Budgets can never be judged by the immediate reaction. Time is needed for headline statements to be properly considered and for a drilling down into the detail. The Chancellor’s Budget was no different, puerile jokes and partisan statements aside. The initial headlines were of tax cuts and an end to austerity. Cue for much rejoicing on the Tory benches.
But, by the following day, a different picture was being painted by those who had number crunched and projected the outcomes, prompting far less favourable headlines as the reality became clear. The Resolution Foundation – hardly a left-wing caucus, given it’s chaired by the former Tory Minister David Willetts, a man of such formidable intellect that he was dubbed “two brains” – was scathing.
The judgement of its collective “brains trust”, along with that of other thoughtful journals, was quite damning. They pointed out that “low- and middle-income families were facing big cuts while higher income families are benefiting from tax changes since 2015”. Their analysis showed that the truth of the budget was that “half of tax cuts were going to the top 10 per cent, 90 per cent to the top half”.
Austerity for all imposed after the financial crash, now to be supplanted by penury for the many. The additional cash to stave off unfolding disaster on Universal Credit only mitigating rather than ending the hardship there. With social security being frozen, tough times are soon going to become a lot tougher.
But what’s been symptomatic of poverty over recent years has been its spread from the workless to the working. The gig economy and other benefit changes have seen those in work or only just in employment with limited hours, struggling to keep body and soul together. Foodbank use testifies to that.
Increasing the personal allowance, of course, benefits the low paid but that’s a fraction of what’s being given to the wealthy. The Resolution Foundation noted that “real average earnings are not set to return to their pre-crisis peak until the end of 2024 – representing an unprecedented 17-year pay downturn”.
With fuel costs rising, inflation increasing and the general cost of living mounting, life’s hard for the poor, working or not, and truly brutal for some.
So, it’s sure as hell tough at the bottom but it ain’t easy in the middle either. Poverty is, after all, a relative concept and, with mortgages rising and other costs increasing, many will be feeling the squeeze even if it’s nothing like the pressures for those with much less. They don’t feel wealthy and would react with fury to being told they were.
The tax cuts benefiting top earners pile the pressure on the squeezed middle, never mind the just-about-managing who Theresa May once pledged to support. Just why Labour has chosen to support it beggar’s belief. So much for being “for the many not the few”, and hardly likely to resonate if, as many surmise, this budget is a prelude for an election next year.
It’s reminiscent of Gordon Brown accepting Tory spending plans in the run-up to 1997. This time, not only does it box them in, but it’s uninspiring for the many who might well feel resigned to their fate and disinclined to vote for anyone.
But, as with the Budget, the SNP Finance Secretary’s immediate response has to be considered in the cold light of the following days’ fuller picture. Greater fiscal powers there may be, but the Scottish Budget is still hugely affected by the UK’s policy decisions, room for manoeuvre is constrained and proposed actions need reassessed. It won’t be easy for the Scottish Government as the Chancellor’s decisions have raised many thorny issues.
Derek Mackay was right to characterise the budget as being by the rich, for the rich. However, as with Chancellor’s statements, Mackay’s instant response requires further consideration. The different trajectory of last year’s Scottish Budget, compared to south of the dorder, has now been emphasised by Philip Hammond’s decision to increase the threshold for the 40 per cent tax rate.
The smart move last year by Mackay of a one per cent higher rate in Scotland and a slightly lower starting allowance, having frozen them, was generally well received. A 1p higher rate and commencing at £43,001 rather than the south’s £46,351 was no great hardship.
However, now that the threshold there is moving to £50,000, the gap – unless action is taken by Mackay – will become significant and the differential with south more marked. Berating the rich is one thing but lambasting the middle – even if numerically they’re not as large as many would think, given the median wage is below £30,000 – is far harder. Care and sensitivity will be required.
These are, though, the people who ironically benefit most from many of the free services in Scotland. Tuition fees, free personal care and other such benefits are disproportionally used and enjoyed by them. They’re also welcomed by them and they would be loathe to see these benefits lost.
So, as Mackay considers his own budget, the Chancellor’s actions have given him cause to ponder. Ironically, it’s probably made life easier in holding off demands for an increase in the 45p highest band. Labour condemnation will look hypocritical given their Westminster leadership’s support for the tax changes.
The issue is what does Mackay do about the 41 per cent tax rate. Holding it is essential given it’s now an article of faith for the Scottish Government. It’s about the kind of country that you seek and the society that you want. Services are better in Scotland and many things that are charged for south of the border are free here – the collective, rather than the individual, offering both economies of scale and social cohesion. People need to realise that you can’t have it both ways and there’s a price to be paid for a fairer society.
Continuing the support for the lowest earners is as essential as maintaining the universal services we have here in Scotland. However, people in the 41 per cent tax bracket are not the super-rich by any means and alienating them would be electorally stupid. Hence why raising the allowance – albeit not to £50,000 – may well be wise, taking the sting out of the issue for those affected but still emphasising the difference between the societies on either side of the border.