18 March 2016

Let’s have a Budget that is about the economy, not the Tory leadership


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Perhaps in future, rather than the UK Chancellor presenting an annual Budget to Parliament, he could simply publish an “options paper” instead. Rather than a formal text, worked over by teams of hundreds of officials in the Treasury, George Osborne might just “put a few ideas out there,” with “absolutely no pressure” to get some “blue-sky thinking” going. If he did adopt that irritating, modern business approach to strategy and consultation, it would then at least make it much easier to execute a series of u-turns later. Osborne could say that he had never meant a word of it.

I suggest this approach, not entirely seriously, because once again this week an Osborne Budget started unravelling within 24 hours of it being delivered. As in 2012, following the infamous omnishambles Budget that Osborne loyalists still persist in saying was all a lot of fuss over nothing, he is under intense pressure to reverse cuts that are included in his calculations, this time to the Personal Independence Payments (PIP) for the disabled.

This time I do sympathise with Osborne in at least one respect. The optics of cutting benefits for disabled people are about as awful as it gets, but it is not quite as simple as it appears, or as simple as it will be presented if we get to the stage of politicians screaming and shouting and protest marches on Downing Street. The root of this cut, beyond the hysteria and headlines, is a change to benefits that backfired in narrow monetary terms. It is a story of valid reform by the last government that ended up costing more than anticipated. The coalition government became convinced that DLA (the Disability Living Allowance) should be replaced with a better test that would bring a number of improvements. The grading system in interviews would target money at the greatest need, and the requirement for subsequent checks should benefit the taxpayer if a claimant’s condition – happily – improved. The new system was introduced as part of the welfare reform bill and came into effect in 2013.

In 2014, disability rights campaigners noticed that the disabled were finding it considerably easier to access the new benefit. Eligibility had risen, from the low 40s to 50% (excluding terminally ill applicants) in year one. The government which had got its projections wrong was understandably not keen to highlight the figures, because the reforms had been introduced on the basis that they would decrease the overall numbers and total spend, and hopefully do more proportionally for the most disabled. In Whitehall, and in a Treasury that rarely needs any excuse to accuse the Department of Work and Pensions of incompetence, this counted as a problem, with the cuts counted in many years down the line. Simultaneously, pre-election, a Commons committee was lambasting the implementation of the PIP system as a shambles that had left a backlog of applications and appeals. That analysis is rejected by the government and as a story it has lurked largely out of view to most voters, until this week and there it was in black and white, or red, in the Budget. To get PIP on track and costs under control, tightening up the eligibility rules is under review.

None of this is to say that the proposed cuts will be easy to implement, only that because almost everything at Westminster is refracted through the prism of the next Tory leadership race the PIP changes are brandished as evidence of Osborne’s supposed innate cruelty, which is just daft, as anyone who has ever met him will tell you.

But then, whose fault is this? The most political of Chancellors – since Labour’s Gordon Brown, and with no Tory comparison in living memory – has for years burnished a reputation as the master strategist, always several steps ahead of his rivals, in this case the outgoing Mayor of London Boris Johnson, that’s him with the slightly Donald Trump hair.

The dull truth about the Budget was that there was not much to announce. The government is still spending too much, despite the howls of the opposition, with a deficit for 2015-16 of more than £70bn. That is troubling because after several years of decent growth and an employment miracle in Britain one would hope for better. But the number this year need not yet be catastrophic if the fears about the world economy prove to be over done. There is room for UK growth to surprise on the upside and as long as that sinister nincompoop Donald Trump doesn’t make it to the White House, and start dismantling free trade, then an energy self-sufficient America should power away. If that happens, there is a chance the UK will also grow more quickly and the deficit will fall faster than anticipated.

The Chancellor could not stand up and say any of that, of course. It would have been over in about ten minutes. The Budget is the big moment in which he can position himself as the future leader or at least kingmaker and it has been built remorselessly by my trade – the media – into a fake drama, with the television networks even using helicopters to follow his car 250 metres as he makes his way from Downing Street to Parliament. That expectation and leadership hype meant all manner of government announcements had to be found that should have had nothing – nothing – to do with a finance minister, including a tricksy sugar tax on soft drinks (and the tonic in gin & tonic!) that will end up as a sticky mess if he is not careful.

How I wish the denizens of Westminster would finally shake off this Gordon Brown way of doing politics and not play the media game so blatantly to further leadership ambitions The next Chancellor should stick to reforming and simplifying the tax system, encouraging enterprise and controlling spending. It would also be a bonus if he or she had no ambitions to lead the Tory party and could concentrate full-time on the economy.

Iain Martin is Editor of CapX