THE BLOG

Missed Opportunity In A Brexit Budget

10/03/2017 11:35

Philip Hammond's spring budget was anticipated as a 'Brexit budget'. On the surface the label seemed apt. The focus was on the future, building into the budget the plan for Britain's global economic role in a post-EU world. The country will be ready to cut the cord with the EU, set free to trade globally with old allies and new friends. The subtext was political: not just that the Chancellor intends to prepare the economy so that Britain is ahead of the game, but that he intends to consolidate Theresa May's raid into Labour's receding territory. Government hearties cheered the Chancellor along opposite the stony faces of the toughies, male and female, on the Labour front bench.

There was the visionary stuff, with lots of optimism and a cash injection, £500 million, for Britain's brave new world of robotics, electric vehicles and artificial intelligence; £300m for 1,000 new PhD places and fellowships in STEM (science, technology, engineering and maths) subjects. Businesses dreading the rate rises on 1st April after the recent revaluation will be helped with £435m for those affected.

And for all those left behind by the failed leftist social engineering agenda, the radical reform of education and training will continue apace. Funding for new grammar and free schools, to the tune of £300m, will go hand in hand with a plan for 'parity of esteem' for technical education. £500m will go to support new technical 'T-levels'; there will be a 50 per cent increase in hours for technical training for 16-19 year olds, complemented by three-month work placements, and £216m for existing schools. And free school transport will be extended to pupils on free school meals who attend a selective school.

So far so good: the Chancellor also confirmed he wanted 'gas in the tank': there would be no gimmicks, no give-aways and the priority would remain to cut the UKs' debt of £1.7 trillion and bring the deficit (and borrowing) down. This budget sought to reaffirm that Britain is changing. The economy of recent decades with too high a proportion of low-skilled jobs in the labour market needs to give way to one rich in high-productivity, high-worth jobs, through which more people share in the UK's rising wealth.

Yet something went awry. In refusing to play politics with the people's money, the chancellor's impeccable spreadsheet offset unplanned spending against new sources of income. So to cover the £2bn to local authorities to fund social care, NICs for the self-employed have been put up from 9p to 11p in the pound.

Not only did this appear to reverse a Conservative manifesto promise, it seemed at odds with Hammond's own admirable desire to encourage the entrepreneurial spirits to raise their game for Brexit. The self-employed include new - and longer term - earners, hundreds, perhaps thousands of 'geeks', the self-employed technological and digital wizards who follow the star that can lead to ARM or Facebook; the sort of entrepreneurs who start the small boutique that becomes the stock-exchange-listed mega brand. They also include farmers, individual entrepreneurs with an idea, the building trade and yes, the white van men so loathed by Labour's front bench and the Islington chattering class. It may seem to the Chancellor only 'fair' to raise the NICs for this group to the same levels as those paid by employees. But for an economy with its eyes on growth, new taxes are rarely a good idea, and taxes on effort are downright bad.

How, then, should the chancellor have paid for that £2bn adult social care top up? Welcomed as it may be by many councils, they too must look in the first place to their own fat. As the leader of Cumbria's Conservative councilors, now in opposition, explained during the week, whereas his party when in power saved £55 million, the current council's administration has 'wasted million upon millions of taxpayers' money.. [and] there's still money out there to be found'. Hammond has brought much cheer to the country and may be forgiven one mistake, though it may need to be reviewed. In the longer term, he must steel himself against the demonic determination of the Treasury to take the easier choice of raising tax, instead of continuing to cut levels of public spending.

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