This is the budget of a dying government. It has no interest in the future of the country — it doesn’t even have any interest in its own long term survival. It knows it can limp through to the next election with the size of its majority, and it knows it’s already lost.
That’s why this budget is so nakedly ideological. If you’re going to lose, then who cares about what the public thinks of your policies? Who cares about what it will do to the country, now or in the future. What matters is achieving your own ideological goals, as many of them as possible, and as quickly as possible.
We now have a massive tax raising budget, for pretty much no purpose other than to further redistribute significant amounts of money from net contributors to net recipients
It was the huge mistake the last Conservative government made. They could have made drastic changes that would be politically painful for the Labour Party to reverse post-election. They could have scrapped inheritance tax, scrapped the Equality Act, even left the ECHR. Instead Rishi Sunak adopted the “good chap” theory of government, as he focused on small technocratic tweaks and restoring economic stability. Presumably, he trusted that the veneer of sensible, pragmatic centrism that Starmer cloaked himself in would mean that Labour would do only limited damage and certainly would respect unambiguous Conservative achievements.
Well this budget confirms the extent of the delusion that many had about what the Starmer project would entail. There is a debate to be had about to what extent it’s the occupants of Numbers 10 and 11 Downing Street, or whether it’s their colleagues in the parliamentary Labour party driving this vigorously left-wing ideological agenda. To some extent though that’s inside baseball. The policies are undeniably socialist.
Even before the benefits bonanza laid out yesterday, we’d seen the rolling back of the educational freedoms embedded in the academy system, the effective end of property rights for landlords in the renters reform bill, and the most vigorous prosecution of a poverty-focused energy policy in history.
But we now have a massive tax raising budget, for pretty much no purpose other than to further redistribute significant amounts of money from net contributors to net recipients. Families with multiple children in receipt of benefits could end up receiving an additional £5,000 a year. For a graduate with three children earning £60,000, you would need a £15,000 pay rise to get an additional £5,000 in take home pay due to the extraordinary marginal tax rates that kick in. For a graduate with three children earning £99,000, assuming each they received tax free childcare worth up to £2,000 per child, they would need a pay rise of about £28,000 to get £5,000 more in take home income.
The one way that this deranged system of marginal tax rates is tolerable is the use of salary sacrifice schemes. When it was briefed that the government were considering capping the use of cycle-to-work schemes — where an individual pays for a bicycle, or bicycle subscription out of their pre tax income —-a government source sneered that “Cycle to Work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 e-bikes for weekend rides in the Surrey Hills.” But when the alternative to spending £4,000 on an e-bike is losing virtually every penny to the Treasury, these schemes become a necessity.
In the end, cycle to work schemes weren’t touched. Instead, salary sacrifice schemes for pension contributions were capped at just £2,000. It was a revealing moment. There is no greater threat to the long term fiscal sustainability of the country than the UK’s pension system. There’s the state pension of course. Kept off the balance sheet is a £5 trillion plus liability. The triple lock currently means that one day the state pension could be larger than the size of the whole economy, given its guaranteed growth rate of 2.5 per cent at minimum outstrips long term growth forecasts. There is also the liability for public sector pensions. Just as significant though is the fact that despite all the changes to private pensions, we still don’t save enough money for our retirement. And with the demographic crisis meaning fewer and fewer young people relative to pensioners, the need to encourage pension contributions has only grown. Yet in an act of extreme fiscal irresponsibility which should wipe the words “mini-budget” and “Tory chaos” out of the chancellor’s mouth for good, she’s now piling on taxes to the pension contributions that are so vital to the nation’s long term future.
The migration figures out today provide the perfect coda for this budget, and the economic future as it stands. Net migration has indeed dropped to 204,000. But dig into the details and you find that non-EU migration has remained high, at 383,000. This figure was only dragged down by the almost 180,000 of British nationals and EU nationals who left. It’s not hard to work out why this country, this economy and this system remains so appealing to one group, and is starting to become so unappealing to another. The left used to valorise the words “workers of the world unite”. How much better off we would be if this remained the case. Instead, today’s version is “benefits claimants of the world unite.”
