The budget dilemma

The Institute of Fiscal Studies Green Budget has been a big feature on the airwaves this morning. Understandably so, because it is authoritative and non-partisan and Spreadsheet Phil will be delivering his verdict in less than two weeks: Green Budget

I expect a holding budget with the big public expenditure decisions being delayed until next year. That is only reasonable with so much uncertainty surrounding Brexit. If we crash out, we may need a mild fiscal stimulus.

The fundamental problem is, as always, the public demand for American taxes and Scandinavian public services. Actually, the gap between UK and US taxes as a percentage of GDP has narrowed, although, of course, the US spends more on defence. We have surrendered our previous mid-Atlantic position. There is a lot of grumbling about the highest tax take since the 1940s, but tax as a percentage of GDP is still well below levels in most other European countries.

However, the challenge for Phil is to find ways of increasing taxes without upsetting voters (fuel duty levy) or Conservative voters and backbenchers (national insurance charges for pensioners, reducing tax allowances on pensions). As the IFS makes clear, just to pay the NHS bill and stop all other cuts will require significant tax increases. There are many who think that local government, the police, prisons and some aspects of education need more money.

The prime minister proclaims that austerity has ended, but when Phil reasonably points out that this will mean rowing back on some manifesto promises on tax, he gets slapped down.