I’m sure many of you will be aware of the budget and already digested multiple takes about it. I haven’t bothered writing about Conservative budgets in the recent past as it would’ve been a relentlessly negative critique. I thought I’d cover off this one as there’s a sense that this Labour government is getting into its stride and is trying harder to break with the past. This year’s budget is a mixed bag, which makes it genuinely interesting.
From a Lib Dems perspective, the costed tax rises at £26 Billion are remarkably similar to the £27 Billion tax increases proposed in the Lib Dems manifesto last year – absolutely astounding that the mainstream media hasn’t picked up on this. This would suggest that the macro management of the economy is broadly going in the direction we would want, although the methods aren’t necessarily of our choosing (insert gag about Morecambe & Wise and André Previn here).
I won’t cover off every measure, that wouldn’t make for an easily digested read, but here’s my thoughts on some of the key measures announced yesterday.
The Good:
Scrapping the two-child benefit cap: This constitutes a campaigning win for the Lib Dems, and from a political perspective is a rare example of Starmer and Reeves listening to activists within the Labour movement. Scrapping the cap lifts 450,000 children out of poverty and comes at a time when the birth rate is a a 100 year low, way below the natural replacement rate. This is the sort of redistribution you’d hope to see from Labour
Introducing the council tax surcharge: It’s long been argued that the structure of Council Tax is inherently unfair, that’s finally been backed up with policy – the surcharge of £2,500 on properties over £2 million and £7,500 on properties over £5 million is the biggest change to Council Tax since 1991 and is welcome IF it means councils will get more money overall
Introducing the local tourist tax: This is a popular and widespread tax across Europe that we’re only just catching up with. A few people have scoffed at this but if combined with greater Council Tax raising powers it makes the UK slightly less centralised in terms of revenue raising – 97% of all tax goes directly to HM Treasury. As a Lib Dem I welcome more localisation and more discretion to tax and spend at a regional level
Increasing the online gaming + gambling taxes: Another measure widely campaigned for. Online gambling has low overheads, is very lucrative but causes huge social problems for problem gamblers. New measures see Remote Gaming duty increase from 21% to 40% and online betting duty increase from 15% to 25%. My Methodist ancestors would approve
Freezing rail fares: The financial environment for travel has tied rail up in knots this century – there have been virtually no rises in fuel duty since the protests in 2000, by contrast regulated fares have risen above inflation year after year. Train travel is back to near pre-pandemic levels of usage, it’s great see it get a boost with a fares freeze, even though they’re still some of the highest fares per mile in the world
Increasing the minimum wage: The minimum wage is set to increase by 50p an hour to £12.71 an hour for the over 21s. It certainly has come a long way since being launched in 1999 at £3.60 an hour. Interestingly enough it’s really kicked on since 2020 when it was just £8.72. Through 25 years of real world outcomes we know that the CBI was spectacularly wrong in saying the MW would cause a significant uplift in unemployment, and by its very existence it’s doing what right wingers want – which is to make work pay (except they’d mainly reduce benefits to make that happen)
The Average:
Freezing income tax thresholds: While everyone understands that public finances are bad, and tax rises have to come somewhere, freezing tax thresholds is a choice. The Chancellor could very easily introduce a new top rate (or wealth tax) or luxury lifestyle taxes (adding to the private jet tax introduced last year), instead of hitting people on average incomes
Charging EVs pay-per-mile tax: Road charging has been talked about for decades. At some point all cars will have GPS trackers that will calculate your usage. Certainly it will be a fiscal necessity to tax EVs because fuel duty is a major part of the overall tax take. The devil’s in the detail though – how usage is monitored, and the initial rate – 3p per mile – we’ll have to wait and see how it affects the EV sector where the life cycle cost of an EV has just dipped below that of ICE cars for the first time
Restructuring of business rates: The rise in unemployment since Labour took office has happened almost exclusively in the hospitality sector. The government recognises it has to do something about this. The restructuring of business rates, with a higher change set on properties valued over £500,000 would appear too low to favour small independent businesses that much. The government wants to hit large corporate warehouses more, it probably needs bigger changes to favour the independent foodservice and pub sectors
Continuing the pensions triple-lock: As time goes by there’s a growing debate about this coalition-era policy which has lifted millions of pensioners out of poverty. Recently that debate has intensified – for many years the state pension has gone up by more than universal credit, sick pay, holiday pay, PIP or the carer’s allowance. Will we ever see a rebalancing towards working-age welfare?
The Bad:
Support for new nuclear, large and small: Britain was the first country to have a civil nuclear power programme, however throughout history we’ve been lucky to have significant reserves of all forms of fossil fuels and in the 21st century we can also tap into all eight major forms of renewable power – hydro, wave, tidal, wind, solar, biomass, biogas and geothermal. This is pretty remarkable considering we’re a small island. The UK could very easily go 100% renewable and become a major exporter of electricity to boot. New nuclear – large or small – takes too long to build, is more costly than renewables and still creates hazardous waste that we can’t agree how to store. Fundamentally flawed, and a criminal waste of money when finances are so bad
Cutting the Digital Services Tax: The government recently published a review into this tax where it acknowledged that it had pulled in a lot more revenue than first estimated and that revenue stream was increasing because the digital economy was growing so fast. The Lib Dems have called for an increase in DST, initial reports that it could be cut due to pressure by Trump on behalf of US tech bros, are disappointing to say the least
Derisory new support for playgrounds and libraries: New Labour renewed most of Britain’s social infrastructure comprehensively – a lack of new building programmes for schools, hospitals, leisure centres, council houses is a big failing and that’s encapsulated in the pitiful amounts of money allocated for new school playgrounds and libraries: £18 million for playgrounds and £10 million for primary school libraries. These numbers are so small they’re barely worth mentioning in a national policy speech of any kind
Renewed commitment to the Digital ID: This is simply a terrible idea that Labour just can’t shake. ID cards were not in Labour’s manifesto, nobody asked for them, and will always be problematic for those at the margins of society. At a time when the government can’t afford to fund the Bakerloo Line Extension or build any Olympic sized swimming pools, it’s set to waste billions on a large poorly thought out IT project just like it did on the NHS digital patient records scheme in the 2000s. Will Labour ever listen and learn from its own past mistakes?
