The end of austerity - but not yet?
The Chancellor’s budget has a clear theme of extra spending. I was waiting until the end for the hammer-blow of more taxation somewhere to make up for all the goodies but it never came. As it happens, I believe his approach is the right thing to do when gilt yields are so low, but I do note from the Treasury’s detailed documents that the fiscal loosening doesn’t really kick in till 2019-20 and there’s actually a small fiscal tightening compared to March 2017’s forecasts in the next two years. It will all be very convenient if this Government lasts the full five years but could backfire if it falls after, say, two.
I’d applaud a number of the micro measures the Chancellor is proposing: to allow councils to charge 100% premium on the council tax for unoccupied properties and to remove the transitional arrangements for taxing carried interest (designed to ensure that tax is paid on the full economic benefit of a partnership’s activities) immediately, to take two tiny examples. As always, however, the Budget is long on headlines and I am cynical about how much of them will really make it into legislation, particularly given the weakness of this Government.
I will highlight a couple of the details I found interesting: he is making £1bn available for local authorities to finance local infrastructure at a rate of Gilts +60bps. I wish he would make more use of this - effectively allowing them to borrow. On the other hand, there is a mention of a new long term strategy for the asset management industry, ensuring it continues to ‘thrive and deliver the best possible outcome for investors and the UK economy.’ That could be taken as code for making them pay for some of the infrastructure improvements he wants to bring about.
All in all, I would give the Budget a thumbs-up, though with the caveat that all these detailed measures may never happen. Ending austerity must be the right thing to do, with the BREXIT risk looming, and the Chancellor was absolutely right to talk up Britain’s strengths rather than falling prey to the gloom everywhere.