This was a ‘kitchen sink’ Budget according to the BBC’s Faisal Islam, with the Chancellor throwing almost everything into it, including a wide range of tax cuts and incentives. A mini-Budget it wasn’t. But there was little to explain how it would all be funded. The shadow Chancellor Rachel Reeves perhaps explained it best when she said that “never before has Government borrowed so much and explained so little”.
It was billed as a difficult Budget to navigate. Growing spending pressures that were in play before the pandemic have been compounded by Covid-19-related catch-up demands, including health and education. Interest rates have been inching up, too, making debt repayments a bit pricier. Throw in a brewing cost of living crisis amid building inflationary pressures and looming tax hikes, and it looked like very tricky terrain indeed. So how was the Chancellor going to navigate it?
Today’s Budget was largely as expected. Much of the content had been flagged beforehand, and then there were the big manifesto pledges that were off limits. But that’s not to say it wasn’t a significant Budget, and it may indeed be the last, or penultimate, big spending Budget. Rishi Sunak today announced £37.5billion of spending in the current financial year and the next. Apart from last year’s Budget, it is, by any historical comparisons outside of the pandemic, a huge amount of spending. What’s concerning though is that spending in future years is going to be cut at progressively larger amounts, and next April will therefore herald the start of four consecutive years of public spending cuts. On the tax front, there were further cuts or extensions of existing tax cuts in some areas but also tax rises in others.
Today’s Budget announcement was part of a stimulus ‘double-bill’. The Bank of England unveiled a massive impetus this morning, with a 50-basis point cut in the interest rate and more importantly a package of targeted measures to guarantee credit flow to businesses given the looming threat of Coronavirus.
This afternoon’s instalment in the form of Rishi Sunak’s debut Budget complemented this by acting to ease cash flow concerns for households and businesses. In addition, the public spending taps have been turned on to support public services and to enable investment in infrastructure – in relation to everything from climate change to transport and housing. One thing that was missing however was any meaningful increase in taxes. Normal Budgets are generally a careful balancing act of revenue-raising and spending commitments, but not today, which was a rather one-sided affair in that it was overwhelming focused on spending.
Where is all of this money coming from if not from tax rises? The answer is borrowing. The UK is set to borrow £300billion over the next five years.
Today’s Budget speech may not have been the most exciting ever, but it was possibly the most future-focused. Indeed, Philip Hammond used the word ‘future’ 33 times at the dispatch box this afternoon, and focused heavily on measures relating to, for instance, first time homebuyers, the technology sector, electric cars. In contrast, there was no mention of pensioners and little to appeal directly to that particular demographic. This perhaps marks a new era of more youth-friendly Budgets. Continue reading →
Chancellor Philip Hammond surprised those anticipating a boring Budget by littering his speech with jokes and gags. However, there were definitely none of the pyrotechnic policies that were prominent in the last Chancellor’s Budgets (e.g. the sugar levy), as the substance of ‘Spreadsheet Phil’s’ announcements lived up to his nickname. And, needless to say, the state of the public finances remain no laughing matter. Continue reading →