Why we should scrap the Budget

We could do without the theatre

(Image credit: © Dan Kitwood/Getty Images)

published 24 October 2021

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.

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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.

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.