Contribution
When we cut through it all, the central choices in this Budget were to increase the fiscal headroom and spend more on welfare, and to pay for it via an income tax threshold freeze. I am not sure why Labour Members are reluctant to describe it in that way, because it does contain some legitimate political choices.
I welcome the increase in fiscal headroom. It was creating far too much uncertainty in our economy. I pointed that out to the Chancellor when she was before the Treasury Committee in the spring, and I am glad that the Treasury has now corrected that mistake. I welcome the abolition of the two-child benefit cap, which the Liberal Democrats voted for—I think it was one of our very first votes in this Parliament. The Chancellor explained over the weekend that she was able to afford it because of taxes on the gambling industry, but that industry existed last year, so she could have done it then.
My issue is not with those measures but with how they are to be paid for. There are others that could have paid their fair share, the first of which is the banks, which have been completely let off the hook. They have made unforecasted windfall profits over the last few years, particularly because of the quantitative tightening programme and the interest rates. Many, including the Liberal Democrats, have argued that we should tax those windfall profits and put them to good use, but it seems like the banking industry’s lobbying efforts have paid off.
When comparing the top 10% with the bottom 10%, the Budget appears to be progressive, but a deeper analysis shows that the top 0.1% have been let off the hook, particularly with measures such as the dividend rates, where the additional rate has been left completely untouched, and the cap that has been introduced for non-dom contributions in inheritance tax. While we are on the non-dom regime, I know that some Members have said that all the non-doms have fled the country, but I point them to page 82 of the OBR’s Blue Book, which says that the estimated revenue from that regime will remain broadly unchanged.
Really, all this discussion is a dead end. We are just talking about redistribution. What is really important is what is not in the Budget. As the Federation of Small Businesses puts it, we must get out of this doom loop of tax measures to balance the books. The Budget is far too short-term in its thinking, and we need more long-term vision. Last summer the Chancellor seemed to get this. She promised that her focus would be on growth, yet her first Budget hit businesses with the rise in national insurance contributions, which has hit employment and set a mood of doom and gloom in our economy.
We had a zero-based spending review from which no significant changes to spending emerged. I cannot list a single area of Government spending that changed fundamentally after that review. We have seen tax measures that are piecemeal, and no significant efforts at reform. Economists from left and right all agree that the UK tax system is in a mess. Property taxation and the way that we treat different types of income are in desperate need of reform, and we have not seen that from the Government.
Then, of course, there is the elephant in the room, which only the Liberal Democrats are willing to address: our relationship with Europe. The strategy with Europe is to have tiny negotiations over small measures. We need a proper customs union. That will deliver the growth that our economy needs.
Ultimately, this Government lack the ambition to rewire our economy. We need to stop capital pouring overseas by changing the incentives to invest in this country. We need to look at corporate governance and make sure that it serves the British economy well. We need to look at devolving real economic power, not a reorganisation of local government, and we need to stop triangulating between the people who think net zero is a good or bad thing and ensure that Britain can be a green superpower in the 21st century.
The Budget gets us through another year, but it does not excite me for the future. The country was promised change—where is it?