This week the UK government began sending letters to income taxpayers that suggest how the state spends its citizens’ money. For example, someone paying £10,000 in direct taxes will be told that they are “contributing” £1,900 to public spending on health, which accounts for 19 per cent of state expenditure; £100 to overseas aid, which makes up 1 per cent of spending, and so on (see picture). George Osborne says that by giving people bespoke descriptions of how their contributions equate to spending by various parts of the state, he is increasing transparency.
On the contrary, the chancellor is being opaque. What is pitched as an exercise in numerical transparency is also a lesson in how language confuses public policy.
A politician wants to vote for the decriminalisation of marijuana. But she knows that opinion polls suggest that her electorate is against easing access to weed. Although she cares about the issue, she also cares about being re-elected. What should she do?
Should she: 1) Heed the pollsters and vote against decriminalisation; 2) Appeal to her electorate, citing evidence and appealing to their values; or 3) Just vote for it, since her electorate will support her anyway?
I think most political advisers would suggest the first or the second option. But a fascinating new experiment by David E. Broockman and Daniel M. Butler suggests politicians have broad latitude to shape public opinion without any electoral cost. The third option – vote for decriminalisation – may be more viable than it appears. The research implies that politicians could worry less about what the public thinks. Read more
Not a single track has been laid for High Speed 2 and yet George Osborne is already talking about “High Speed 3″, an extension of the project to link Manchester and Leeds. In a speech on Monday in Manchester, the chancellor spoke of his support for a “Northern powerhouse”: a conurbation to rival London, connected by transport links such as HS3, and governed by independent mayors. It is an excellent idea.
Although there will be a temptation to see Mr Osborne’s speech as simply another part of the HS2 debate, that would be simplistic. It represents the coming together of different conceptions of the future for British cities – and as ever political necessities.
The pension reforms announced at the Budget have jolted Westminster from its pre-election ennui. Conservatives and Liberal Democrats are cock-a-hoop. But “It has been a disorienting few days for the opposition”, as Rafael Behr writes.
This is what can happen when a new policy is as uncompromisingly ideological as the change to annuities. Most of the objectives for government policy are not inherently divisive; parties tend to disagree over means rather than ends. In this case, however, the chancellor succeeded in making whether one supports or opposes the idea of voluntary annuities a case study in moral discombobulation. Read more
I like it when one chart demolishes two myths.
The graph below from Citi’s Michael Saunders shows how the coalition government has consistently delayed its fiscal tightening.
This suggests how the chancellor has been less dogged in pursuit of “plan A” than often believed. If you were being kind you could say it was a sign of pragmatism. But it also indicates how, contrary to the Budget rhetoric about responsibility, George Osborne is funding some tax cuts with temporary revenue-raisers and unspecified spending cuts. Ironically, it is the sort of financial short-termism depicted above that worries the morte thoughtful critics of the chancellor’s pensions changes. Read more
On Thursday, the Institute for Fiscal Studies delivered its verdict on the Budget. If you prefer prose, I recommend director Paul Johnson’s lucid explanation. But for pithiness, you can’t beat this slide from Gemma Tetlow’s presentation:
For all the chancellor’s talk of investing for the long-term, the evidence from the IFS suggests that he is doing the opposite: funding permanent tax cuts through temporary schemes and to-be-determined spending cuts. Read more
Wednesday is the UK’s Budget day. For those who enjoyed exams when they were younger, this is a glorious occasion; the chancellor announces lots of new information, including some things have that haven’t been leaked, and he prompts a scramble to understand what it means. Normal people and the rest of the world find the scene baffling. But there is a good chance you will be called upon to say something intelligent about this unintelligible event – and that this will happen before any typically-brained human being will have been able to analyse the figures.
Here are seven things that you can say in any conversation about the Budget. This bluffer’s guide has the advantage that you don’t have to watch the event.
1. “Any announcement worth less than £10bn is not worth discussing.” No-one wants to seem without perspective or worse, vision. And vision means the big picture and the big picture means big numbers Read more
One of the arguments made by proponents of a higher minimum wage or a “living wage” is that it would raise more revenue for the Exchequer. Higher wages would, they argue, mean higher income tax and National Insurance receipts, and lower spending on tax credits; the state would pick up less of the employer’s wage bill. It is an argument that encourages some fiscal conservatives to support a wage hike.
But the government disagrees. Read more
Alex Salmond’s speech on Monday was billed as a response to George Osborne’s rejection last week of a formal monetary union between an independent Scotland and the rest of the UK. But this formed no more than a quarter of the first minister’s speech. Mr Salmond was keener on rejecting what Mr Osborne said in 2010 (announce cuts to public sector spending) and what David Cameron said in 2013 (promise a referendum on UK membership of the EU), than what they said in 2014. Read more
In a lecture last year, Sir Nicholas Macpherson, HM Treasury permanent secretary and perhaps the most powerful old Etonian in Britain, explained the “Origins of Treasury control”. Sir Nicholas said that Treasury’s power came from three sources: conflict, links to Parliament and being able to outwit the rest of officialdom. All three were in evidence this morning, as George Osborne cited his top official’s advice and told Scots they can have independence or the pound – but not both. Read more
On Saturday, Ed Balls announced that a Labour government would bring back the 50 per cent tax rate on incomes over £150,000. His main justification is that it would raise more revenue than government estimates suggest. Is the shadow chancellor correct? Read more
On Thursday evening, George Osborne said that “I think Britain can afford a higher minimum wage”. Reports suggest that the chancellor would like to see the rate paid to adults over 21 years-old rise to £7 per hour from £6.31 per hour, a jump that could benefit more than 3m employees, at least according to this estimate. Read more
This morning, the chancellor announced that there would be a further £25bn of spending cuts by 2017-18, and that in order to not increase the pace of current departmental spending cuts, a further £12bn would have to be eliminated from the “welfare” budget.
The Venn diagram from Flip Chart Fairy Tales summarises the choice facing Mr Osborne, and includes an apocalyptic assumption about the collapse of some public services. At the Autumn Statement, by targeting a return to surplus in 2018-19, the chancellor implicitly committed himself to finding about an additional £25bn in savings or revenue. Read more
These charts show public sector net borrowing excluding the accounting treatments of Royal Mail and asset purchase transfers. Revised growth forecasts mean that the deficit is projected to fall sooner than previously expected – and there might be a surplus in 2019.
These changes provided the backdrop George Osborne’s Autumn Statement, a confident defence of his economic strategy in the past, present and – crucially – future. The latter included arguably the most clear-eyed articulation of supply-side reforms in recent memory. But the frame was the improvements in the economy relative to March. In this sense, seven months have made a huge difference. Read more
On Wednesday morning, the National Audit Office published a report on government efforts to increase UK exports. Under the coalition, foreign policy has acquired a greater emphasis on trade and investment. The government has two targets for 2020: to double exports to £1tn from £500bn in 2012, and to have 100,000 more companies exporting than was the case in 2011. Here is how the first one is going. Read more
If you alight at Hackney Central railway station, there is a good chance you will slope on to the platform amid one of London’s glorious human hodgepodges. There will be first and second-generation migrants, white working-class people, scraggly bearded-hipsters, advance armies of gentrifying families – and dozens of Chinese shoppers. Rather than pay high prices in central zone one, this latter group – middle rather than upper-class Chinese tourists – have come east for the retail outlets of Burberry, Pringle and Aquascutum that are nestled outside of the London Overground station. Following the liberalisation of the UK’s rules for tourist visas, there will probably be more Oyster Card adventurers. Read more
In his speech today, George Osborne made two arguments in defence of his economic policy. First, that there was no an alternative. Second, that there is no alternative.
In the past few weeks the opposition’s case against the chancellor has shifted emphasis from the existence of a recovery to its nature. The overall picture may be improving, his critics admit, but it does not feel like that for many people. Policy must change to ensure an improvement in “living standards”, the argument goes. But Mr Osborne chose not to accept the premise. Instead, he repeatedly argued that the same approach (albeit with some amendments) that “worked” for the macroeconomy will also deliver on a micro level. Read more