Anyone expecting Jeremy Hunt to unleash the animal spirits of wealth creators in his Budget today cannot have been paying much attention to the Treasury’s pre-briefing. Two per cent off National Insurance is likely to be as good as it gets, we are told. Perhaps a white rabbit will be pulled from a hat during the speech itself but more likely the animal in question will be a sloth.
Such a creature – steady and dependable but resolutely undynamic – would be emblematic of the condition of what pundits used to term ‘UK plc’. For Britain under Hunt does not have an economy so much as a ‘meh-conomy’. While talk of a serious recession is overblown, major GDP growth is not a prospect and GDP per capita continues to decline.
We cannot go on like this for much longer without sliding into an outright social and economic crisis
Meanwhile, George Osborne’s creation of the Office for Budget Responsibility (OBR) threatens to do to fiscal policy what Gordon Brown’s independence for the Bank of England did to monetary policy: transfer control to unelected bureaucrats immune from the pressures of electoral politics. Since Liz Truss and Kwasi Kwarteng came a cropper after cutting the OBR out of their autumn 2022 Budget deliberations, the body has held enormous sway over their more conventionally minded replacements.
For Tory MPs, now staring at a Labour poll lead of more than 20 points in an election year, the bungled bid by Truss and Kwarteng to deliver a cultural economic reset ranks as one of the great squandered opportunities of this parliamentary term. Hemmed in by the OBR and his own fiscal rules and natural caution, Hunt appears doomed to unveil a token effort by comparison. Indeed, the freezing of income tax thresholds imposed by Rishi Sunak and set to run for several more years locks in an enormous automatic annual increase in taxation.
Perhaps Conservative parliamentarians should be grateful that Hunt is even bothering to try and pep up his party’s poll rating. The last time the party was looking down the barrel of a landslide defeat, Ken Clarke refused even to hold a pre-election Budget. The most he could be persuaded to do was deliver a penny off income tax and boast of a ‘Rolls Royce recovery’ in a Budget in November 1996. He then folded his arms for the next five months and prepared to hand over stonkingly strong public finances to Brown. In retrospect, those were glory days for the UK economy, with the Treasury working to an official long-term trend growth rate of 2.5 per cent – later raised to 2.75 per cent by Brown and Ed Balls.
Much of the present malaise can of course be laid at the door of a leaky lab in Wuhan and the rather grander entrance to the Kremlin. But in our age of reparations mania, nobody will find a way to make China and Russia compensate the world for the havoc they have wreaked.
Some economies outside Europe, most notably the United States, have recovered far better than has either the UK or the EU club that it left. Perhaps part of America’s success is down to the sharper incentives that prevail when taxes are lower and there is no wraparound welfare state to cushion those not making an economic contribution.
But this is not the modern British way. This side of the pond, the state, even under a Tory regime, takes on ever-greater responsibilities. Taxpayers must now even fork out to feed other people’s children because a footballer said so. Our own economic model, based on importing huge numbers of migrants to do low-paid work while millions of our own adults of working age have drifted out of the labour force, has left us chronically under-invested.
Everyone agrees we cannot go on like this for much longer without sliding into an outright social and economic crisis. But nobody seems prepared to take the kind of axe to welfare spending that would clear the way for Nigel Lawson-scale tax cuts and restore some long lost ‘loadsamoney’ vulgarity to the lives of the kinds of working people who actually do work.
Hunt’s Budget speech will no doubt linger over some bright spots in the UK economy and skate over the many dark patches. Perhaps some of the disappeared tribe of Tory voters will be brought back into the fold by this latest instalment of his ‘long-term economic plan’. But it doesn’t feel like that to me. This time round it may be outgoing Tory Treasury ministers telling their Labour replacements after the election: ‘Sorry, there’s no money.’
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