Budget 2017
Correctly predicting what’s going to be in the Budget is akin to completing the football pools or picking the lottery numbers, given the variables and levers that a Chancellor has to pull at any one time. For the very last Spring Budget, before the major fiscal event of the year moves to the Autumn and relegates the Spring announcement to a statement from 2018, one would hope for it to go out with a bang.
But at the excellent event run by the Resolution Foundation on 28th February its illustrious panel, which included an FT journalist, a former member of the Monetary Policy Committee, a Labour MP and a former Treasury special adviser, were all united in their overriding prediction: that the Budget next week could well be a very boring affair instead.
And they are very likely to be right. With a bit of good news on the public finances, plus likely a bit of cash for social care and possibly business rates, there has been little indication of anything big brewing within the Treasury thus far. In part this is because of the Chancellor’s own style: Philip Hammond portrays a serious façade, very much concentrating on the serious role of running the Treasury and the economy. In his first and – so far – only outing as Chancellor being to deliver a budget at the dispatch box last November, he eschewed the rabbits out of the hats that his predecessors, notably George Osborne and Gordon Brown, used to employ. Far more steady as she goes for Mr Hammond.
In part, it may also be because of Theresa May’s own style of running things. News filtering out from the centre is that less news will be filtering out of the centre, as the prime minister is intent on running things as she did at the Home Office, with a few trusted advisers and officials around her, taking more and more of the decisions. As a result, Treasury officials are said to have less influence than they had in the past, and while many may not lament such a course of events, it does mean that perhaps the economy is not the front, centre and only prioritisation of this government. As a former Home Secretary, Mrs May’s eyes may not have yet been taken off the home affairs agenda .
In part, it’s also likely to be a boring budget next week because there is no, or little, political imperative to do so. The Conservatives are in a very strong position politically, with Jeremy Corbyn’s Labour party seen as currently a weak opposition – that the Conservatives took Copeland last week from Labour for the first time in over 80 years, and by the biggest increase in support for a government party since 1966, illustrates the point. With little further need to illustrate the divide between the main parties, Mr Hammond can afford to play a safe and steady hand, while at the same time portraying his burgeoning economic stewardship skills, which in a post-Brexit world will be vital. So there seems little need for any tricks or gimmicks next week or the foreseeable future.
All of which is a bit of a shame for Westminster watchers, who may be denied their own future rabbits, such as the huge reforms to the pensions system in 2014, or major political U-turns, such as Brown suffered with the 10p lower rate of income tax, or Osborne did with VAT on pasties. But by scaling back the political dynamic to a budget, it is also likely to mean better policy making. As the Institute for Government (IfG) put it, what would be ideal is “A Budget process that contains fewer measures, which are better thought out – and can be implemented efficiently by HMRC without imposing unreasonable burdens on taxpayers.” Hammond does seem to be leaning this way.
His decision to change to one fiscal event in the year has also been met with wide acclaim. As Hammond himself said, “No other major economy makes hundreds of tax changes twice a year and neither should we,” a sentiment echoed by many a business. Meanwhile, the IfG said that by reverting to one fiscal event a year this allows “more time for better consultation and scrutiny and reducing the strain that two big fiscal events a year puts on government and external tax policy resources.”
The IfG did add one crucial caveat though: that the commitment to one fiscal event a year needs to hold. Hammond allowed himself a little wiggle room by not ruling out the possibility of an announcing some measures in the spring statement, if economic circumstances demand it. Often such circumstances may well conflate with political circumstances and given how many Chancellors have succumbed to using the heady power of the tax system before him, Mr Hammond, or whoever comes after him in the years to come, will have to have a hard head and a strong heart not to introduce the odd measure here and there in future spring statements.
Which leads me to my own prediction; it may be on a break, and indeed it may not always be called it, but we haven’t seen the last of a Spring Budget. It’ll be back in some form. Politics will see to that.
Written by Simon Hodges, Head of Public Policy (@SimonDHodges)