Tuesday, 30 October 2018

A very political budget

'Fiscal Phil's' budget was very political and the main target was the benches behind him (I don't buy into the argument that it signals an early general election, the Conservatives aren't going to risk that again). He has enhanced his reputation with the benches behind him and given Mrs May some more breathing space.

It could all still go pear shaped if there is no Brexit agreement, but I still think it is more likely than not that there will be a fudge that will scrape through the Commons, leaving all the difficult issues to be negotiated during the transition period/implementation phase.

What was important was what was not in the budget: no changes to tax allowances on pensions, which cost a lot of money, but would hit Conservative stalwarts hard. Not only were the income tax allowances not frozen, they will be brought forward. Higher rate taxpayers will gain most, but you don't have to be in a top job or earning huge sums to be one of those. Domestic air duty was frozen, as was the duty on beer, cider and spirits, but not wine, drawing a shout of 'Oh no!' from behind the Chancellor.

Public spending is to increase, but not just yet. One billion pounds is going to defence which will please Conservative backbenchers. The £400m for schools will mean £10,000 for the typical primary school and will not help to save a single teaching assistant. It was also delivered with a patronising reference to 'little extras' which has not gone down well with the teaching profession. It should be paid for by the new digital services tax if it manages to raise £400m.

Getting multinationals to pay their fair share of tax has always been a challenge, but even more so now they are not moving goods around in many cases. What is required is international cooperation to deal with tax havens, but that is looking less rather than more likely.

The difficult decisions about where to increase public expenditure and how to pay for it will be deferred until the comprehensive spending review post Brexit. That makes sense, but it doesn't help local authorities teetering on the edge of bankruptcy or the stretched police and prison services. The £700m extra for social care, although welcome, addresses only part of the problem that local government faces.

The corny jokes by the Chancellor diverted attention from the seriousness of the situation: something, but not enough, has been done about Universal Credit which is being used to cut entitlements, particularly it would seem for the disabled and single parents. But there were no apparent gaffes and the antics of feisty Liz Truss provided another amusing diversion.

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