The Budget has always been one of the big set-piece occasions of the British political calendar. The chancellor sets out his plans for tax and spending for the year, determining the fate of departments, and usually coming up with one or two headline-grabbing new policies. It defines the government’s agenda for the year and the chancellor gets his chance to shine.
Rishi Sunak’s Budget speech is scheduled for next week and there is already plenty of speculation on what it might contain. But there is something the chancellor could do that would be far better for the economy than delivering a two-hour speech to the House of Commons: just take the day off instead.
Enough already with the tax fiddles
First, we have had enough major changes to the tax and spending regime already for one year. It has been a massive 12 months for tax and fiscal policy, unprecedented outside of wartime. We have seen corporation tax pushed up to 25%, reversing 40 years of steady reductions in the levy on company profits. We have seen a whole new social charge introduced, the “health and social care levy”, which is, in effect, an extra form of national insurance. We have seen the deficit pushed up to the highest level outside of wartime, while vast new spending programmes, such as the furlough scheme that ended up costing £70bn, were launched in the blink of an eye.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It is, to put it mildly, a lot. It is hard to see that the Budget really has anything else to accomplish. We have seen that the political system is capable of responding quickly as the economy changes, and policy changes with it. Is it really necessary to wait until the chancellor’s big Budget speech to make any reforms?
Second, the Budget encourages the very worst form of government. Every chancellor feels he needs to do something to grab some headlines: an extra tax on petrol lawn mowers for generating greenhouse gases; a levy on tanning salons because they might be bad for our skin; a subsidy for anyone developing electric planes.
A Budget can very quickly turn into an hour of high-profile virtue-signalling with the chancellor dishing out rewards and punishments according to whatever fad is dominating the headlines that week; it makes for easy politics and guarantees some positive coverage. The trouble is, it clutters up the tax system with endless fiddly tax rules. It is very easy to introduce a subsidy for something, but once it is in place it is very difficult to repeal it. The result is a tax system so complex even expert accountants can hardly understand it anymore.
Replace it with a Great Repeal Statement
True, we have made some progress. In his pomp, Gordon Brown introduced what was in effect two Budgets a year: the main one, plus the Autumn Statement, both of which came with his trademark round of fiddly gimmicks and stealth taxes that no one really noticed for a few years. Philip Hammond, who, looking back, was a far better chancellor than we realised at the time, did everyone a huge favour by finally getting rid of that abomination.
We could go further: the one thing the British tax system needs right now is less clutter. And it definitely doesn’t need yet more interference from the government and more rule changes. It would be a lot healthier if we simply left it alone for a while.
If Rishi Sunak wants to have a big day with lots of TV cameras following him around then he could try a Great Repeal Statement – a one hour speech that ripped up lots of small and fiddly taxes that hardly anyone pays any more anyway. That would be a bold signal of intent, would still generate some headlines, and would remind everyone that amid all the industrial strategies, subsidies and interventionism this was still a Conservative government.
But a full-scale Budget? We definitely don’t need another one this year. And if we scrapped it for this year, perhaps it could be quietly consigned to the history books for ever – if chancellors did a little less for a few years, the economy might even end up in better shape.
-
Is Donald Trump's re-election a wake-up call for Europe?Donald Trump will turbocharge the US economy – and expose Europe's weakness
-
Invest in Hilton Foods: a tasty UK food supplierHilton Foods is a keenly priced opportunity in an unglamorous sector
-
Do we need central banks, or is it time to privatise money?Analysis Free banking is one alternative to central banks, but would switching to a radical new system be worth the risk?
-
Is HS2 back on the government's agenda?The government is rethinking what to do about HS2 – Britain’s farcical train project.
-
The Gulf states: a new competitor for the City's financial crown?Bahrain and other Gulf states could eventually threaten London's financial dominance.
-
Is Labour on the brink of a crisis?Labour's Autumn Budget is approaching – a fiscal and economic storm on the scale of 1976 looks likely, says Max King
-
How will the UK gambling sector be hit by the Budget?There are concerns for the UK gambling sector in the lead-up to the Autumn Budget. What could be on the cards?
-
Working from home: is it working?While Labour plans to make working from home the legal default, some employers are calling workers back into the office. What does the future hold?
