lower taxes, and that in our mixed economy we need more of the private sector and less of the government sector in the mix. This budget took as a step in the other direction.
Large scale investments will be undertaken by the Government, in the past government investment performance has been patchy. I have never had confidence in government’s ability to ‘pick winners’.
The distinction between what is ‘investment’ -generating future returns, and what is day to day current expenditure has often been an elastic one. Fiscal rules are not immune to bending.
That is why it is always prudent to keep the total government borrowing requirement in check and to see that the stock of government debt is on a downward trend as a proportion of national income (it still is -just).
I recall a Conservative election poster in 2010 with the image of a new-born baby and the slogan ‘ she has her mother’s eyes, her father’s hair…and Gordon Brown’s debt’.
Tories must continue to heed their own advice about borrowing: never to borrow now in the expectation that future generations will repay.
What a difference a couple of days make:
What I wrote on Sunday for this column was completely overtaken by events on Tuesday.
Having expressed some concern about an expansionary budget of £30 billion, how do I react to the announcement this week of a further £330 billion.
Counterintuitively, I approve wholeheartedly.
We are now in an economic existential crisis pf a greater order than 2008. We responded then with an even larger package to prevent the collapse of the financial sector. It was tough but it paid off.
It is essential that we respond to the new circumstance to prevent economic oblivion.