Spring or autumn Budget? We are mired in debt whatever the season
Despite years of ‘austerity’, the state is still living way beyond its means – and Labour is mostly to blame
The blossom is out; the daffodils are in full bloom. The Easter eggs are in the shops. It must be Budget time. Mainly because the financial year begins in April, spring is customarily when the Chancellor sets out his tax plans. But it won’t be any more. Philip Hammond intends that after his first Budget today, the whole circus will move to the autumn. I suspect that will last only as long as he remains in No 11, after which the natural rhythms of the British political season will be re-established.
Mr Hammond is not the first Chancellor to tinker with the traditional Westminster timetable: between 1993 and 1996 Kenneth Clarke moved the Budget to the gloom of November before Gordon Brown restored it to its rightful, vernal home. Apart from Clarke’s four autumnal aberrations every peacetime Budget since 1900 has been in the spring other than after a general election,
Why meddle with these eternal constitutional verities? The State Opening of Parliament, hitherto always staged on the threshold of winter, has now been transferred to the late spring. This may spare Her Majesty a chilly trip along The Mall but seems to have been done for no obvious reason other than to fit in with the fixed-term parliament that William Hague excoriated here yesterday.
There is a palpable sense of fiddling for fiddling’s sake, even if the Chancellor’s rationale is that businesses will find it easier to plan ahead with one financial package in the autumn. Why that should be so is lost on me – but then I don’t run a company.
Of course, it matters less when the Budget takes place than what it contains. In days gone by we had no real clue as to what that might be until the Chancellor got to his feet, so closely guarded were the secrets of the red box. (This, incidentally, used to be the battered old case used by Gladstone – another tradition that has been junked, along with the alcoholic beverage traditionally quaffed by the Chancellor but dispensed with by the puritanical Brown and not yet revived. Will “Spreadsheet Phil” have a glass of Scotch to hand, as Ken Clarke did; or sherry and beaten egg like Gladstone?)
Clarke’s last autumn Budget in 1996 was leaked almost in its entirety to the Daily Mirror which showed a publicspiritedness unlikely to be repeated by returning some of the documents, unpublished, to the Treasury. Today there is no need for subterfuge because the source of most information about the Budget is more often than not the Chancellor himself.
The old-style self-denying ordinance known as “purdah” was one of the first conventions to be jettisoned by New Labour when they came to power nearly 20 years ago. “Spinning” the Budget in advance through the judicious placement of stories became an art form enthusiastically emulated by George Osborne.
In keeping with this relatively new approach, Mr Hammond has been happily talking about his Budget if only to reassure everyone that there is nothing in it, which might turn out to be reverse spin if there is a surprise today. The Chancellor popped up on TV on Sunday deliberately to dampen expectations and especially to dispel Labour’s daft idea that he had a “windfall” of about £40 billion to play with because higher tax receipts meant borrowing over the next few years would be less than forecast.
Leaving aside the slim chance that any fiscal prediction is accurate, the notion that borrowing £190 billion rather than £230 billion over the next five years constitutes a “windfall” speaks volumes about the makebelieve quality of political debate in this country. In 1996, when Mr Clarke presented his last November Budget, the national debt stood at around £350 billion, which was 48 per cent of GDP; today it is approaching £1.7 trillion, or 84 per cent. It is only six years since it went above the £1 trillion mark, which was alarming enough. By 2020 it will be almost £2 trillion.
How on earth did this happen? Weren’t we supposed to have had an austerity drive? Obviously, the financial crash which triggered a recession was largely responsible, with revenues collapsing while spending surged. But even before that, by 2006 the debt was £600 billion; and while this was only 43 per cent of GDP because the economy was booming, it is an indication of the scale of Mr Brown’s spending spree.
Labour people always deny they spent too much (remember Ed Miliband in the 2015 election?) and insist they financed investment the country needed. But this isn’t true: most of the hospitals and schools built
READ MORE at telegraph.co.uk/ opinion by Labour were purchased under the “buy now, pay later” Public Finance Initiative (PFI). By the time all the PFI contracts have all been paid off in 2050, taxpayers will have forked out about £300 billion for assets worth around £55 billion.
These deals are partly responsible for the mess that many NHS trusts now find themselves in as they struggle to honour the contracts. Moreover, hospitals built under PFI had 30 per cent fewer beds than those they were replacing, which is why most operate at around a 100 per cent occupancy rate.
As PFI deals are off the balance sheet they don’t appear in the public spending figures, which wrecks Labour’s argument that they should not be blamed for overspending because the money went on schools, hospitals and other much-needed infrastructure. In truth, it was mostly splurged on a massive expansion of the public sector bureaucracy, such as the 600 NHS quango chiefs all taking home six-figure salaries, disclosed in this newspaper on Monday.
Furthermore, the official Treasury debt totals do not include many other liabilities that fall on the state. If you really want a scary bedtime read you should look at the Whole of Government Accounts. The most recent figures in 2015, which included rapidly rising unfunded public sector pension pledges, showed liabilities of £3.5 trillion – or 190 per cent of GDP. And that’s before we have handed over a larcenous “Brexit fee” to the EU.
We are up to our eyeballs in debt and need to pay it down by earning more and borrowing less. Yet still the whole political debate is about putting up taxes in order to increase spending. That will just stifle growth and enterprise – whatever the time of year.