Make no mistake, this budget was conceived and designed to further the naked personal political ambition of the Chancellor.
The central criticism of it, notwithstanding the 77 measures contained within it (which may be a record), is that it does nothing to address the growth issues which we face. Indeed, some measures, such as those for small businesses, may rebound in that they may perpetuate the slow and lingering death of the zombie companies among them, and that will continue to weigh on productivity growth.
The economic commentariat has been busy picking apart the Chancellor’s forecasts and assumptions and most find them wanting. There is a certain irony in clamping down on online gambling practices, while undertaking a massive gamble himself. There is one clear judgement supported by real money, and that from a source which is not known for partisan behaviour, the foreign exchange market, which marked sterling down from 1.405 to 1.425.
The arbitrary nature of figures chosen by this Chancellor are evident in the amount of the tax deduction for advice; just a year ago this aspect of his flagship ‘Freedom and Choice’ agenda was just £150 but now is to be £500. It is difficult not to conclude that the real motivation behind ‘Freedom and Choice’ was the £900 million that it is expected to contribute to the Exchequer this year.
An unusual feature of the budget was the extent to which revenues from one area were hypothecated to a particular spending application, something which the Treasury has traditionally strongly resisted. Many of the specific project commitments bear more than a passing resemblance to US ‘pork-barrel’ politics.
The Chancellor asserted many times that this was a budget ‘for future generations’; but actions and words do not agree. The Lifetime ISA proposed is accessible at any time, though with loss of the government bonus and after a penalty of 5% of the principal.
This caters to the short-term preferences of savers and does hold the prospect of harming the take-up rate of auto-enrolled pensions even though it is massively inferior as a pension saving investment vehicle. Auto-enrolment superiority arises mainly from the presence of employer contributions.
It seems unlikely that many of these ‘Lifetime ISAs’ will survive to provide savings for retirement. It will of course compete directly with personal and stakeholder pensions. Many read the Lifetime ISA as a precursor to the Pension ISA. It is clear that this is yet another step away from occupational pensions and along the road to the financialisation of everything, which now seems closer than the internet of things.
The change in the SCAPE rate, which determines the valuation of public sector schemes, and is estimated to raise the contributions of private sector participants in those schemes by 2%, is yet another irritant in that regard.
If we are to address inter-generational inequality, then the place to start is with today’s inequalities and a budget which sees £4 billion of cuts in disability benefits while offering £2.5 billion to the top 10% exacerbates that.
With the Chancellor’s freedoms constrained by his need to promote his referendum position and prospects, we may have expected a more conventional budget. What we got, leaves me full of foreboding for the future; future visits to the dentist almost seem an attractive alternative.
Con Keating is head of research at BrightonRock
