Budget 2015: key issues missing from the chancellor’s speech

18 Mar 15

George Osborne’s statement included no details on tax rises or how to improve public sector efficiency, but the next government will likely need both to meet fiscal targets.

George Osborne has delivered his sixth and final Budget of this Parliament. We are moving, he tells us, “from austerity to prosperity”, with “a state neither smaller than we need nor bigger than we can afford.” Yet, as is so often the case with these set piece events, it is not what the Chancellor says that is important but what he doesn’t say. There was plenty of talk of tax cuts but nothing about tax rises, and plenty of talk about driving down the public sector deficit but nothing about driving up public sector productivity.

Neither omission should come as a surprise in a pre-election Budget but both are a disappointment from a government that prides itself on its ‘long-term economic plan’. The real fiscal challenges facing the country are not those of the next five years but those of the next 50.

Even if we restrict our focus to the next Parliament, today’s Budget clearly fails the Santayana test (“Those who do not remember the past are condemned to repeat it.”) Every post-election Budget for the last quarter century has seen taxes go up. Does anyone really expect this to change after May’s General Election? Even the OBR struggled to get a clear answer from the chancellor on this. Tucked away on p.127 of its Economic and Fiscal Outlook report that accompanies the Budget, it reports an acknowledgement from the Treasury that ‘tax rather than spending could deliver some of the consolidation’.

If clarity about taxation is too much to ask, we might at least expect a degree of parsimony on the spending side of the equation. An immediate issue is the productivity of our public services. Simon Stevens’ Five Year Forward View requires a heroic doubling of productivity over historic levels if he is to keep the lid on health costs over the short term. Over the long term, a failure to reform the NHS will cripple the public finances. Reform’s latest report, A framework for fiscal sustainability, shows debt spiralling to levels not seen since World War II. Yet, on the subject of public service reform, the chancellor was entirely silent.

There was some good news for those who yearn for a more mature approach to fiscal policymaking. Five years after the prime minister promised that the Government would measure progress “not just by how our economy is growing, but by how our lives are improving”, the Chancellor told us that real household disposable income per capita (the living standards measure preferred by the ONS and OECD) has increased by £900 since 2010. Reporting progress in these terms sets a good precedent. We must hope that George Osborne’s successor continues to do so.

Richard Harries is the deputy director of the think tank Reform and a former senior civil servant.

  • Richard Harrison, C.Co
    Richard Harries

    Richard Harries is the deputy director of the think-tank Reform and a former senior civil servant. He is also the managing director of CIPFA subsidiary C.Co

Did you enjoy this article?