Wednesday, July 18, 2018

Chancellors may like a gimmick, but it’s taxpayers who lose out

Some 20 years ago, I was press secretary to the chancellor.

It was (Autumn) Budget time. I was briefing the press. Spinning in the gallery as well were Ed Balls and Charlie Whelan – on behalf of chancellor-in-waiting Gordon Brown.

They had a big complaint for me – and for the Treasury. The chancellor had too few big parliamentary outings. One a year was not enough. When they were in power – as it happened less than six months later – this was something they would change.

Read more: Philip Hammond signals an end to austerity

Their first initiative was to move the Autumn “unified” Budget back to its more traditional March timetable. Then they also upgraded what had been the Autumn Statement (a commitment under the Industry Act for the government to produce two forecasts a year) into the grander sounding “Pre-Budget Report”.

In a good move, spending reviews went from annual affairs to multi-year “comprehensive spending reviews”. And in between Gordon Brown moved to take de facto control of most of the domestic policy agenda – and international development as well.

The rest is history.

Under both Brown, and then George Osborne, we drifted into a cycle of having two major fiscal statements a year. And because both wanted to use the occasions to set strategic tone, lob out some crowd-pleasing goodies, and demonstrate the width of their political reach, we ended up with what were essentially two Budgets.

Announcements, as a former senior Treasury mandarin admitted, became driven by the simple existence of the event: “there have been some gimmicks over the years, including some that have been expensive and wasteful. It is also true that the nature of the Budget and the Autumn Statement / Pre-Budget Report processes creates pressure for these”.

The losers were taxpayers – funding those wasteful and expensive gimmicks, and facing a proliferation of poorly thought-through tax changes. We ended up with a counter-productive dynamic whereby policy was produced to fill the space available.

One consequence of this hyperactivity was an increasing tendency for Budgets to backfire. What looked good on the Wednesday night often started to unravel day later – and be reversed within a fortnight.

That was why Philip Hammond’s announcement in his 2016 Autumn Statement that the UK was going to rejoin the club of countries (aka the rest of the world) with one major fiscal event a year was so important. And that is why it is even more important that he sticks to his declared intention to avoid measures dreamt up “for the sake of it” today.

The Treasury would rapidly find itself back on the treadmill of finding new things to say in March with the print buttons barely having been pressed on the documents for the autumnal announcements. This way, they have more time to consult, to think things through – and hopefully get them right.

There are pressures in the other direction: there is always a temptation to instantly spend any fiscal bonus the Office for Budget Responsibility offers, or to react to pressures for current spending. There are very real problems emerging on public spending, but those need to be addressed through a proper spending review to break the addictive cycle of crisis-cash-repeat.

So, if Hammond really does sit down in under half an hour, and stick to a dry forecast update, free of a raft of new measures, spare a thought for the economics journalists, business broadcasters, accounting firms, and others denied their moment to shine.

But celebrate on behalf of the rest of us, as he will have taken the country one important step on the path to better Budgets.

Read more: What to expect from next week's Spring Statement

Original Article

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