Almost as much speculation before today’s Budget was spent on discussing how long Philip Hammond will hang on to his job as chancellor as was expended on what might be in the Budget itself.
Apart from some good, and some not so good, jokes, it is not very clear yet what the answer to the first question will be. Hammond’s performance was good enough – especially compared to Jeremy Corbyn’s rather halting and sloganeering response – but whether he clings on is another matter.
It’s important to understand several things about the whole Budget process that often get overlooked, but are very important and, I would suggest, often misleading and damaging to debate around the issues raised.
First of all, taxation and spending – the main focus of the Budget - are not the be all and end all of government policy. We have a system where government policy is split between money (the Budget) and law and regulation (the Queen’s Speech) in a way that is disjointed and often hard to understand.
Secondly, we now live in a semi-federal state. Devolution to Scotland and Wales (and Northern Ireland?) has created a situation where a lot of headline announcements in the Budget are really only directly about England. Tomorrow’s papers will be full of talk about health (extra money), education (money and maths) and housing (money and planning) nearly all of which will only directly affect people in England.
It is surely not healthy for the governance of the UK that announcements that really only affect England get treated, implicitly, as if they are UK-wide?
Thirdly, for all the theatre in Parliament, the House of Commons has precious little real power over taxation or spending. Unusually amongst advanced democracies only the government can propose taxes or spending. So fume, as they will, Labour cannot put forward amendments to increase (English) NHS spending or put up corporation tax.
They could propose amendments that reduce spending (e.g. defence spending targeted at Trident) or specific taxes, but they likely won’t.
Fourth, the Budget Speech, which is given so much weight and coverage, is actually often a misleading bit of theatre. The real content is in the so-called Red Book and the saying ‘the devil is in the detail’ was never more apt – remember the “Pasty tax”?
It is also confusing because chancellors of all-stripes regularly make announcements that confuse annual spending or tax alongside cumulative amounts over 2, 3, 5 or 10 years making it hard to make sense of their importance. This time the chancellor made multi-year announcements about housing especially which made the actual spending amounts sound much greater than they were.
So we come to the final, and biggest, problem with the whole shenanigans around Budgets – what does it all mean? Buried away in the Red Book (Table C.2) is a snap-shot of the nation’s tax, spend and fiscal position as forecast by the Office of Budget Responsibility.
On the second line of this table is a forecast for “Total Managed Expenditure” (basically everything the government and other public agencies spend), as a percentage of gross domestic product, up until 2022-23. Why does this matter? Because it gives us a rough guide to how much of our national wealth we are going to devote to common objectives like good health, education, transport, housing and the rest.
Since 2010 every Conservative Budget has contained a projection to get TME as a proportion of GDP down to around 38%. This is an historic shrinking of the state, putting the UK at the lower end of the spectrum of public spending across OECD states when we used to be roughly in the middle.
The figures in today’s Red Book show we are already down to 39% (from a long term average of about 43%). By 2022-23 it is projected it will be down to 37.7%. And amongst all the talk about increased ‘investment’ it’s worth noting that this rises from 2% of GDP this year to only 2.3% in 2022-23.
For some reason British politicians (and hence the media) are reluctant to ever talk about these numbers although they tell us a great deal about the ‘big picture’ of the state of Britain. To use another metaphor, this is very much failing to see the wood for the trees?