The Chancellor's Budget; why bother?

In the lead up and the immediate aftermath, there was a lot of talk about whether the annual set-piece Budget statement by the Chancellor should be scrapped.  The argument is that it destabilises the economy, encourages speculation and is never the Government’s finest hour in terms of attempts to spin.

There would be something in this were it not for the fact that much of what was in the Budget this time had already been pre-announced in one form or another.  The main exception was the Help to Buy scheme, which was such a rabbit out of the hat that it seems to have surprised quite a few Government Ministers, including the Chancellor, who found themselves unable to explain it in detail.

If the rush to meet the deadline for the Budget has led to poor policy-making (a pasty, anyone?), then that is probably the best reason of all not to have it, but as far as the rest of the Budget Statement was concerned, one gets the impression that those commentators calling for its demise were probably speaking more out of ennui than anything else.

But there is a good reason to have a annual Budget Statement from the Chancellor and it is to do with a couple of things we seem not to give enough attention to these days; accountability and governance.  Our public finances are built on the back of an agreement between the Government and taxpayers and it is important that Government sets out, at least once a year, how it intends to change the terms of that contract.

Politicians of all stripes have had quite a lot to say recently about the moral issues in the tax system – it is our moral duty to pay our taxes and Government’s moral duty not to overtax.  With all that moral high ground being fought over, why then should the Chancellor not take a measured moment to set out clearly and simply for us all how he wants things to change?  The hoo-hah is the price we pay for getting this important policy debate out in the open and properly aired. 

As taxpayers we adopt a number of different relationships with Government, each of which is complex in its own right and overlaps and entwines within itself.      

The Taxpayer as Consumer is happy to pay his taxes as long as he gets something in return;  we want our bins collected and our streets cleaned, hospitals to be ready to receive us when we are ill and the police and fire service to turn up in an emergency.  It might not always be a pound for pound exchange of value, but the important part of the contract is that it is something for the money.

The Taxpayer as Benefactor recognises that there are people less fortunate than herself, and while we also get some comfort from living in a society in which we know we will be looked after if we fall on hard times ourselves, we don’t necessarily support care for people with physical or learning difficulties, or support overseas aid because we can see ourselves needing the same one day.  We do it because that is the kind of society we want to live in.

The Taxpayer as Citizen pays taxes to get the benefits of living in a free society, relatively safe from harm and to project the interests of the community or the nation state more generally outside its borders.  The benefits are less tangible, but this part of the contract is no less important; because it supports the rule of law it is probably the part that gives us confidence that the rest of the contract will be honoured.

The final relationship, the Taxpayer as Investor is perhaps the one that has tended to receive least attention over recent decades. In the Nineteenth Century, when our infrastructure was being built, there was constant tension between people who wanted sanitation and lighting in our cities and those who wanted cheap rates.  Recently things have been more ambiguous; the Private Finance Initiative usually seemed to be more about the Taxpayer as Consumer than the Taxpayer as Investor, although in fact it was about both.  

But it is to the Taxpayer as Investor that the Chancellor is seeking to appeal with the Help to Buy Scheme.  As he said during the budget statement;

“Because it’s a financial transaction, with the taxpayer making an investment and getting a return, it won’t hit our deficit”.

OK, so at one level perhaps this is a bit of political flummery designed to put across the message that the scheme has no whiff of Plan B about it, and to lance the accusation that it might actually make the deficit worse. The inference that there is no long-term cost to this scheme – in fact an implied benefit- may not be right. You have to ask if it’s such a great investment, why isn’t the private sector already doing it?

But more importantly it is asking the UK taxpayer to see things slightly differently in our relationship with the Government.  Given that the Budget also included announcements of further cuts and benefit changes, this is asking us all to see ourselves less as consumers and benefactors and more as investors in the UK's future, putting our money at risk to help boost the economy. Others better qualified have commented on the pros and cons of this particular approach, but there it is nevertheless, in the Chancellor’s own words.

The Government’s contract with the taxpayer is important if we want people to have faith in the public finance system and be more or less happy to keep paying.  We have seen what can happen in countries where a culture of tax avoidance is more prevalent than it is here.  If the Chancellor of the Exchequer in the UK has one role, it is to ensure that taxpayers can have ultimate faith in the way the public finances are governed. Is it not important that we get a chance once a year to hear from the Chancellor’s own lips and in summary his thoughts on such matters?