The July 2015 Budget: How big, how blue, how beautiful?

Posted on July 8, 2015 by Karl Wilding
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With apologies to Florence and the Machine, currently riding high in the charts and apparently a favourite among some in the NCVO policy team, I thought it useful to note down a few questions left hanging by today’s events at Westminster.

For a more systematic analysis of today’s implications, head over to Michael Birtwistle’s fantastic post on the budget take aways.

How big?

Prior to today, political insiders were apparently promising something ‘Big. Very Big’, according to the BBC’s political editor Nick Robinson. After the event, Sky’s political editor, Faisal Islam, described today’s Summer Budget (we have one for nearly all seasons this year) as big, bold and brutal.

I’m tempted to say that the state looks like it wont be nearly as big by 2020, but in a budget where it feels like our collective expectations were managed very well, the reductions in public spending were not as large as we had been led to believe. All of which makes me wonder whether we need to wait for the Autumn season for the big stuff, specifically the zero-based budgeting that comes with the Comprehensive Spending Review. Tin hats in fashion this Winter?

How blue?

I was fortunate to attend a private briefing from a right of centre think-tanker after the election, who forecast that Cameron’s pragmatism may well surprise people. Maybe. But for those that hoped for the ideology-fest of small state, first-conservative-budget-in-twenty-years stuff, the surprise may well have been the appropriation of policies one might more have associated with the opposition benches: curtailing non-doms, more free childcare and, most flamboyantly, the living wage, which has delighted some on the right and appalled others.

 

It is also worth noting that some of the gap between income and expenditure is being met by increased taxes.

Many of course are already seeing splashes of clear blue water all over Osborne’s ‘One Nation’ budget, with many arguing that this marked the beginning of the dismantling of the tax credits system built by New Labour. And the ring-fencing (aka hypothecation) of motoring taxes into a new Road Fund definitely sounded more blue than green.

How beautiful?

The beauty or otherwise of budgets tend to be a function of time. Beauty is also, of course, in the eyes of the beholder. Some budgets unravel quickly, initially visually appealing to those on the government benches, but less so once unpicked by analysts and fact checkers. Moreover, with an independent OBR and a seemingly unimpeachable IFS, chancellors are less able to cover budgetary blemishses.

For some of NCVO’s members, today’s budget contains measures that are neither superficially nor substantially attractive: Child Poverty Action Group argued that children featured little; similarly, Shelter highlighted the loss of housing benefit to young people.

Indeed, the inter-generational distribution effects of today are likely to be played out significantly over the coming days, with one opposition leadership contender arguing that this was not a one nation budget, but a two generation budget. For children and young people, read similar arguments about a whole raft of measures in today’s budget. It’s not called political economy for nothing.

And a few more questions from me

We’ll make further comment over the coming days, but I’m left asking a few questions of my own:

1. Philanthropy

What will be the impact of changes in income tax thresholds on charitable giving and gift aid uptake, and likewise the impact on the changes to inheritance tax relief on legacies

2. Living Wage

We’ve argued that charities should be empowered to pay the living wage, but as things stand I think they’ve been instructed. Have we got estimates of cost and impact? Are we prepared? And will public service commissioners mandate this, and pay for it?

3. Tax, and its relief

I wonder if we’re seeing a few emerging trends: decentralisation; hypothecation; targeted ‘special cases’ for relief; and, according to the Resolution Foundation in this great blog, a long term growth in the cost of relief. So, we do we have a long term vision of what the tax system is for for charities, and what behaviours we want it to incentivise? Or do we just want to ask for more relief? And as corporation tax falls, will the tax advantages of being a charity outweigh the costs that come with additional regulation?

4. Housing and the social investment market

Today’s reductions in housing benefit place further pressure on the wide range of charities that are providers of social housing, while right to buy adds uncertainty and risk. Besides the impact on housing providers themselves, do we know what impact this will have on the nascent social investment market?

5. Government spending (DELs)

Maybe I haven’t caught up yet, but I don’t think I heard a lot about spending departments today, or what will be passed down to local government. This is almost certainly a job for the Comprehensive Spending Review: so, see you again in the autumn.

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Karl Wilding Karl Wilding served as NCVO's chief executive from September 2019 to February 2021.
All blog posts by Karl Wilding

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