160317 Budget giveaways and takeaways
  • An update. A particularly brief To The Point post today because a) I’m tired of fashioning charts from the Office for Budget Responsibility’s spreadsheets, and b) the chart above simply updates one that I made last year. As I explained it back then: “It shows the fiscal effects of [George Osborne’s] policies for the five years after they were first announced. The blue bars represent things that contribute to the cause of fiscal consolidation, these being spending cuts and tax hikes. The red bars represent the spending hikes and tax cuts that detract from it.”
  • Neutral no more. My point in that original post was that Osborne tends to make his Budgets revenue neutral: in eight of the first 12 the blue bars and red bars balanced each other out. But that has changed since the election. Yesterday’s Budget represented a net takeaway of £4.2 billion, with spending cuts and tax rises to the sum of £13.8 billion, against spending rises and tax cuts of £9.6 billion. Last year’s Autumn Statement was a net takeaway of £6.4 billion. The June Budget took to the tune of £18.9 billion. Which is to say, the Chancellor has become all take and little give.
  • What the chart doesn’t show… Or has he? It should be added that these numbers are just for the everyday tax and spending policies that Osborne announces on Budget days; they do not include the overall framework for departmental spending that is decided in Spending Reviews. This means that Osborne’s largesse of last November – when he added around £30 billion to departmental expenditure limits, compared to previous plans – isn’t shown.
  • …and what it does. But this doesn’t make the chart redundant. For starters, it describes the policies that we’re more likely to notice – from sugar taxes to fuel duty freezes. For seconds, it might suggest something about Osborne’s mindset. This is the first time that he has delivered three Taking Budgets in a row. If he delivers a fourth, a fifth, a sixth, we’ll know that he’s really worried about the state of the public finances. And perhaps we’ll know, too, that he has come to regret the laxity of his last Spending Review.