PHILIP Hammond has been scraping the Budget barrel since the summer to try and fill his red box with some good news. In the week of Halloween, however, the Chancellor’s budget is more of a trick than a treat.
The public have been given nothing more than a sticking plaster Budget that fails to compensate the country for the huge financial Brexit black hole that the Conservatives are set on delivering.
Indeed, Theresa May’s assertion that people will see an end to austerity has left many wondering what her pumpkin juice has been spiked with.
Sadly, for the millions of people feeling unsure of their futures, this Budget does nothing to increase the opportunities coming their way. Instead they will still see bills piling up, living costs spiralling and a housing crisis so bad that it is segregating our society.
The Budget doesn’t even begin to signal an end to austerity. Next year three-quarters of the planned increase in public spending is on health and social care, a figure which rises to 90 per cent in five years’ time.
While we desperately need this injection of cash, it does nothing to improve people’s personal financial positions. The increase in the personal income tax allowance continues a Lib Dem policy, but by extending it to upper rate tax bands, it ensures that the main winners are those who are already relatively well-off.
The Budget simply ducks the fundamental challenges we face as a society. The tax system remains broken. It penalises business investment while our high streets suffer the worst year on record, with in-store sales falling and hundreds of thousands of jobs lost. In that context, the business relief announced in the Budget is nothing more than short-term hand-to-mouth support when fundamental change is needed.
Liberal Democrats would create a level playing field between the high street and online retailers. That means scrapping the broken business rates system and replacing it with a tax on land values that would boost investment and cut taxes for businesses in nine out of ten English local authorities.
It is also the tax system where this Government is most misleading. The Conservatives spent the days leading up to the Budget talking of ending austerity, but they refuse to have a mature conversation about what that means.
Liberal Democrats are honest that taxes will have to increase if we are to have the world class public services which people crave. We know for better public services, we need to raise more money. According to the IFS, an increase in taxes worth just one per cent of GDP – or around £20bn – would allow a real “end to austerity”.
So, among other measures, Liberal Democrats would tax work and wealth in the same way – by taxing capital gains and dividends through the income tax system, aligning rates and abolishing most reliefs.
As the Budget comes under further scrutiny, its shortcomings become glaringly obvious. On mental health, for example, the Chancellor’s £2bn investment falls well short of the amount that experts say is needed to do deliver vital improvements to services.
Despite a small amount of additional cash, Universal Credit’s serious design flaws, which are hurting millions of vulnerable people, were not addressed and we can expect the food banks to remain oversubscribed.
On the environment, the Chancellor has proven the Tories are full of hot air by dumping the ‘latte levy’. And not a single penny has been dedicated to tackling the sharp rise of serious violence on our streets and the worsening crisis in our prisons. I also know that millions of rail commuters, already let down by poor services, will be furious that Government has denied pleas for an immediate fare freeze.
The biggest problem for the Government remains Brexit. May and Hammond can’t agree what a no-deal Brexit will mean for the Budget. Hammond thinks it will require a whole new, emergency Budget while May has attempted to save face and insist the Budget will stand regardless. Either they don’t know the answer, which makes them incompetent, or they do and are choosing to mislead the public.
The reality, as spelled out by the OBR, is that Brexit uncertainty is already weakening public finances by £15bn annually. No matter what deal is reached, any Brexit will make us poorer.
Lord Newby is leader of the Liberal Democrats in the House of Lords. He grew up in Lofthouse.