Thursday 4 March 2021

Sunak's "sticking plaster" budget.


I have long believed that we British make far too much  fuss about the annual budget, as though at the micro level a few extra bob a week per family is going to  transform  our lives into ecstasy and a few less will plunge us into misery and destitution. Nor at the macro level can the direction and efficiency of the economy be changed overnight  by a few deft "touches of the [fiscal] tiller."  

At the level of political perception most budgets are cheered by the party in power and their supporters on the day of delivery, the holes appear on closer inspection a few days later, and within a week the media caravan moves on (Harry and Meghan?) and the whole thing is forgotten.

Presumably with this in mind our PR-smart  government have pre-announced most of the "good things"  (what's happened to "purdah?) so that they'd be firmly in our minds before the errors and omissions become apparent.  So we can welcome the "sticking plaster" measures which will keep the economy going until September.  

Furlough payments for those unable to work becasue of the restrictions continue until September, though they are tapered off  in the final couple of months. The £20 extra for those in receipt of Universal Credit (UC) will also continue until September.  

Since the level of UC without the extra £20 is clearly inadequate it is difficult to see why the addition couldn't be made permanent. The modest cut in VAT for hospitality services is also to continue, though it would have been a good idea to make this universal (as Labour's Alistair Darling did to great effect after the Banking Crisis of 2008).

Personally I welcome the freezing of income tax free allowances: (raising the threshold of paying tax is of most benefit to the wealthy payers of the  the higher rates), and the rise in Corporation Tax back to a more internationally comparable level (25%, but like the Kingdom of Heaven, "not yet") is long overdue.

Sadly there is no mention of a windfall tax on those businesses that have been allowed to operate and therefore thrive  in the pandemic.  Nor any attempt to equalise the business rates on firms which operate by mail order with those paying high rates in town centres.  

Given the urgency of tackling the climate crisis the failure to increase fuel duty  is a startling omission (any higher prices for consumers which might result from  this could be compensated by the VAT cut mentioned above) and the the stamp duty tax break on house purchases up to half a million benefits only those who have (or whose parents have) whilst  pushing up the price of houses for the less fortunate strugglers.

The pandemic has exposed the gross inadequacy of our public services, yet there are no measures to increase public support for them,  not even the much-lauded NHS or the desperate care services.  There is no extra increase in the minimum wage (already announced to be £8.91 from April) which would have been an appropriate way of rewarding the lower paid health and care workers, and deliverers, who are keeping us going, often at great personal risk, during the pandemic.

Local government services continue to be squeezed and most areas will be forced to increase council tax by around 5% in order to provide even the minimum services, so  in spite of denials "austerity" continues. Nor are there any imaginative measures to promote the building of affordable housing, surely one of our most pressing social needs.

Every budget has to have a gimmick. In Sunak's first it was "Eat out to help out" which  cost over half a billion to subside the treats of those who could afford to eat out and helped spread the virus . In this it is a number of "Freeports" to provide products and services tax free with  less regulation, which probably includes fewer health and safety safeguards.   Freeports  have been tried in the past and seem to have largely diverted existing industries to the designated areas rather than created new ones.

There are extra funds to stimulate 45 towns.  Apparently the vast majority of them are in marginally-held Tory constituencies.*  So much for the chancellor's promise of honesty and  "levelling with us."

The "spirit of 1945" is not much in evidence.


*Post Script added 5th May.

Apparently 40 of the 45 are Tory held.  They include Richmond in North Yorkshire, which is in Sunak's own constituency, Wakefield, normally a Labour  bastion but now Tory held, and Morley, which used to be twined with Batley, and of which it was the posher half, and is now part of Morley and Outwood and Tory held.  Batley has the misfortune to be represented by a Labour MP and so receives no perk.  I'm surprised Dewsbury isn't included as that is a struggling area but with a Tory MP.

 The Labour leader, Sir Keir Starmer, has demanded that the criteria by which these towns were chosen should be published.

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