Tuesday, 21 November 2017
The annual obsession of Britain's political and chattering classes with the government's budget is both unhealthy and unrealistic.
Unhealthy because it is simply not true, for the vast majority of us, that a little bit more or a little bit less income or spending power is going to make much difference to the quality of our lives and our happiness. Yet on Thursday (the budget is tomorrow, Wednesday) the papers will be full of charts and columns showing how the budget will affect the incomes and spending of various groups: single people; single mothers with one, two or three children; happy families with a mother, father and 2.4 children; pensioner couples, and single pensioners.
For all of these groups a decision to take a twenty-minute walk every day, to eat less junk food, and to smile more often at our neighbours, would make far more difference to the quality of our lives than any decision the chancellor of the exchequer can make.
That is not to say that those on and below the margin, some twenty percent of our population, will not be affected by minor changes in their incomes, but these can be made, and often are, at any time on the year. .A decision to cut the "waiting time" for universal credit from six to four weeks has already been made, and it should now be reduced by anther two, There's bags of opportunity to force builders hoarding land with planing permission (a problem that has existed for decades, but which the government has apparently only just recognised) to build on it or lose it.
There is no need to parcel all the possible improvements into one piece of political theatre.
Unrealistic because there is the expectation that the budget, for good or ill, will turn round the fortunes of the government. Uniquely I think, some members of the governing party are hoping that the budget will be a flop as this will enable them to get rid of the chancellor becasue he is insufficiently enthusiastic about Brexit. But how many. other than anoraks (and not all of those) now remember the details of last year's budget, or even George Osborne's omishambles?
More seriously, it is unrealistic that one collection of economic tweaks is going to transform the ailing British economy. As Larry Elliott pointed out here;
"even before the referendum Britain was running a record current account deficit, growth was being pumped up by an overheating housing market, factories were still producing less than before the start of the financial crisis, and people in the poorest parts of the country were being targeted with deep cuts in welfare benefits."
Since the referendum matters have worsened. The pound has depreciated by some 15%, fuelling inflation; investment has been held back because of the uncertainty caused be Brexit, and influential firms and organisations are either planning or actually moving to other countries. Yesterday, for example, it was announced that Goldman Sachs would make Paris and Frankfurt their post-Brexit" hubs," and two EU institutions will, not unexpectedly, move out of London: the Banking Authority also to Paris and the Medicines Agency to Amsterdam.
There used to be a "joke" that it took three miles (or was it three leagues?) to turn round the RMS Queen Mary. Something similar can be said of the British economy: it well take not one but a decade or more of the constructive budgets to put matters right.. There is no shortage of such constitutive ideas. My own humble Keynesian contribution was published as early as 2011 and can be seen here.It all remains highly relevant, though I would now add, of course , that we abandon Brexit.
If Mr Hammond sticks to his guns tomorrow's budget may make a start, but I suspect it will be modest.