Deal with the virus, yes, but Budget for our brighter future
THIS week’s Budget is a real baptism of fire for you. Not only have you been at the Treasury for less than a month, following the dramatic resignation of your predecessor Sajid Javid, but also your financial plans are overshadowed by the worsening health crisis.
At the start of the year, your Government, buoyed by its massive Commons majority, would have hoped to push through radical reforms to enhance prosperity and rebalance the economy.
But now the coronavirus has transformed the political landscape. So your Budget will be a severe test of your authority. With the epidemic spreading rapidly, the public needs to know the state will have the necessary resources to cope.
It was therefore reassuring to see your TV interview on Sunday, in which you pledged that “the Government stands ready to give the NHS whatever it needs”. Those words must be translated into reality.
Yet it is not just healthcare that requires support. The coronavirus has brought turmoil to the commercial world. From entertainment to travel, businesses have been badly hit, as highlighted by the collapse of Flybe last week.
IN ORDER to avoid a fullblown recession, you should consider special measures, such as a temporary suspension of VAT or relief on business rates. The need for such steps was reinforced yesterday by news of the continuing decline in the high street, where shoppers fell by 8 per cent last montgh alone. It has been estimated that since Christmas, 900 independent stores have closed costing almost 3000 jobs.
Given the health crisis, you will have to delay several key long-term spending announcements until the Autumn Statement, especially on transport infrastructure.Yet there are three key areas where your
Government must make rapid progress. The first is the recruitment of 50,000 more nurses and 20,000 more police, as promised in the Tory manifesto.
The second urgent task, as emphasised by PM Boris Johnson’s weekend visit to stricken Worcestershire, is a major programme of improvements to flood defences. It was reported yesterday that you plan to double the budget for this to £5.2billion by 2024, which would be very welcome.
The third is perhaps the most important of all: an effective, long-term answer to the broken social care system, which is riven with neglect and gross injustices.
Your Government has already promised an extra £1billion this year, plus freedom for local authorities to raise the council tax bills by 2 per cent. But much bolder steps are needed. To raise standards, accelerate recruitment and prevent crippling bills in old age, a significant injection of cash is needed. One idea, adopted successfully in Germany, is for everyone over 40 to pay a fixed levy into a fund to meet future care costs.
To pay for the inevitable growth in spending, taxes will have to rise. In the present fragile climate, I don’t think either corporation or income taxes should be touched. Indeed, one of the reasons Britain has enjoyed a jobs miracle over the last decade is because so many low-paid workers have been taken out of income tax, while self-employment has been fostered by your Government.
I would also be very wary of increasing fuel duties, as you are reported to be planning. Fashionable green dogma should not come before essential economic interests.
Such a step would hit families and businesses hard, undermining the Tories’ much-vaunted claim to be on the side of working people.
You should look to other sources of revenue. There are two obvious choices, both of which have widely touted.
One is the imposition of a stamp duty surcharge of around 3 per cent for overseas buyers, which could raise a hefty sum.
FOR all the wails from the property sector, stamp duty is a highly effective tax that raises £12 billion a year and which falls most heavily on the already rich. This revenue could be used to deal with homelessness or help first-time buyers.
The other step is to end the tax reduction schemes such as Entrepreneurs’ Relief, which was meant to encourage innovation – not serve as a cynical vehicle for tax avoidance.
But throughout all your decision-making, don’t lose sight of the traditional Tory goals of promoting sound finance and enterprise. By cutting the deficit, boosting employment and reforming welfare, your party has built a fine economic record over the last decade. Whatever the short-term pressures, don’t squander this legacy now.
‘Hold to the traditional goals of sound finance and enterprise’