In terms of the state of the public finances, the Treasury’s recent borrowing projections have consistently been over-optimistic and many will consequently take them with a pinch of salt. If this again turns out to be the case, it will have consequences for the sustainable investment rule, which will come perilously close to being broken even on yesterday’s central projections.
The Chancellor’s focus on green issues is to be welcomed. However, rather than targeting just a few specific polluting activities such as driving gas-guzzlers the government should focus on bringing all CO2 emitting behaviour within the EU Emissions Trading Scheme.
The Chancellor’s commitment to continue to look at ways of implementing road user charging is a positive development, coming in the wake of recent coverage suggesting that this policy might be abandoned. A recent SMF publication set out an action plan for how road user charging could be taken forward.
The government’s decision to disregard Child Benefit in Housing Benefit and Council Tax Benefit awards from October 2009 is to be welcomed. This will continue the government’s good work in this area by further strengthening work incentives for low-income families with children and hence tackling in-work poverty.
However, the government should now drop its 2010 child poverty target and focus on the 2020 target to abolish child poverty. A further £2.4bn each year will need to be found and spent on tax credits to hit the 2010 target. But higher tax credits will do little to solve the underlying drivers of inequality. The government should find that cash but instead urgently invest it in services such as Sure Start to ensure that every child has the same chance in life.
Ian Mulheirn is Chief Economist at the Social Market Foundation think tank.