Jeremy Hunt’s budget today received a mixed reaction from Westminster’s wonks. Unsurprisingly, it was most welcomed by centre-right voices with the free-marketeers and lefties alike less enthusiastic. As always, Guido has the lowdown on their reaction.
The Taxpayers’ Alliance was hardly full of praise to a budget “full of problems” . Despite criticising the government for rises to corporation tax and tobacco duty, they welcomed reforms to medicine approval and the abolition of the lifetime allowance for pensions. Chief Executive, John O’Connell said:
“Despite looking good on the surface, under the bonnet this Budget is full of problems for taxpayers. The chancellor has identified a number of structural weaknesses in the UK economy and has rightly focused on fixing them. But yet more spending increases in coming years will further frustrate households, whose rising tax bills are contributing to the biggest drop in living standards since records began. While forecasts are heading in the right direction, taxpayers still face funding the cost of government crisis for years to come.”
Hunt’s policy of full capital expensing gave the Adam Smith Institute cause to celebrate a win in their campaign to abolish the factory tax. Beyond this, they were similarly lukewarm to the budget – giving it an overall score of 6.5/10. They summarised their reaction on twitter:
“The Chancellor seemingly has the right ideas about what is causing our economic ailments… but came to the Budget with the wrong conclusions about how to fix them.”
The Institute of Economic Affairs agreed with the ASI’s assessment that childcare reforms were still “too demand-inducing”. Their Editorial and Research Fellow, Len Shackleton said the policy would “primarily benefit middle class families” and was unlikely to be effective. On the budget more generally, Director Mark Littlewood was similarly critical:
“The budget lacks ambition but takes some welcome steps. Introducing full expensing for plants, machinery and equipment will encourage business investment and boost productivity. Abolishing the lifetime pension allowance will encourage more people to work. Recognising foreign medicine approvals could save lives by providing earlier access to treatments… For a government claiming to be laser-focused on reaping the rewards of Brexit and promoting economic growth, this is a profound misstep.”
In a break from the free-marketeers, centre-right wonks were more receptive, with the Centre for Social Justice leading the charge. Their Chief Executive, Andy Cook, heaped praise on the “back to work budget”:
“Universal Support – the long forgotten “sister” to Universal Credit – was specifically designed to help those in this group who want to work get back into the workforce. The CSJ has long campaigned for the roll out of Universal Support, and we are delighted that the Chancellor has now taken decisive action to begin that process. Delivered properly, Universal Support will help hundreds of thousands more people reap the financial, social and health benefits of work… With CSJ calls to boost childcare support in Universal Credit also adopted, the Chancellor’s ‘back to work Budget’ certainly packs a punch.”
Policy Exchange joined in offering a ringing endorsement for the “serious budget to tackle serious challenges”. Connor McDonald added:
The Chancellor was right to deal with two big problems facing the UK: economic inactivity and business investment. The budget measures on labour market participation represent one of the largest packages of its kind in recent history. The proposals to expand childcare and tackle supply-side reform in the sector are potentially revolutionary, and we are glad that Policy Exchange proposals, such as incentivising childminder agencies and bringing ratios in line with Scotland are being implemented… While more could be done on taxes – the tax burden is still too high and rising in April – this budget identifies long-term problems for the UK economy and delivers a comprehensive plan to address them. A serious budget to tackle serious challenges.”
Onward has similarly kind words for Hunt – and in particular his childcare policy. Seb Payne responded that:
“This was a Budget to bring back trust – reassuring and optimistic, providing support now and fostering growth in the future. It balanced fiscal security and creating better conditions for prosperity. A solid start, but there’s still an electoral and delivery mountain to climb…”
Unsurprisingly, the Resolution Foundation took the opposite view. Torsten Bell summarised his response as follows:
“So, in summary; bad, but not as bad as previously feared… policy announcements will be more successful at boosting employment (make a real difference to women) than investment (today will make no real difference). The back to work package is basically: The carrots: big spending/tax bungs to keep better off parents/doctors in work; The sticks: increase conditionality on poorer parents. Anyone saying this would be a boring Budget was very wrong – big policy changes, especially on childcare and disability benefits”.
The Resolution Foundation’s less establishment-friendly comrades at the New Economics Foundation weren’t happy – Guido doubts Jeremy Hunt will be losing sleep. They provided running commentary on Twitter:
“Increasing the pension lifetime allowance is a massive giveaway to the wealthiest people in society. It won’t encourage people back into work and it won’t help most of us struggling to get by…The expansion of 30 hours free childcare is a big step forward – but it’s not enough to fix our broken childcare system. It’s not enough for providers or parents. We need free, universal, high-quality childcare. The most notable thing about this budget is what was missing. There was room for tax breaks for the rich but no mention of a pay rise for hard working nurses, teachers and other public sector workers.”
Despite the 5p cut to fuel duty being maintained, the budget was also a non-starter for the Alliance of British Drivers. Chief Executive, Brian Gregory, said:
“The Chancellor could have helped ease the cost-of-living crisis by removing the outrageous burden of paying tax twice at the fuel pumps – in the form of VAT and fuel duty… Instead, the Government will continue to spend hardworking taxpayers’ money to support electric vehicle subsidies and grants for electric vehicle infrastructure which will benefit the wealthy… This was a disappointing Budget from a disappointing Government.”
Driving the agenda…
Stick Sir Keir in a wig and a frock and you might be forgiven for thinking Liz Truss herself had turned up this morning to give the speech for him. Launching his plan to “secure the highest sustained growth in the G7“, here’s what Starmer promised Labour would deliver:
“A plan which represents the determination of my party to create more wealth, lead Britain out of its low wage, high tax, doom-loop.”
Which sounds a lot like the words of free market economist Julian Jessop, who just last week said:
“The UK is in a doom loop of a rising tax burden, a weaker economy and deteriorating public finances. These latest stats will only encourage the OBR and the government to double down on this doom loop by drawing the wrong conclusions from dubious data. If the Treasury takes the OBR’s grim forecast for economic growth as gospel and refuses to cut taxes, the doom loop will continue.”
Alas Starmer plans to increase spending, substantially. Which means as sure as night follows day, taxes will rise even more. Given Guido thought he noticed someone who looked a lot like Torsten Bell lurking aound the stage this morning, the odds of the Treasury paying less attention to the OBR under Sir Keir are pretty slim…
Read Starmer’s speech in full below:
Now the Office for Budget Responsibility isn’t even trying. This morning, less than a day after the Autumn Statement, the OBR’s Chairman Richard Hughes held a fireside chat with none other than Torsten Bell at the latter’s left-of-centre think tank, the Resolution Foundation. The same Resolution Foundation that spends its days pushing for ever-higher welfare payments and attacking every Tory chancellor since George Osborne.
Why would Hughes appear at the Resolution Foundation, flanked by Resolution Foundation employees and effectively endorsing the Resolution Foundation, when he’s running an ‘independent’ body that blesses every policy coming out of the Treasury? Maybe it has something to do with the fact that he used to work there, spending his days co-authoring reports on the horrors of Brexit and rubbing shoulders with the man who used to be Ed Miliband’s policy director. You can perhaps wonder if Kwasi Kwarteng had legitimate suspicions about the OBR/Resolution Foundation marking his homework. The Resolution Foundation has a left-leaning ideological position, plain as day. Even the BBC thinks so…
One of the mini-budget’s maxi-consequences has been to boost the reputation of opposition economists. They said the Chancellor’s fiscal event would be a disaster and outcomes have proven them absolutely right.
At the Treasury select committee this morning, Angela Eagle invited Torsten Bell of the Resolution Foundation to remember how angry he was at his pre-announcement appearance before the committee and how much more angry he must be now.
True, Torsten was alight, he was blazing – but it looked more like delight than disgust.
“Maybe you could have got away with it in more benign times,” he said and then let slip his commanding belief: “It wouldn’t have been a good idea at any time.”
This peloton of economists are united. The growth targets are unachievable, and there is “no plausible route by which tax cuts lead to a 1% increase in GDP.”
They may be right, they may not. It’s worth remembering that economists have historically failed to pick any of the turning points in the economy, and that 364 of the blighters wrote to the Times warning against Geoffrey Howe’s disastrous 1981 budget.
The economy immediately took off.
If that happens again, if the animal spirits of the economy pick up in the unpredictable way that they do – the dismal scientists will look even more dismal.
The Treasury Select Committee is set to hear ‘oral evidence’ on Kwasi’s mini-Budget this Wednesday from a panel that looks like it was dreamt up by an FBPE focus group. The Anti-Growth Coalition’s own cast of Avengers…
The Institute for (Big) Government, the Institute for Fiscal Studies and the Resolution Foundation are all sending their star performers to the show. No prizes for what Torsten Bell or Paul Johnson will have to say about a plan that actually supports tax cuts…
There’s been plenty of media squawking in the last couple of weeks over the lack of an Office for Budget Responsibility (OBR) forecast in the mini-Budget. Never mind the fact the OBR didn’t even exist until 2010, without its explicit blessing, how can any fiscal policy ever be trusted?
Even a cursory look at the OBR’s personnel gives you an idea of which school of thought its leaders belong: both the chair of its Budget Responsibility Committee and its Deputy Chief of Staff are former colleagues or protégés of Torsten Bell, chief executive of the left-of-centre* Resolution Foundation (RF). Torsten Bell will be a familiar face to co-conspirators. Before he spent his days pushing for ever-higher welfare payments at the RF, Bell was Labour’s Director of Policy under Ed Miliband. For years it seemed carving Labour’s manifesto into stone would be his crowning achievement. It turns out seeing his friends land top jobs overseeing government fiscal policy has won out…
Richard Hughes, now the chair of the OBR’s Budget Responsibility Committee, spent a year alongside Bell at the Resolution Foundation as its research associate, where he:
Laura Gardiner, OBR Deputy Chief of Staff responsible for policy costings, expenditure, receipts and “fiscal risks“, worked for Bell for six years. In that time she:
It baffles Guido that Richard Hughes was recruited to head the OBR from an organisation, the Resolution Foundation, which has been unremittingly critical of every Tory chancellor since George Osborne. Is it any wonder that Kwasi didn’t fancy having his plans benchmarked by known ideological opponents who favoured staying in the EU and egalitarian redistribution on a gargantuan scale. It doesn’t take a great insight to guess what the OBR will say when a budget that doesn’t align with their values and objectives lands on their desks…
*David Willets, the foundation’s president, is used as a token Tory shield against accusations it is a left-wing campaigning organisation. Guido would not go as far as to say Two Brains is a useful idiot, he is however an ideological fig-leaf…