Budgets just ain’t what they used to be

@cstreetpartners

Budgets just ain’t what they used to be

They are too early in the day, for a start. Budgets used to be announced at 4pm, when the Chancellor of the day, replete from a long lunch, would hand down the financial figures to MPs who, also replete from lunching, would cheer and bray from either side of the green benches. It meant ludicrously tight deadlines for those of us in the media, of course, but at least it guaranteed decent stories for the following day.

Budgets are also far too frequent these days — we now have the Autumn Statement, and we endured a post-Election Budget last summer. Each new Budget serves only to dilute the annual impact of the next, and announcements are carefully staged over months and years.

And as for secrecy — Budget options are all too often selectively leaked, not least by Treasury ministers themselves, to open up debate and tee us all up for at least some of the changes planned. How else would we already know about the later school hours planned for England?

And, other than funding, how is that anything to do with the Budget anyhow? The answer, as all government departments have found, is that the Treasury has an interest in everything, if it so wishes.

And when George Osborne is seen as a likely future Prime Minister, be sure the Treasury wishes to impose its will on everyone.

So, much trumpeted, we had the Budget for the Next Generation — which turns out include extra funding to allow schools to stay open till 4.30pm, though not in Scotland.

The Next Generation has to be a wealthy generation, so the Chancellor produced his first rabbit — the Lifetime Isa, a tax-free savings account for under 40s to save for a house or a pension.

The Next Generation also has to be healthy, so the Chancellor produced an even bigger bunny — a sugar tax, to be imposed, after due discussion with the soft drinks industry, on all fizzy drinks. This not being a devolved matter, this gigantic Easter Bunny was immediately christened the Irn Bru tax. And just to hammer home the point, the £520m it would raised would be spent on increasing sports funding in primary schools.

But for this generation, rather than the next, George Osborne introduced a heavily devolved Budget, with infrastructure funding for Manchester, Wales and London — from the Northern Powerhouse and HS3 to Crossrail 2, something which the Chancellor felt sure would be welcomed by his absent colleague (and Prime Ministerial rival) the Mayor of London.

Scotland, of course, could not be missed, and the Chancellor ensured he scored a direct hit. Aid to the oil industry and the effective abolition of Petroleum Revenue Tax backdated to January was followed by a loud declaration that Scotland was better together, supported by the broad shoulders of the UK. The opposition green benches demurred.

As promised, he delivered on income tax thresholds, raising the 40% rate to £45,000 by April 2017 — and with an implied challenge to the Scottish Government not to reduce that rate when it becomes within their powers to do so.

By now playing for laughs, the Chancellor pointed out that a former Lib Dem Treasury minister had warned of risk of abolishing the pensions tax free lump sum. “We found no consensus for that, so we decided to keep the lump sum and abolish the Lib Dems….”

There were numerous small business changes, and big business bashing, and a quiet admission that growth would be tiny over the next five years — though better than other countries, the Chancellor claimed.

Politics, politics…. In truth the Chancellor had begun his speech with a highly political message to put stability first — and that stability depended on staying within the European Union. While inevitably he had to claim to be balancing the books, George Osborne was speaking with one eye on the EU referendum, and perhaps the other on the long term possibility of moving next door in Downing St.

Call that a Budget? It was more like a European election rally, or an early bid for the keys to No 10, or George’s Easter Bunny. Come to think of it, that’s exactly what it was….

Rob Ballantyne
Associate Partner