Budget 2017 Reaction

Homer Simpson - George Osborne - Budget - Annual Statement

This was a holding budget designed to buy the government some political breathing room, and so Philip Hammond kicked the can down the road on nearly all of the major fiscal and structural issues facing Britain

I intended this piece to be just a few disjointed thoughts reflecting on Philip Hammond’s Budget Statement and the boldness or cowardice of the Tories, but it gradually expanded to touch on issues of federalism and local government, and the counterproductive nature of the annual “Budget Theatre” itself.

A one-way ratchet to Bigger Government?

As Budgets go, this one was fairly bland and non-offensive. Contrary to the justified fears that Theresa May’s administration would be a one-way ratchet to Bigger Government, such ominous moves were largely missing from today’s statement – though of course we still have the highly un-conservative “Industrial Strategy” to come.

Equal to the challenges facing Britain?

It is hard to argue that this Budget in any way acknowledges the scale of the challenges facing post-Brexit Britain. A serious Budget which attempted to do so would have included a lot more on education and proposed a means to help re-train the many workers who will find their jobs outsourced or automated in the coming decades. £40 million to train new maths teachers is good, and any steps to improve Britain’s STEM output are welcome, but this does nothing to disarm the time bomb which will affect many of those already in the workforce.

A serious Budget would have done more than take tentative steps around the housing crisis, firmly addressing the supply issue now rather than tinkering with demand by abolishing stamp duty on properties under £500,000. It would have touched the third rail of British politics and defied the doctrine of NHS non tangere to meaningfully reform British healthcare and the way it is funded. It would have grappled with social care and the need to ensure that those who can afford to bear more of the cost of any care they require in old age.

But of course we got none of those things. And the great danger is that we will now never see these problems meaningfully addressed in the lifespan of this government. One can appreciate that Brexit is currently sucking much of the oxygen which might otherwise fuel other policymaking, but we should not have to choose between managing Brexit (which this government is also failing to do) and dealing with other long-term problems. It should not be too much to ask for the UK government to walk and chew gum at the same time.

Short-term thinking over long-term need?

A government’s first budget is normally a place where bad news gets dumped and difficult decisions made, the idea being that it is better to absorb public anger now and then win back favour with giveaways in the final budget(s) before a general election than have to anger people with harsh corrective measures later in the term. David Cameron’s government followed this approach, with Chancellor George Osborne doling out the harsher medicine (or plain confusion, in the case of the Omnishambles budget) in early years and then sweetening the deal prior to the 2015 election by pretending that he had solved all of Britain’s fiscal challenges and therefore had spare cash to throw around.

The fact that Theresa May’s government is not following this well-worn path is not a sign of some innovative new strategy – it is a sign of clear political weakness. The current Conservative government is already teetering on the brink, without a majority in the House of Commons and kept afloat in the polls only because of fear of Jeremy Corbyn. Philip Hammond therefore had no political capital to spend by irritating the electorate any further, or asking anything more of them; instead he was forced to try to accrue some political capital with a giveaway.

As I previously wrote:

Twice a year – once in the annual Budget and once in the Autumn Statement – the Chancellor of the Exchequer gets to his feet and delivers a refreshed set of economic policies in a big, set piece speech where he is essentially forced to favour tomorrow’s headlines over optimal long or even medium term decision making.

Nationally significant policies from every government ministry live or die by the concessions that their ministers are able to wrangle from a Chancellor who is forced by political reality to be more concerned with tomorrow’s Daily Mail headline than the state of our public finances in a year’s time.

Thus the annual Budget Theatre encourages short-term thinking. Whether one takes the Osborne approach or the Hammond approach, Budgets are as much about chasing favourable headlines and dominating the news cycle with positive coverage for a few days than they are about serious long-term strategic thinking.

Budget Theatre is a bad way of governing

This blog has long complained that this annual Budget Theatre, with all the speculation and press coverage surrounding it, is a really bad way to run a modern democracy. Why? Well, there are a number of reasons.

First of all,  as already discussed, the Budget spectacle encourages short-term thinking. Budget 2017 is something of a “giveaway” budget, with the government making concessions and seeking to tamp down public anger rather than taking difficult decisions in the long term. In short, it prioritises the political and tactical over the strategic.

Secondly, the Budget spectacle directly feeds into the Politics of Me Me Me, far more so than any other event, even general elections. During the build-up to Budget Day, the day itself and the immediate aftermath, we are encouraged by the media to think only about how the budget affects us and our wallets. This is understandable, since the Chancellor has the power to inflict severe pain or lavish great rewards on favoured groups. But it is also therefore an incentive for us to “ask not what we can do for our country, ask what our country can do for us”, to reverse John F. Kennedy’s exhortation.

As I wrote at the time of George Osborne’s 2015 Budget:

Having two occasions each year when an already-powerful chancellor in an already-centralised country like the United Kingdom gets to play with nearly all of the controls and levers which influence our economy – as though he were Homer Simpson at the controls of Springfield Nuclear Plant – only encourages meddling and tweaking of things that should properly be left to local government and individuals.

When you have direct, ultimate control over which families deserve help buying a house, which people should keep or lose their benefits or how much a person pays in sin taxes for their guilty pleasure, the temptation to use those powers is irresistible. And because of the ratchet effect, it is the easiest thing in the world to give away new perks to favoured interest groups, but nearly impossible to ever claw them back without being exposed to political attack. Even under this nominally conservative government, budgets and autumn statements have often been a one-way ticket to bigger government – or at least more activist state.

Unfortunately, Budget Theatre is inevitable when so many decisions affecting so many people are made centrally rather than locally, and applied at a national level rather than taking into account the specific and varying needs of different regions (or between the cities and the countryside).

And this leads on to my next point…

Britain’s overcentralisation disease

I continue to find it vaguely ludicrous that decisions about how much tax should be applied to a pint of beer or a litre of gasoline are set nationally in Westminster, and that we all have to tune in to the Budget Statement every year to find out what tweaks and incentives the Chancellor has seen fit to impose on our lives at the behest of the public health or environmental lobby.

Britain is a ridiculously over-centralised country in terms of governance. Devolution is a good thing in principle (though I would argue that we should move toward a federal UK with the same powers devolved to each home nation) but the net result of current devolution is that Wales, Scotland and Northern Ireland have rightly floated off to do their own thing in terms of domestic policy while England remains overcentralised.

We need to move to a place where local authorities, ideally county councils, take over some of the tax-raising powers from Westminster and gain more control over spending in areas such health, transport and education. We need to stop fearing the “postcode lottery” and start welcoming it as a petri dish for testing new policies and encouraging healthy rivalry between regions. More decentralised taxation and spending would force local politicians to put their money – or their electorate’s money – where their mouths are. If leftist politicians want to hike sales taxes or fritter money away on white elephants they should be free to do so, and then answer to voters.

Finally, enhancing the powers of local government in England would increase the current woeful levels of participation in local democracy as the decisions made locally suddenly started to matter a lot more. And this in turn would see an improvement in the calibre of people running for local office, and serve as an incubator for political talent outside Westminster.

Of course, some of the blame for the current situation rests with the Thatcher government, which felt it necessary to de-fang many local authorities since they represented such an impediment to the government’s turnaround strategy. One can argue whether or not this was justified, but certainly the end result is a country where far too many decisions and policies rest with the Westminster government when they should really sit much closer to the people.

Conclusion

This year’s Budget could have been a hell of a lot worse, given Theresa May’s interventionist instincts and tolerance for Big Government. Fortunately, Philip Hammond seems to have resisted such pressures and delivered a Budget which – if Britain were operating in steady-state with no major challenges on the horizon – would have been largely inoffensive.

Unfortunately, Britain is not in a period of steady-state operation, where domestic and international issues are stable and a technocracy is more than capable of fiddling with the switches and dials to keep things running smoothly. On the contrary, we have entered a period of discontinuity, an abrupt departure from our previous national trajectory, when the old political consensus is revealed to have frayed to the point of uselessness and bold new policymaking is required.

As I recently wrote, a bold new programme of coherent, mutually-supporting policies is required to equip Britain to face these oncoming challenges. The Tories now have the slogan, but it remains painfully clear that they do not yet have the solutions, though various initiatives are now underway to come up with some original new policies.

But it will take their time for these policy groups – notably George Freeman’s Big Tent and Nick Boles’ Square Deal schemes – to come to full fruition and develop workable policies. And even then there is no guarantee that Theresa May or the next Conservative leader will approve of these policies and work them into their programme for government.

Unfortunately, as a nation we are treading water at the moment, neither swimming toward the oncoming wave or swimming away from it as it threatens to break over us. This was a holding budget designed to buy the Tories some political breathing room and perhaps signal that they are starting to comprehend  public dissatisfaction with the status quo, particularly on housing.

But without some kind of joined-up, comprehensive plan – and a coherent message with which to sell it to the public – it is hard to see the Tories winning the kind of electoral mandate or public support they need to be anything more than a caretaker government.

 

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Building A Britain Fit For The Future

Building a Britain fit for the future - new Conservative Party Tory slogan

Strong and stable, version 2.0

Word on the street is that the Tories have got themselves a shiny new slogan. Guido Fawkes reports:

Here are seven words you can expect to hear a lot more of over the next few weeks and months: Guido understands the new Tory slogan is “Building a Britain fit for the future”. Theresa May used it three times at PMQs on Wednesday, telling the Commons: “this government is building a country fit for the future”, “we are building a Britain fit for the future” and “We in the Conservative Party are building a Britain that is fit for the future”. This morning the CCHQ Twitter account used the same phrase.

As slogans go, I suppose that “Building a Britain fit for the future” could be a hell of a lot worse. It is certainly better than “strong and stable”, though according to Guido it seems as though the Tories are already in danger of wearing out their new slogan through enthusiastic over-use.

BABFFTF has potential because it at least acknowledges that we are entering a period of discontinuity – a time where the current system or political consensus is starting to fray and show signs of fatigue, where new and previously politically unfeasible policies are required to break the impasse or respond to the concerns of the electorate. The rise of Jeremy Corbyn as Labour leader and the vote for Brexit are just two of the most prominent signs that we have entered such a time of discontinuity, with the pro-EU, centrist consensus adopted by Labour and the Conservatives through 2015 increasingly failing to address the hopes, fears, concerns and priorities of many people.

The problem, though, is that the slogan seems to have been trailed before the necessary supporting ideas – the vital national reboot checklist which can steer Britain through Brexit and on to the other challenges – have been developed. Now, it’s possible that Theresa May has been huddled in Downing Street with her SpAds brainstorming some breathtakingly original new ideas, and that we will all be bowled over when they are announced in the coming weeks – but it seems unlikely. Firstly, she would be breaking the habit of a lifetime (doing something bold and visionary) and secondly it is hard to tell when such inspired policymaking might have taken place given all of the shenanigans going on in her Cabinet.

While we can finally detect a few faint signs of new intellectual life in the Tories – notably the Big Tent programme launched by George Freeman, and the Square Deal initiative led by Nick Boles – these groups are barely getting formed, and are months away (if not more) from reaching full fruition. And as I have previously written (and will continue to expand upon in coming days and weeks), we are still missing anything like an overarching framework to diagnose the issues facing Britain, draw out the links between them and produce an electorally viable set of policies to tackle them. Discontinuity requires policymaking through extraordinary means; the same old processes tend to yield the same old solutions.

That being said, the Tories cannot remain silent altogether while they try to get their act together. It is good, in a way, that Brexit is currently consuming most of this government’s energy because that means that they have little time (and even less political capital) to push through some of the authoritarian, statist, anti-market policies which one suspects Theresa May would now be rolling out had she won a thumping majority. A de facto “first, do no harm” doctine has thus been partially imposed on this government, like it or not.

But still the Tories must do something, starting with the Budget next week, to show that they are starting to understand the depth of public dissatisfaction with the old political settlement, particularly on housing (since this is a vital policy area more separated from some of the others). Years of disappointment mean that I have zero positive expectations of Phillip Hammond when he gets to his feet to deliver the Budget next Wednesday. I fear that even if there is noticeable movement on housing, it will be a big sop to Labour by focusing on the building of new council housing rather than the big unleashing/encouraging of private development (upward, not outward) which we need. This is Hammond’s chance to prove me wrong, as well as everybody else who has lost faith in the current government being anything more than a very clumsy caretaker.

The pessimistic part of me still believes that a mid-term rescue for the Tories is simply impossible; that it will take a (hopefully) short, sharp spell in opposition to rid the current Tory frontbench of much of its dead wood and see some new talent push forward – hopefully talent less beholden to the current political consensus, and which wants to do more than simply make a few cosmetic tweaks to win back public opinion. Readers will no doubt correct me if I am wrong, but I cannot think of one example of a successful political turnaround that was driven by refreshed policies rather than the good fortune of events.

But a Jeremy Corbyn government is not something to be entertained lightly. The next government will likely set the tone and direction of Britain’s immediate post-Brexit years, and so will play a large role in stamping their imprint on whatever the new emerging political consensus or centre of gravity happens to be. After years of leftward drift under both New Labour and Conservative governments, it is important that the next significant course change is to the right. In a world of pure ideology one may well want the Tories decimated at the next election so that they can grow back stronger and with a renewed sense of purpose, just as controlled forest fires can ultimately benefit an ecosystem even as they destroy in the short term. But since we all have to live in this forest for the duration, dropping a match onto dry leaves by ushering Jeremy Corbyn into 10 Downing Street really must be an option of last resort.

Therefore let us hope that “Building a Britain fit for the future” and whatever quickly-concocted policies lie beneath it buy the Tories sufficient breathing room to attempt a more fundamental policy review – to create the new Stepping Stones report for 2018 that Britain needs to chart our way from one failed political consensus to a new one which addresses today’s challenges.

Let’s hope that it falls to conservatives to build the Britain of the future, and not Jeremy Corbyn’s Labour Party.

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