This week has seen the return of that annual ritual, the Budget. I find the budget rather uninteresting, but also deeply annoying. It strikes me that if something needs adjusting in the economy it should be done, and if it doesn’t then it shouldn’t – but instead we seem to save up a whole series of unrelated tweaks and announce them all in one go once a year.
The Budget ends up being a strange admixture of changes driven by tradition and ideology. So, it seems to be vitally important to fiddle with excise duties on an annual basis – and also usually a good plan to move tax thresholds and interfere with pensions. Each Budget also offers an important opportunity for chancellors to make the tax system even more complicated – just in case there was a risk that someone actually understood it.
The Budget is also the chance to announce changes to income tax – usually to either raise or lower the rate for the very rich. Lowering taxes for the very rich is unlikely to attract many votes (the über-rich are not terribly numerous, though very influential) so I assume is driven by ideology or with an eye to future party funding. Raising taxes on the rich may be more of a vote winner, but perhaps is less conducive to future party funding (or lucrative consulting jobs for ministers when the political gravy train hits the buffers). In either case, changes need a strong dose of ideology as no-one knows what tax rate would maximise tax revenues from the seriously rich – I believe there is some certainty (maybe a sigma or two) that the value lies between 30% and 75%, but nothing better than that.
The other platform provided by the Budget is to announce a combination of increased spending and/or cuts – though usually these have already been announced and are nowhere near as new as the Chancellor would have us believe. I have a rather serious problem with announcements of either type, as they all seem to suffer from a common failure of understanding. Chancellors of all political stripes seem to believe any problem can be solved either by throwing more money at it, or throwing less money at it.
If you throw more money at a problem, the money will certainly be used but usually with minimal impact on desired outcomes. There is a form of financial Parkinson’s Law in action whereby costs expand to consume the money available. The most powerful segments of any organisations being funded will take the lion’s share of the money and grow bigger and more powerful. Sadly, power rarely lies where you want the money to be spent.
If you throw less money at a problem, despite what many think, organisations do not tackle waste and become more efficient. Instead, the most powerful segments of the funded body will devote all their energies to protecting themselves and their empires and will instead ditch activities they consider to be peripheral. Sadly, these peripheral activities are probably the very ones for which the bodies exist and which represent their most important outcomes for UK plc.
These last two paragraphs are true for organisations whether funded by public or private means – though, on the plus side, privately funded organisations may eventually go bust (unless prevented from doing so by the State, yes I am talking about the Banks). I always feel that when my employers start eliminating biscuits from meetings (a meaningless cost-saving activity) it is time to seek employment elsewhere – and I assume that other savvy employees think similarly. Cost cutting is, thus, an excellent way to weed-out the competent, go-getting portion of your employee-base while retaining the dead-weight. I do wonder if something similar applies to nation states – and austerity is an excellent way to “fix” net migration by selectively disposing of the more economically-valuable portion of your economy whilst simultaneously encouraging the more sensible potential immigrant to seek another destination. Are we deliberately turning the UK into the B Arc of Golgafrincham? Well, we do seem to be turning into a service economy – though my phone does remain staunchly unsanitary.
Anyway, time to turn from Budgets in general to the most recent offering. This is dear old George (née Gideon) Osborne’s fifth attempt at a budget, and despite all the evidence he does continue to believe that he has the common touch and knows what matters to we members of the lumpen proletariat. After singeing his fingers with the pasty tax and static caravans, he has now turned his attention to beer and bingo.
As a sometime beer drinker, I did wonder what his headline measure would mean for me. As a man, I am given a suggested weekly allowance of 28 units of alcohol – and if I choose to take all of this in the form of beer at a relatively modest 3 units per pint, I would find myself £4.85 richer every year. I’m afraid, were I a woman, this boost would be a mere £3.64 and given my modest drinking habits (and foolish consumption of wine and spirits) I will be luck to clear an extra 50p. Not quite the giveaway the newspaper headlines (both good and bad) suggested.
I must admit I have no interest in Bingo – I think that I blame it (quite incorrectly) for the destruction of so many cinemas (well, it tended to use old cinema buildings in my formative years, creating the unfortunate association). I must admit I wasn’t even aware there was a bingo tax – but I suspect reducing it is not going to have a large financial effect on very many people.
Nevertheless, some in Mr Osborne’s own party seemed to think these two changes were the most important things to be announced in the budget. Sadly, their crowing about this seems to have back-fired rather spectacularly. I had always assumed that such measures were designed to provide a fig-leaf of good news behind which to hide the entire forest of bad news contained in the rest of the Budget. If this was the good news, which seems to have gone down like a lead balloon, how bad must the rest of the Budget been? I have seen some suggestions that new pensioners are to be encouraged to spend their pension pot on fast cars – rather than frittering it away on an income for their declining years. I presume this is an attempt to defuse the pensions time-bomb via the medium of road traffic accidents – which is certainly a bold initiative and bound to be more fun than spending one’s lifetime savings on the cost of a nursing home or one way trip to Switzerland. So, unless pensionable age continues to recede from me, I could be the proud possessor of a shiny red Ferrari in a mere 20 years time! Not really a dream of mine, but I suppose someone has to prop up the Italian economy – and it would be churlish of me to try and live forever bleeding dry anything that remains of the State in 2038.