This year’s Budget Statement was never going to break any new ground. The competing priorities of ending austerity, increasing public spending, cutting taxes and increasing infrastructure investment are by definition impossible to reconcile with sincerity.
The ‘public spending spree’ that some were hoping for, materialised as more of a 'spending sprinkle'. We were offered a host of upbeat, if modest, announcements - but perhaps at the cost of dealing with the wider, longer-term challenges around public finances.
Deficit, Borrowing and Growth
It’s concerning that eliminating the deficit – and ultimately the debt - continues to be pushed further down the road. Our national debt now stands at £1.75 trillion – a figure so significant, we cannot rely on it just inflating away. Returning the public finances to surplus must continue to be a priority, and should be referenced and promoted as such by the Government.
Of course, we should welcome that government borrowing has reduced further than expected. We should also be thankful that the economy continues to grow, but the rate of growth is extremely lacklustre compared with our G7 partners.
I was also struck by the Chancellor’s insistence that the Government will not enter into any new Private Finance Initiative (PFI) projects.
As a model, PFI has many merits; much of the failure of PFI projects in the UK has arisen from government’s poor contract negotiation. The PFI model is in fact being successfully adopted by many countries around the world, who have learnt from our mistakes.
There was also a failure to revise the target to create three million apprenticeships by 2020 – which it’s widely thought will now not be met. There was, however, welcome news that the contribution of small companies to the apprenticeship levy will be halved – an encouraging development for those businesses who offer ICAEW’s Level 4 and Level 7 Trailblazer apprenticeships.
It is also welcome that the extension of the IR35 rules to the private sector is delayed until 2020. A number of issues still need to be resolved.
With less than six months to go until Brexit – and an increasing possibility of ‘no deal’ - confidence and stability are paramount. To those ends, this Budget Statement was safe and sensible. Our debt, however, continues to build.
As you were. The comment in the original pieces appears to have been amended.
Thank you David. You are quite right. I read it too quickly. And sorry Michael (Izza).
Hello, I believe you may have mis-read. Michael Izza said "It is also welcome that the extension of the IR35 rules to the private sector is delayed until 2020. A number of issues still need to be resolved."
I read it as he's welcoming the delay not the fact that it's being rolled out to the private sector, originally it was feared that it was going to be rolled out from April 2019.
Michael (Izza): That's three of us with pretty firm views on the IR35 issue. The Tax Faculty leads for ICAEW on tax. May I suggest you read the Faculty papers of 26.6.18 and 19.9.18 for confirmation of our up to date views on this that seem to run rather contrary to your own. Then perhaps you might publish further comment that confirms the top of the executive is supporting the Faculty position on this.
I agree with all you say. Incidentally, it was the last paragraph of the article I disagreed with, not your comment. The rules that will stay the same are the 4 freedoms of the single market, whether we lose the Thatcher rebate / UK opt outs, will depend on who blinks first. Over Brexit, the UK has always blinked first up to date. My main argument is that there will not be an actual proper exit without a deal. I.e. there will be no cliff edge. I don't actually think Theresa May has any intention of leaving. When Cameron called the referendum, he said article 50 would be triggered within a week and we leave in 2 years. That was nearly 2.5 years ago, and by my calculation, we are currently a minimum of 2.5 years away from leaving now (i.e. the end of the implementation period). I reckon the aim of the government is to delay brexit unless and until a second referendum looks likely to return the 'right' result...