James Kirkup is Director of the Social Market Foundation.
Dear Prime Minister,
I hope you’ll forgive some uninvited advice about what should be in the Budget and how you could, just, use this last opportunity to steer your Government back to the sensible centre ground where most voters and the national interest can be found.
As you know, the Social Market Foundation isn’t part of the Conservative family, or tied to any party. We’re centrists, our advice and ideas on offer anyone who wants to put common sense ahead of party colours or ideology.
So these ideas, I hope, are ones that lots of people in politics could take up and use. But you’re in office today, so you’ve – still, just – got the best chance to actually make things things happen. If you do, you could make Britain a fairer, richer place, and maybe change the story of your premiership.
Let’s start with tax. You need to end the fixation on increasing the starting threshold for income tax to £12,500. This used to be a sensible policy, but now too much of the benefit is going to people who, while not rich, are not poor either.
However much money the Treasury was earmarking for the next increase in the threshold (it’s generally about £2 billion for each annual hike) should instead go mainly into Universal Credit. Specifically, the Work Allowance: working claimants should be able to keep more of their benefits.
Simply, the working poor need a better deal. These are people who, in the terms of political cliché, are doing the right thing, working hard for low and often falling wages. Yes, they’re claiming benefits, but that isn’t the sin that George Osborne liked to suggest. Osborne is gone; time to end his war on welfare claimants too.
You should do this because it’s right and fair, but if you need a further incentive: it would confound Jeremy Corbyn. He’s getting a free pass on welfare and the working poor: people just assume he has policies to help them. In fact, he’s triangulating, pitching to your base: free tuition for the middle class kids who still dominate higher education, free winter fuel payments for wealthy pensions, and a staunch defence of older home-owners against your (perfectly sensible and progressive) “dementia tax”.
Why not take the fight to him, march your troops onto his ground? A Tory Government that truly dedicated itself to helping the working poor would give Corbyn a real fight. And instead of taking part in his auction of promises on higher education, why not do much better for the 51 per cent of kids who don’t go to university? They matter too, though you wouldn’t know it from most of Britain’s political debate.
Instead of just reviewing HE funding and fees, you should look at all funding for post-18 education: technical education and further education deserve a much, much better deal, and with the right support could do much more to deliver the high-skill workforce we need to raise productivity and thus wages. While we’re on the subject, help the Open University, dying on its feet because of daft bureaucracy that stops part-time students getting funding: you should encourage life-long learning, not make it harder.
You’ve said you want to defend the market from Corbynism. To do that, you need to realise why some people think he’s got a point. You can’t expect people to support an economic order in which they quite literally have no stake. You need to make it easier for more people to own stuff. That doesn’t just mean houses either, though I’ll come to housing a moment.
Companies should get new tax breaks to encourage them to offer share options to workers. If a company believes share options are a useful tool for motivating the CEO, the same terms should be offered to all employees. Stop handing money to rich savers: no more increases in the ISA limit. It’s risen from £11,520 in 2013/14 to £20,000 in 2017/18. But 75 per cent of people saving in Isas invest less than the maximum, so increases in the upper limit only benefit the very richest who can afford to save the full amount. Meanwhile, 14.4 million working-age adults are saving nothing at all. Some of your colleagues are losing their jobs right now, but they’ll cope financially. Can you say the same for the 16 million Brits who have less than £100 in savings?
Stop spending money raising the ISA limits and give it to youngsters. From 2020, every 15-year-old should be given £1,500 to invest and hold until they turn 18. Maybe some of your colleagues would be fret about appearing to emulate Gordon Brown’s baby-bonds. You can comfort them by explaining this is about building the asset-owning democracy once described by Noel Skelton, an old Scottish Conservative.
Talking of older people with valuable assets, I think you should have another look at inheritance taxes: they should be higher. I know that’s unthinkable to many Tories, but it shouldn’t be. If you are, as you like to claim, the party of work and enterprise, why are you rewarding people who receive huge windfalls simply by accident of birth? No-one earns their parents’ house, and people who inherit valuable estates are already likely to well-paid owner-occupiers.
They should pay some more tax on their windfall – money you could use to make life a bit easier for people further down the ladder. You inherited from Osborne a real-terms cut in local housing allowance (housing benefit for people in rented private sector homes) which could make many of them homeless. Surely they need your help more than people who stand to inherit a house they did nothing to earn?
Which brings us to housing. The politics here are simple. It’s time to go big or go home. You’ve bottled previous opportunities to launch a really serious building programme; you might not get another. So your message to the private sector should be this: you build them, or we will.
The good news is that some of this stuff doesn’t need legislation. The Neighbourhood Planning Act 2017 allows ministers to create new development corporations that can purchase land and start building. They can also designate areas as “new towns”. It’s time to start using those powers. The Budget should give those new development corporations the firepower to deliver by announcing that yes, the Government will indeed borrow more than it had previously intended, and use the money to build those houses and create those towns.
While we’re talking about borrowing, why not just admit that the commitment to a budget surplus is now little more than a bad joke? Osborne (yes him again: do you really want to live in his shadow?) first promised a surplus by 2015. Now that date is somewhere after 2025. The markets know it’s empty promise but they’re lending to you anyway: “despite Brexit”, despite your Government’s fragility, despite everything, gilt yields are low.
Ditch the surplus target and commit to a primary surplus: HMG will raise more in tax than it spends on services and programmes – excluding debt interest payments. Yes, that will mean more borrowing, but it will also give you more money – and one last chance to demonstrate, as you once said you would, the good that government can do.
Director of the Social Market Foundation