Published: 4:15 PM, Mar 27, 2022
Life used to be simpler when we had one budget a year, now we have effectively two. Or at least the expectation of two budgets. Having a spring statement, or mini budget along with a full budget later in the year may give the impression of a government that can react more quickly than one that simply thinks of finances once a year, but then the chancellor must actually do more stuff, hard when you dont want to do anything at all.
Promising to take a penny of a tax band 2 years from now is reason enough just to cancel the whole thing. It's not certain he will be in the job then and we now know life comes are you pretty fast in 2 years, we've had a pandemic and made a pretty decent attempt at kicking off WW3.
We know that we have the biggest tax take in 80 years and if we are announcing minimal tax reductions with a 2 year introduction time then I'm fairly sure we will never reduce taxation.
Ultimately, we know as economists that high taxation sand high spending stunts growth, we take money from people who would have otherwise gone and spent it, giving financial opportunity to others.
We will never willing be able to reduce government spending while we have a services that suck the life out of the economy with poor performance and inefficient resource allocation. We have ultimately run out of economic road, no longer able to plan and implement budgets on a grand scale. We live in an economic cage of our own making.
In 1981 faced with 15% inflation and dismal productivity from manufacturing Howe increased taxation, he increased bands, increased VAT, he increased fuel duty. But he also cut spending.
364 economists signed a letter to the Times saying it would be a disaster and threatened the country's social and economic stability. What happened next was one of the most prolonged economic rises seen by any modern county.
Yet now the media screams about cost of living and the bravery is not there to make the big calls. We nudge pennies in the pound, or at least say we will nudge them in 2 years.
The public exists at the moment unaware of the concept of stagflation, give it 6 months and people will take from their sleep screaming the word. We will have to take the full punishment that it will bring, knowing that we have a government that cannot go against the grain and push us into a painful budget for greater success down the road.