Published on 21 Mar 2013

‘Heavy hint’ from Treasury: tax rises will come

The IFS chief Paul Johnson has spotted a line in the budget which he thinks is a “heavy hint” from Treasury civil servants that public sector cuts could be getting out of hand.

On p25 of the main Budget document it says:

“This Budget sets a fiscal assumption that TME (total managed expenditure) in 2016-17 and 2017-18 will continue to fall in real terms at the same rate as over the Spending Review 2010 period.34 Fiscal consolidation for 2016-17 and 2017-18 is expressed as a reduction in TME. It would, of course, be possible to do more of this further consolidation through tax instead.”

Mr Johnson, an old Treasury hand, says he’s heard that line was inserted by current senior Treasury hands who worry that the projected spending cuts outlined for after the next general election could prove impossible to deliver.

As the IFS has said before, taking into account ring-fencing the projected cuts imply cuts of around a third in unprotected departments’ budgets.

Paul Johnson seemed unimpressed by the hours of work put into making sure that the year-on-year borrowing figures in the budget crept down by the smallest possible amount rather than spike up.

“It’s unlikely,” he says, “that this (careful management of numbers) has led either to an economically optimal allocation of spending across the years or to a good use of time by officials and ministers.”

See the IFS analysis here: Fixing the budget to fix the figures?

Looking¬† back over the TV footage of the Budget speech itself, it’s quite clear that Ken Clarke slept through a chunk of it. Also clear that George Osborne wasn’t the only one with a croaky throat. You see the PM slip a lozenge into his mouth just behind the Chancellor 20 minutes into the speech.

Looking back over yesterday’s statement you also see that, a little unconventionally, the would-be candidate for the Tory leadership, Adam Afriyie MP, used the budget statement to tell MPs and the world a bit about himself (“growing up in a single parent household in social housing as a mixed race kid … working hard at school and eventually starting a business”), a reminder that at least one MP didn’t think this budget had altered the short-term or medium-term prospects of the current leadership.

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8 reader comments

  1. Philip Edwards says:

    Gary,

    PLEASE can you get an interview with tory oxbridge “Business” Minister Mathew Hancock?

    Even by tory standards the guy is a stereotype Daily Mail/Sun gawp. But it’s hugely entertaining as well as informative of the kind of mentality in this alien government of occupation and its toady Whitehall civil servants.

    We could do with a few laughs, even when they are as unintentional as Hancock – and I don’t mean Tony.
    :-)

  2. Philip says:

    If the public expenditure cuts have been as effectively thought-through as the “cull of quangoes” it’ll be haphazard, inconsistent, counter-productive & some of it will be smoke & mirrors. So while the poor feel the cuts, Barclays execs get ¬£ms in bonuses for at best unethical & possibly illegal activity! Plus ca change….

  3. Steve Willis says:

    I notice none of the political parties are removing the special privileges and statutory exemptions in relation to Income Tax and National Insurance currently enjoyed by Members of Parliament and Government Ministers.

    Clearly, we’re not all in the same boat – our Parliamentarians must be in a luxury yatch. Anyway, it’s my turn back at the oars in Steerage Class. :-)

  4. neil horton says:

    a total lack of belief in the politcal procsess poloticians lie greedy bankers with no remorse no one speaks out for the common man

  5. StuartM says:

    I suspect the big question is not so much if taxes will rise but which sector of society will be hit when they do. I doubt they can increase VAT (the previous increase had a pretty devastating impact on growth). I doubt they will increase NI (particularly given the recent decrease and the somewhat inaccurate expression “tax on jobs”). Any sort of tax on consumers will impact growth (e.g. higher “luxury” VAT rate). Same with restricting the scope of VAT exception.

    Who is hit will depend on when the rise happens. This side of the election I suspect it will be the lower income people who are hit (can you see the Conservatives increasing the 45% rate ?). Tax bandings seem to be slipping lower with inflation but it sounds like people think that is not enough. After next election I can’t see Labour hitting the poor and I would suspect we would see an increase in the 45%. So, ironically, if the Conservatives want to avoid the 45% rate being increased they should probably implement their own tax increases sooner rather than leave it up to Labour to do.

    They could try getting big business to pay existing taxes, but this is unlikely to happen with the current crowd in…

  6. Andrew Dundas says:

    This pensioner’s taxes as % of income are already much lower than yours. Moreover, I don’t pay any NIC, and you do. My taxes are now set to fall in line with Corporation Tax cuts and with a 10% rebate on top.

    This inappropriate. I’m unlikely to invest in new industrial kit or employ someone.

    …. I know most Tory Party members are retired … But surely that’s not the reason. Is it?

  7. Y.S. says:

    The last boom was because of the Banking sector and Government over spending.
    The last bust was because of the Banking sector and the Government over spending.
    Some think the we can kick start the economy by Government over spending.
    Can someone come to the conclusion that we need industry, stupid. Not quick fixes and fiddeling with figures.
    Look at Germany, solid Industry, the only future. We need to start making things again to keep our people employed not on the dole.
    We dont need a horsemeat economy, buying things from abroad because its cheap.

    1. Andrew Dundas says:

      It’s not completly true that there was “over spending”. It only appears so because of the way the UK accounts for “contingent liabilities”.
      The “over spending” was caused by the crash to zero of Corporation Tax receipts. Real spending was neither exceptional nor large, though it has risen since because we have more folks unemployed and the finacial services industry is still not paying tax. [Perhaps they’re now like Starbucks?]
      Also in the frame was the swap of government gaurantees in exchange for massively discounted shares in those banks and provided to British banks that involved no transfer of taxpayers’ money.
      Those gaurantees are a contingent liability and were listed as ‘spending’ by HM Treasury & ONS. Hence the listing of an upsurge in “spending” in the bank crisis times, and dispite the fact that no extra taxpayers’ money was spent.

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