Tax mess must not divert focus now
Last week’s Budget has tarnished the Government’s reputation ahead of its greatest challenge: Brexit negotiations with the EU. Theresa May is expected to trigger Article 50 in the coming days, and that is what her ministers should be focused upon. Instead, the dreadful mistake of raising National Insurance contributions has cast into sharp relief the divisions within her Cabinet. What the country needs now is united and effective government.
The error made in the Budget is well known and disliked. The Chancellor raised direct taxation on the self-employed, which contradicted not only a manifesto pledge but the spirit of post-war Toryism. This is bad enough. The blame game that has followed has made matters worse.
The Treasury reportedly feels that it was asked to raise funds to plug a hole in public spending – that it did its duty and ought to be backed by No 10. Downing Street in turn complains that Philip Hammond ought to have spelt out to the Cabinet that a hike in NI would break a manifesto promise. Whoever is at fault, many will find it odd that Tory ministers did not instinctively oppose a direct tax rise, regardless of the arguments being made for it – or that they were unfamiliar with the contents of a manifesto they were elected on. Moreover, a picture emerges of departments failing to speak to one another.
David Davis writes on this page about the importance of minimising distractions during the Brexit process. He refers to tinkering by the House of Lords. But we would extend his warning to Whitehall departments that do not work together. After all, Brexit will be an incredibly complex undertaking. There is no doubt that it can succeed or that Britain’s private sector has the talent and energy necessary to make the most of its opportunities. But the Government faces two mammoth tasks: negotiating the best deal it can, while preparing for any outcome. Responsibilities are stretched across departments: every ministry in Whitehall has a role to play. Brexit will have consequences for Northern Ireland, too, while the SNP agitates for separation. The Home Office must ensure security and devise an immigration system that admits talent while meeting the national demand for border control.
The most critical relationship will be between the Treasury and No 10. Both need to be 100 per cent behind Brexit and clear about what Britain should be doing to make the most of the Brexit deal – or, indeed, of no deal at all. That means cutting taxes and deregulating, rather than piling yet more burdens on workers. The Government must show that it understands that the future lies with promoting business, investment, savings, free trade, training, aspiration and a more vibrant capitalism. However, the Budget suggests some ministers do not see that future clearly.
Things can, of course, be turned around. This is a young Government staffed in many cases by people who did not even want Brexit. They have shown an understanding of how things have changed, of the necessity of ensuring that “Brexit means Brexit”. But the imminent triggering of Article 50 is a sharp reminder that events are moving fast. A debate that has largely been limited to Britain is about to involve the whole of Europe. The coming months will test the Government’s diplomatic and administrative talents to the full. Ministers must move on from the tax mess and show that they know what needs to be done.