Perhaps you didn’t notice, but we had a Budget this week. In an exciting break with tradition, it was delivered by the prime minister rather than the chancellor, but a Budget it most certainly was. When the chancellor stands up to deliver his own version next month, he will be merely going through the motions, because there is so little new to say beyond filling in the ugly details. Whatever Rishi Sunak really thinks about his boss’s pre-emptive strike, to take the state’s share of spending to a 70-year high, this is the clearest triumph of politics over economics we are ever likely to see.
There is no logic in raising National Insurance contributions rather than income tax. The political calculation is that we will think that half of the 2.5 per cent increase will be paid by our employer, so it somehow doesn’t count as a tax on income. This is clearly nonsense. In addition, NI is still associated in the public mind with welfare in old age, so those puzzling over why their take-home pay has been cut when taxes have not been raised may be bamboozled rather than resentful. Their confusion is understandable.
Rather than take an opportunity to make the tax system comprehensible to ordinary mortals, the introduction of a specific levy for a specific purpose makes it even more of a nerdy accountant’s delight. Besides, by the time we are asked to vote again, some of this week’s thumping tax rises will have been reduced, allowing our chameleon of a prime minister to claim, once again, to be at the head of a party committed to low taxation. The sad fact is that, collectively, we are likely to believe it.
No commentator defended the rise in NI over the more honest rise in income tax, and the surprise rise in taxes on dividends did little to disguise the blatant attack on younger, lower-paid workers to the benefit of the well-heeled retired. Once again, the government has failed to challenge the belief that the rise in the value of your house is somehow the result of your efforts, thus giving you the right to pass it on to your ungrateful offspring (who will sell it as soon as you die).
The biggest wedge is the divide between the older, Tory-voting homeowners and the aspiring next generation. Already widened by government policies like help-to-buy builders’ yachts and a stamp duty holiday which merely accelerated rising property prices, these tax rises open it further.
Ordinary Budgets come with a proper debate and a Finance Bill which is picked over by both houses of parliament. This one was not seriously debated, being bounced through the day after we first saw an outline of the contents, just ahead of an expected reshuffle of government posts. No aspiring Conservative politician, however disgusted she may be at belonging to a party whose leader believes that more state spending is the answer to almost everything, dare risk being caught in the wrong lobby.
This was truly a dramatic re-writing of the fiscal rules. It conforms with the emerging Johnson doctrine of “policy is what I say it is today”. It is hard to imagine that a Corbyn administration would have dared to impose more punitive taxes, including the previous increases, than we have now. Boris Johnson may not be explicitly punishing the wicked capitalists who make the economy work, but the effect is the same.
I weep for you,’ the Walrus said:
I deeply sympathize.’
With sobs and tears he sorted out
Those of the largest size,
Holding his pocket-handkerchief
Before his streaming eyes.
A bottomless pit
There is a popular belief that if only the National Health Service was given a big enough dollop of cash, the queues would melt away, staff would stop complaining about overwork, and that running it would be cheaper in future. This is a myth. The NHS is a bottomless pit, capable of absorbing more money than any administration can ever throw at it.
Covid has made things worse, but the figures from the Institute for Fiscal Studies are as scary as the disease. A decade of “Tory cuts” has seen health and social care cost rise from 32 per cent of day-to-day state spending to 44 per cent after the latest injection. For the last 40 years, no matter how much more was allocated to the NHS in the annual spending review, the actual growth was nearly always greater. Reforms come and go almost as fast as health secretaries, making no measurable impact on outcomes, while queues for treatment get longer.
This malaise is a common feature for monopoly suppliers. The customer is reduced to the role of supplicant, grateful for what he can get when he finally arrives at the front of the queue. Think BT in the days when you had to wait to get a telephone, or to pay a bribe for a weekend engineer. The water companies are demonstrations that private sector monopolies are just as bad, enriching their owners at the expense of the environment.
Introducing competition in health is very difficult, because as individuals we need healthcare most just when we are least able to afford it, but the current monolithic structure guarantees an insatiable demand for more, regardless of how much we throw at the NHS. No other developed country has followed the UK’s example. Looking at where we are, that’s no surprise.
Name that trust
There are few things quite as irritating to the long-term holder of a share than a change of name. Two changes in a decade means that the holder is unsure whether the share certificate is worthless or is actually in some soaraway stock he’s never heard of.
Tracing is a lot easier than it used to be, but it’s still a pain. It’s made worse when the name change produces something faintly ridiculous. So it’s goodbye Standard Life UK Smaller Companies Trust, and hello abrdn UK Smaller Companies Growth Trust, which not only incorporates the risible new name for Standard Life Aberdeen, but slips an extra aspiration into the title.
A name change was needed following the sale of the Standard Life name to Phoenix, as the old life assurance company is sent to the abattoir, but nobody seriously expects the abrdn name to survive its relentless teasing for long.
Companies generally change names to draw a veil over past misdemeanors; this week we saw some sparkling results from Vistry. Who they? Please don’t remember them as Bovis Homes, builder of the shoddiest houses in the industry. All behind us now, says the new management, but stuffing the customers appears to have done little damage to the share price, which has returned 14 per cent compound over the last decade, according to Morningstar. Perhaps that’s a useful feature of housebuilding: you don’t expect any repeat business, so why care?