Will Jeremy Hunt pull a cash rabbit out of the hat for true blue Tory voters?
Fiscal events, even in normal times, are a nightmare. Remember the “omnishambles” budget in 2012? Or the cringeworthy “spreadsheet Phil”? The room for error is enormous with crushing expectations and relentless campaigning from all quarters. And with an election looming the stakes are even higher.
Spare a thought for the Chancellor who is viewing a grim picture. Increasing and volatile borrowing costs have been altering the Chancellor’s headroom and, by extension, limiting his choices – with the calls on the public purse ever growing.
Even if he has an unexpected windfall, his Laffer Curve loving colleagues in the Conservative Party are still pushing for tax cuts. They might feel justified in hoping it will accelerate sluggish growth but are perhaps also hopeful that a few extra pounds in the voter’s pockets is a good thing near election time.
If this is going to be Hunt’s performance of a lifetime then why not abolish inheritance tax?
Jeremy Hunt will also have to contend with a resurgent Labour Party and Rachel Reeves, who despite a literary blip seems sure to succeed him in office without offering anything other than being somebody else.
What then can he do in order to deliver success? The Chancellor has always had to play a two-bit magician twice a year for at least the last two decades. We’ve gotten used to fiscal events as set-pieces of entertainment, watching them child-like for a glimpse of the fabled rabbit to come tipping out of a hat.
If this is going to be Hunt’s performance of a lifetime then why not abolish inheritance tax? House price inflation in the ‘blue wall’ could potentially justify it and the core voter base needs a reason to want to vote Conservative. It’s good political tactics.
But bad economics eventually catches up with the politics. How will Hunt fill the black hole that comes with a tax cut? And beyond the horse trading of the Treasury’s scorecard, what kind of legacy does he want to leave behind?
The problem for any politician so close to an election is they have no time to wait for the change a budget can bring. Holding inflation down and bringing us back to growth is going to require painstaking and frankly boring policy that isn’t going to read well on election literature.
For meaningful change we have to get to the heart of why we are not productive and accept in the short term the economic choices we need to make are not cheap.
If the government is serious about the long term then Britain needs massive capital investment. Making it easier to invest in infrastructure is something alluded to in Hunt’s Mansion House speech but outside of transport and energy he should also help put more private capital into housing development. If the Conservatives still believe in a property owning democracy then it would help to have more people owning a house.
Business investment needs certainty. Never knowing what’s happening with your planning application or when your plans might be adversely affected by planning decisions have to stop being the norm. The infrastructure commission needs powers to make things happen, not be stymied by the system.
If we’re going to use taxpayers’ money to subsidise profit making industries then we should agree on what we’re willing to take a bet on. Quantum computing and life sciences are new industries that we need to foster here. The science budgets need to be reconstituted with a firmer strategic focus and better tracking on what value for the taxpayer is being delivered instead of what increasingly feels like a lottery.
And if we’re really going to make a difference to our productivity we need investment in health improvement and prevention. The labour market is unhealthy and getting older. What we are doing right now is not making the difference.
Of course it’s easy to express an opinion or apply political pressure. Deciding is harder. But when history judges this budget, the Chancellor needs to think about what he might want it to say.
Salma Shah, political commentator and former Conservative special adviser
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