EDITOR'S LETTERMerryn Somerset Webb
I’ve sat through a lot of Budgets in my time at MoneyWeek, but this week’s was one of the most boring. There wasn’t much of interest in the macroeconomic forecasts (growth was revised down a bit, now it has been revised up a bit again). There wasn’t much on the debt front (the deficit is going to last for longer than it is possible even vaguely to forecast). The tax system has not been reformed. The NHS has not been saved and the few horrible complications left in our pension system have not been removed.
The only thing of any note was the rise in national insurance for the self-employed, something that was fully expected and makes perfectly good sense. This week, John Stepek has run through what Philip Hammond said and explains why it matters (mostly it doesn’t). But it is dull stuff. So much so that the second Hammond finished speaking, I headed off to the Pensions and Lifetime Savings Association Investment Conference 2017 for some proper entertainment.
Ed Balls, the former shadow chancellor, was up first. Back in his political day, he told us, they assumed that globalisation was about the movement of goods. They assumed new technology would hit the incomes of the poor harder than anyone else. They assumed that one of the biggest problems facing the UK was the rising gap between pensioners’ incomes and working incomes (at the time pensioners’ incomes were 30% lower). All these things turned out to be wrong.
Opening the UK’s borders to the populations of new members of the EU didn’t bring us 10,000 new workers, as the government confidently predicted at the time. It brought millions. And in the UK it is neither the incomes of the poor nor of pensioners that have stagnated for a decade. It is the incomes of those in the middle bracket – largely, I suspect, because of the huge cost involved in meeting the pension obligations promised to those who have already retired.
Balls was followed by the FT’s Gillian Tett. At the beginning of the latest communication revolution, she said, we all assumed that the ability to communicate anywhere anytime with anyone would bring the world closer together. It didn’t. Instead, it has played directly into our tribal instincts, making it easier for us to seek out the like-minded and totally ignore those we disagree with. The result? “Single issue, flash-mob politics.”
This should be a reminder to us to examine our own assumptions. In the papers this weekend, you read that a boring budget should be seen as a good budget – the last thing we need at the moment, everyone will say, is upset. I’m not so sure. If you interpret the Brexit vote as a demand for the government to take real decisive action to have a go at solving our long-term problems – and an acceptance that action comes with risk – it was a pretty bad budget.