The Chancellor is developing an unenviable track record of Budget faux pas. Yet again he has stumbled in the search for acceptable ways to pay for tax cuts.
Time was, when a Chancellor facing the scale of deterioration in the public finances that was unveiled on Wednesday, that he would have turned to the nation and intoned “our long-term ambition remains to raise tax thresholds and increase the point at which people start paying tax at the higher rate. But the worsening economic outlook since the Autumn Statement means I cannot yet afford to do that.”
At a stroke he would have not needed to rely on cuts to personal independence payments to pay for his tax reductions.
Or he could have taken another tack. “Over the past two years motorists have benefited from a dramatic fall in the price they pay at the pump for petrol. While prices were rising, freezing fuel duty was the right thing to do. But with prices at their lowest levels since XX now it is reasonable to add XX to the price of a litre of petrol. This enables me to start meeting our manifesto commitments to reduce tax paid on incomes .... ”. For good measure he could have even added in a bonus Paris climate change mention.
But he chose to do neither of these measures, neither politically easy, but looking better in comparison by the minute as the row over PIPs escalates with the policy being downgraded from firm announcement on Friday, to scored Budget measure on Wednesday to something being consulted on by 10.55 on Thursday evening.
The Chancellor has been there before. In 2012 he dipped into the Treasury’s big box of tax anomalies to find ways to pay for the tax threshold hike the Liberal Democrats demanded as their price for allowing a top rate tax cut. The result as an “omnishambles” budget.
In July 2015, he used a £ 4bn cut in tax credits to make his numbers add up. His autumn reversal forced him to miss his own “welfare cap”.
We have long argued that lack of internal challenge leads to bad policy making. The Treasury is particularly vulnerable. Budget “secrecy” means only the Chancellor and (sometimes) No.10 have an overview of the whole Budget context – the ups and the downs. And in Budgets, context matters – because context determines whether measures appear fair or unfair.
When the PIP cuts were unveiled in a Friday written statement by a DWP junior Minister, there were a few squawks from disability lobbyists. They became politically toxic when set alongside the Chancellor’s other Budget choices. And if course, this is not a unique Osborne phenomenon – the same applied when Gordon Brown decided to abolish the 10p tax rate to pay for a general income tax cut.
The big decision in the Treasury used to be “the Chancellor’s budget judgement.” That used to mean whether there was to be a net hike or net giveaway. Increasingly though the Chancellor’s Budget judgements – of what mix of measures will be politically sustainable – look questionable. As I have argued before, that points to the need to open up the process so the Chancellor can get some help to see the bigger picture.