Well, no-one expected it to be pleasant but I’m not sure today’s Emergency Budget made anyone (beside cider brewers) particularly happy. However, I can broadly support the ideals that the budget argues it represents – deficit reduction, encouraging enterprise and fairness.
Firstly, deficit reduction – the aim of this budget is ambitious: the balancing of the UK’s books by 2015. £113 billion pounds worth of cuts is a big scary number – and £73 billion of these cuts were already set out by Labour (not that you’d be able to tell given their reaction today). But look at our balance sheet, really look without your party political goggles on – it’s horrendous and we have to deal with it sooner rather than later. If you think the medicine of this budget is bitter, just envisage the sort of strictures that the IMF would impose. If we can rebalance our books ourselves, then surely we should give it our best shot. Yes it means 25% off departmental budgets and significant reductions to the welfare bill.
However I believe passionately that the state should not be the economy – the public sector is currently bloated and unprofitable and if it were a private enterprise it would have gone into administration years ago. Encouraging enterprise should be the core mission of government, creating a sympathetic environment for people to start and grow businesses. I meet a lot of people with fantastic ideas that have the potential to make a real impact on people’s lives in all sorts of ways – you have to make it easier for people to turn their great ideas into reality. Lower corporation tax, a general commitment to simpler tax regimes and enacting the Conservative manifesto policies on a “one-in, one-out” approach to regulation all appear to be the approach of a government genuinely committed to unleashing enterprise.
Finally, on fairness – I can see that the coalition have genuinely tried to be fair and to target the brunt of any welfare cuts and tax rises at those who earn more. I can genuinely applaud the increase in the personal allowance for basic rate tax earners and I think a refocusing of the benefits system so it helps those genuinely in need without providing an excuse not to work is probably long overdue. The compromise that has clearly been reached on Capital Gains Tax is also fair without being punitive and a bank levy is more than fair, given the help the financial services sector has recieved over the past 18 months. However I’ve got reasonably serious reservations about the rise in VAT – whilst this may raise significant funds I can’t help but think this will punish anyone on low and medium incomes, despite the retention of exemptions for food and children’s clothing. The fact that such a tax rise has come about under a coalition government where both parties are diametrically opposed to tax rises in general is perhaps a sign of how bad things are. And despite the howls coming from the Labour benches I cannot help but think that we would have heard exactly the same thing from Alistair Darling today had the spectre of a “rainbow coalition” ever have managed to propel itself into being.
On a slightly separate note, I was also pleasantly surprised by George Osborne not appearing like a complete incompetent at the despatch box – I know he can’t help his face but he’s never looked like someone you could trust with your money. However he gave a good performance today, delivering a budget which has clearly drawn on both the Conservative policies developed in opposition and the Liberal Democrat’s genuinely interesting thoughts on income tax and rebalancing wealth. I’m not sure you could ever argue this budget is truly fair – we’re all suffering disproportionately from the prolifigacy of both the banks and the Labour years in general – but I genuinely think that the Coalition has at least tried to think and act in a way that is more progressive and fairer than perhaps a majority Conservative government would have been able to.
All we can do now is wait and see – the early signs from the markets are promising, the Bank of England seems to support the course of action laid out by this budget and investors seem reassured by the new Government’s determination to balance the books. But this is going to be the true test of the Coalition – if its ideals of a smaller state, a revitalised private sector and swift action on the structural deficit are the correct ones then in a couple of years time we will all be able to look around and say “well that was tough but we’ve survived”.
The alternative, quite frankly, doesn’t bear thinking about.