A short-term hit to ensure future stability

Just two months ago, I wrote for this comments page about my views on the previous Chancellor’s mini-budget and how, despite how unorthodox it was, we had to stick with it for the sake of the future, despite the large levels of newly expensive borrowing and tax cuts contained within. This is a very different proposition, but again my position is the same. Given the situation, we need to support the government’s policies to help us rebuild the economy and secure a stable economic future.

Watching the Chancellor’s statement on Thursday morning, I’m sure many of us were thinking the same thing. Namely, what is he doing and where do we go from here? But, upon greater reflection, this is a budget for a Britain needing to unshackle itself from Covid, the EU and twenty five years of consensus on Economic Policy. It is a budget of short-term harm that will lead us to future economic success. It is a budget of the pragmatist over the ideologue and therefore, in that vein, we need to support the government and trust the plan of the Prime Minister and the Chancellor.

The headline announcement of the OBR that we are expected to fall into recession next year whilst suffering the highest tax burden in our history of 37.5% in terms of GBP by 2024-25 is unacceptable and un-conservative. However, we must remind ourselves that this is not an election-ready budget, but one designed to restore our commitment to fiscal stability and the financial markets. An election-ready budget does not involve raids on incomes, dividends, profits, and capital gains, reducing the spending power in our economy and reducing our confidence to make big purchases and plan for the future.

While the pain of those tax rises will be felt massively in the short term, the government is, in the long term, investing in Britain’s future. The Chancellor is right to agree with the assessment of Kwasi Kwarteng, that Britain has struggled with low growth and stagnant productivity for years now, while suggesting ways to change this within a more fiscally responsible framework. This is especially shown through the commitment of DWP to publish a review into economic inactivity as soon as possible, ensuring our labour market works for everyone.

That is why we need to unite and support this budget. It prioritises key initiatives this government is founded on, with strong commitments to the NHS and Social Care, ensuring that the Covid backlog is dealt with and efficiencies within the healthcare service are found, to bring down wait times, improve the quality of care and show the world that we have a world-leading health and social care system. Further spending commitments for the Department of Education remind us that the only way to improve growth in the future is to commit to our children now, to give them the skills they need for the jobs of today and of course, the jobs of the future.

This is alongside the capital spending that will enable the business of tomorrow to be conducted and, in many cases, is desperately needed today to better connect our regions and prepare for the energy transitions. Recommitting to HS2 and Northern Powerhouse Rail shows that the government understands the need for levelling up and unleashing the potential of the North, with the benefits from these projects being reinvested into the regions whilst creating strong long-term job prospects outside of London.

Furthermore, given that the inflation decimating the pound in our pockets is driven mostly by the increasing costs of wholesale energy caused by Russia’s invasion of Ukraine, that the Government has again recommitted to the Sizewell C Nuclear Power Plant is welcome. This project should’ve been completed this year if it wasn’t for Liberal Democrat short-termism that new nuclear power was not acceptable as it would not be online ‘until 2021 or 2022’. Now, this government is committed to ensuring our energy independence as part of a future-proof growth plan that also involves changing and, in many cases, reducing the regulatory burden in industries that the government has earmarked for having high growth potential, such as financial services and life sciences.

Therefore, while this is a difficult budget to stomach both ideologically and financially, it is a more than adequate response to the difficult decisions that need to be taken given the economic situation in Britain. It restores confidence in our government to the markets and provides a pathway to a long-term sustainable economic future with new key infrastructure, improved skills and a reformed labour market as long as the government begins to cut personal taxes as soon as the economic situation stabilises, and the economy begins to grow sustainably.