An extraordinary budget for extraordinary times
A popular aphorism in British politics was coined by Conservative leader and postwar Prime Minister Harold Macmillan: when asked what the greatest challenge was in politics, he is said to have replied simply ‘events, dear boy, events’. Last week an extraordinary thing happened to confirm this Macmillian truism – a British Chancellor of the Exchequer presented a Budget he disagreed with. Or so was the feeling from Rishi Sunak, who as a good economist made clear his philosophical distaste for the big state while engaging in an extraordinary post-pandemic spending spree and tax hike. The messaging was clear: this is not the budget the Chancellor wanted to present to the House, but this was the one that was necessary for a country and an Exchequer ravaged by the effects of Covid-19, directly on the NHS and the severe economic impact of repeated lockdowns for the sake of public health. Now the time for paying for all those testing centres, the contact tracing, the business relief, the furlough schemes has arrived, in addition to achieving the socioeconomic goals of a government that has repeatedly stated its commitment to levelling up regions of a country with intense wealth concentration around London and the southeast. The result was a profound shift back to a style of big state Conservatism not seen since Macmillan himself was Prime Minister, and one totally at odds with the ideological background of the current Chancellor – a victim, if ever there was one in the history of British politics, of events.
One of the key points of the Budget is that taxes are set to rise to a 71-year high. The last time such sacrifices were expected from the British taxpayer, bombsites dotted the country, temporary housing for returning servicemen dotted the country, and rationing was still in full force – now, with the economic impact of lockdowns, furlough and treating coronavirus through the NHS, British workers will be forced to repay similar levels with less obvious signs of devastation. ‘I don’t like it,’ as the Chancellor said in the Commons, ‘but I cannot apologise for it’. Speculation has been rife that Mr Sunak intends to drop taxes before the next general election, partly to win back those Conservative voters who feel alienated from what was once the low-tax party, but also surely to fulfil his own economic ideological goals. The Chancellor didn’t come into office expecting to deal with Covid-19, and undoubtedly feels the weight of history on his shoulders if he completely abandons the party’s Thatcherite past – and comparisons with the stagflationary 1970s Conservative government of Ted Heath made in the Commons by Labour MP Siobain McDonagh can hardly sit easy with a Chancellor who is the heir to such a recent neoliberal tradition. Considered with this year’s rise in National Insurance, the marginal tax burden on the average working Briton is now far from encouraging.
Thankfully there were lighter parts of the Budget. One story picked up by the British press was good news for drinkers, found in adjustments to the tax on alcohol. Draught Relief has been introduced as a lifeline to hard-hit British pubs by cutting duty on draught beer and cider by 5%, and a cancellation of a proposed rise in duty on beer, cider, whisky and wine. There was also some good news for schools – with £2bn of extra cash – and other windfalls for local transport and skills training, such as promoting the government’s new ‘T-Level’ designed to prevent skill gaps. Businesses saw some movement on business rates, but radical proposals to completely reform the way businesses pay tax were dialled back.
The crucial part of this Budget was the squeezing of the taxpayer’s wallet at a time when cost of living is spiralling upwards. As the shadow chancellor stressed at length, a perfect storm of factors in the UK this winter could see many families struggling. Tax and NI rises, Universal Credit cuts, inflationary pressures and skyrocketing gas prices – not to mention the threat of a bad flu season and a return of Covid-19 – could combine to ensure even those on a relatively average wage will struggle, let alone those in the most difficulty. The removal of the temporary £20-a-week increase in Universal Credit which was introduced as a Covid-19 relief measure has been universally criticised, including by several Conservatives, and the Chancellor also refused to budge over retaining controversial cuts to the foreign aid budget. This is firmly a Budget that sees the relief handouts of Covid-19 as a thing of the past.
In what would normally be a crucial absence at the Budget, the Leader of the Opposition Sir Keir Starmer was forced to hand over the reigns to Ed Miliband and Rachel Reeves after testing positive for Covid-19. That this failed to make any noticeable impact on proceedings should be worrying for any Starmer loyalists – and, as The New Statesman pointed out, Starmer’s stand-in came out of the experience looking credible. The lack of what should be the principal savage attack dog from the opposition on a crucial day for the current government went out with a whimper – but who, honestly, expected a savage response from Sir Keir himself? In a strange turn of events, the principal opposition to some of the policies in the Budget seems to have come from the ideological scruples of the Chancellor himself.
As many pundits are predicting, this tax grab now could well set up tax cuts just prior to the next election, in a reassuring display of fiscal responsibility and respect for the taxpayers’ hard-earned cash that many normal Conservative voters are earnestly hoping for. At the moment, the small-state, low-tax Thatcherism which has underpinned the Conservative Party for so many decades now looks without a home, except in moral statements from the
Treasury that some return to neoliberal principles will occur in the future. The fact remains that is one of the most extraordinary budgets since the Second World War –influenced as no other by Macmillan’s events.