Another UK budget day dawns. This is only the fifth time since 1979 that we’ve had to endure the suspense twice in a single year. For much of the past 30 years, I’ve found myself responding to the mountains of material HM Treasury spills out on the day.
Trying to distil each chancellor’s fiscal intent. Striving to uncover the bits they’d rather remained obscure. Seeking out the wackier measures that will boomerang disastrously, almost before a chancellor’s words have traversed the dispatch box. As this one looms, I find myself questioning whether budgets, as I’ve known them most of my journalistic life, are still fit for purpose.
In 1997 one of the first acts of the incoming Labour government was to transfer responsibility for monetary policy to an independent Bank of England. In 2010 the incoming Conservative-Liberal Democrat coalition created the arm’s-length Office for Budget Responsibility to deliver “independent and authoritative analysis of the UK’s public finances”.
In addition, in Scotland, we are seeing growing devolution of fiscal control over a range of taxes to the government in Edinburgh. Holyrood has set up its own independent Fiscal Commission. It will produce its own twice-yearly forecasts of revenues from fully devolved taxes, including non-savings, non-dividend income tax; onshore GDP; and devolved social security spending.
Quite how this patchwork of third-party unelected power, analysis and assessment and the evolution of a more and more devolved United Kingdom interacts with the role of budget day, where surprises are at a premium and the success or failure of any particular fiscal package is measured by its political impact on the day, not its longer-term economic consequences, escapes me.
As the National Audit Office noted last year of the 2015 spending review, the way that governments go about delivering services suffers from “four pervasive problems”. The audit office identified these as ignoring inconvenient facts; making decisions without understanding the consequences; not learning from previous mistakes; and harbouring conflicting priorities. As fiscal watchdogs go, the UK’s Office for Budget Responsibility enjoys a closer working relationship with the Treasury than some of its overseas counterparts. It has effectively sub-contracted from government the task of preparing its five-year fiscal forecasts. Until now, the watchdog has issued its economic and fiscal outlook document twice a year, after the chancellor’s spring budget and again after the autumn statement.
Since each update incorporates the impact of new measures to be announced in these statements, the process involves sharing of information on the government’s tax and spending measures in the ten weeks before each speech. The watchdog can flag up when it thinks the package might breach the government’s own fiscal rules. But it is not in the business of vetting for evidence of the four pervasive problems in public policymaking that the audit office identified.
Today the watchdog will publish its latest forecasts immediately. Next Monday a minority UK government will launch its industrial strategy. In three weeks’ time, the Scottish government will unveil its next budget and the new Scottish Fiscal Commission will produce its first forecasts.
It’s hard to avoid the conclusion that the cause of greater public transparency on how the public finances are managed will be ill-served by this period of intense fiscal congestion.
This is the day that chancellors make big decisions about tax and spending. But how big? Consider the legacy of budgets past, dating back to the mid-1960s. Throughout that period net taxes and national insurance receipts, as a percentage of GDP, have remained remarkably stable. In only one year (1965-66) was it below 32 per cent. In only four has it breached 37 per cent. And in three of those Margaret Thatcher was in No 10!
Phillip Hammond has opted for a single budget statement each autumn from 2018. Time, too, perhaps, to reassess our whole budget process?