Budget chaos - open thread

First things first: Jim wins the compo for most correct guesses at Budget content - by a decent margin, too.  Well done that man.  A (very temporary) job awaits you in Whitehall as official Reeves-whisperer.

The OBR-induced chaos is all very odd.  FFS, Reeves leaked half the Budget, in detail, yesterday - the 'final final' leaks, which once would have been anathema to Parliament and MPs' privileges on being first to learn these things, once jealously defended, not least by successive Speakers.  Hugh Dalton felt obliged to resign in 1947 for less (though some suggest the skids were under him already, and he was glad of the pretext to go).

Anyhow: obviously in the circs, Reeves / Starmer felt they couldn't do anything other than play to their own back-bench gallery.  Feeble politics though it is, I think we all understand.  How much time does it buy them?  Maybe enough, actually:  it might be nicely judged for that specific audience.

On the energy front, the EV levy was inevitable and we may expect it to rise over the years, to replace fuel duty.  (Did any EV user ever imagine otherwise?)  I'm interested in 'pay per mile' - does this mean they are tracking vehicle movements (like Musk and the Chinese do), or is it a self-declared matter on the income tax form?  I would have thought 'pay as metered' would be better - seeing as how smart meters can supposedly detect and discriminate different types of load.  But maybe home charging would represent an easy dodge, even with an SM.

I haven't yet seen the trailed shift of 'green levies' from electricity bills onto general taxation: and I believe they've ditched the idea of scrapping VAT on energy.  Will update when I find out.  Anyhow, it's pretty clear they've completely given up on the £300 bill reductions that were to be achieved via "cheaper renewables".  Not before time: Miliband really does have to ditch that crass rhetoric once and for all, and stop making his DESNZ officials parrot it every time they are asked about bills.

UPDATE:  here's at least part of the energy thing which, I reckon, needs more detail to make total sense of: 

She told the Commons: “The Conservatives’ ECO (energy company obligation) scheme was presented as a plan to tackle fuel poverty. It costs households £1.7 billion a year on their bills and for 97% of families in fuel poverty, the scheme has cost them more than it has saved. It is a failed scheme. “So, I am scrapping that scheme along with taking other legacy costs off bills. And as a result, I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 cut from the average household energy bill from April. “Money off bills, and in the pockets of working people. That is my choice ... Not to leave working families to bear the brunt of high prices, like the Tories did. But to get energy costs down now and in the years to come.

So, yeah: no contribution from "cheaper renewables" (- how could there be?)  And on a quick calc (£1.7bn across approx 20m households), that's only £85.  So the remaining £65 must come from some other levy-tweaking.  We need yet another update.

UPDATE 2:  yes, it's a direct transfer of subsidies from bills to general taxation: easy when you know how. 

Energy costs will be reduced by the ending of the Energy Company Obligation, which is currently funded through bills, and through the government funding 75% of the domestic cost of the legacy Renewables Obligation for three years. This is on top of extending the £150 Warm Home Discount to a further 3 million of the poorest households.

So: 150 + 150 = 300 & they'll say they've delivered the £300 reduction promise - for "the poorest households", that is.  BUT, as I keep saying, Mili's manifesto claim was that it would be delivered by cheaper renewables!

UPDATE 3:  the EV tax - eVED - is indeed on a self-certify basis.  It is assumed that the 'honesty' rate will be 98.5%, based on the 1.5% default rate on VED.  Hmm.  That surely has to be optimistic: people pretty much expect to have their number-plate checked by ANPR these days, but who imagimes HMRC will check their milometer?

Have at it all in the comments.

ND 

Budget compo: and, yes, Miliband - again!

With the Budget looking to be one helluva political set piece drama, it's time for C@W to predict the content.  She's gonna do something big, but what?  Over to you all.  Compo question: which levers will Reeves pull?  

(I have always reckoned that simply adding more bands at the upper end of the Council Tax meets all the political and technical tests: it's fast, 'progressive', virtually impossible to dodge.  If that isn't one of her measures, she's even madder than previously thought.)

AND of course it all leads to heightened leadership speculation.  AND as you all know, I have long championed the notion that Miliband's prospects are a great deal better than most people say - in that Doomsday aspect, if not for keeping his job under Starmer.  Right on cue, here's Guido: 

The Times picks up on rumours that Ed Miliband is a viable replacement for Starmer come the PM’s defenestration. As Guido reported back in September the Energy Secretary went on major manoeuvres after the PM tried and failed to remove him from post at the Phase 2 reshuffle. He is blamed by senior figures in Labour for a series of inflammatory briefings whose aim is to undermine Starmer. No surprise then that with Keir’s possible end on the horizon someone has decided to start whispering Miliband’s name in hacks’ ears…

I agree.

ND

Budget: Open Thread

What has Hunt achieved?  A bit of stealing Labour's thunder?  A bit of tinkering?  The last budget by a Tory chancellor for a decade?

Well I never pretended to understand macroeconomics.  Over to you.

ND

Open Thread: BUDGET DAY

Any signs of an Actual Strategy that we can see?  Or is that too much to expect?

ND

Education wanted re NIC & self-employment

OK - So I get the furore in the newspapers about this 'awful' Tory budget. A big part of me thinks the papers just see budget now and go looking for disaster, after the omnishambles budget of 2012


But genuinely, some of the readers here must be self-employed. How much is this hit going to actually cost you? I just can't see the hit outside of taking away egregious tax benefits.


How big is this storm - a teacup or a hurricane.


As pointed out yesterday, the issue is we cannot trust the press as they are made of many people who are affected by this change directly to the sense of proportionality is lost in a way that say a change on capital allowances would go totally unnoticed.


For example, Business Rates has been a big theme running pre-Budget - but as soon as journalists income is potentially hit, out this goes an in comes RAGE (as written by Sarah Vine).


Personally, many people I know earn a living through self-employment. They try optimize their earnings to around £40k per year. Between expenses and dividends, make their wives/husbands directors etc, contributing to pensions etc, they manage to pay no tax at all, bar NIC's which they need for their state pension entitlements. Their is no contribution at all to the state in real terms.


In a PAYE job to net £40k you would need to earn £63k. This gap at a base level is c.57%.


5 weeks holiday (which the company pays for, not the Government) is worth 10% of wages, so that would take the PAYE earnings needed down , plus pensions contribution from employer perhaps another 5% and other bits add can on another 1 or 2%. So being generous let us say it is worth 20% overall to be employed.


That still leaves a huge gap and also, not unimportantly, a big hole in revenues for the Government. We have not even considered employers NIC here. No wonder employers are keen to get everyone onto consultancy and zero-hours contracts. Self-employment, even up to a mid-level of income is a huge issue for the Government. As the gig economy kicks-in I can quite see why the Government is going to make a stand on this issue.


If only MP's would think of the numbers rather than the headlines.

2017 Budget - a comedic pause

Well, as predicted, that was not very exciting. It is amazing that in a near £2,000,000,000 economy the Chancellor finds time to talk about £16 million here and £7 million there.


Perhaps there are some nasties lurking unsaid in the Red book that will be unearthed later.


However, much more interesting was that Philip Hammond made some funny jokes, I mean, that really is entirely unexpected. Who would have thought....


"there is a reason it is called the last labour Government" and more!


Then in response to this entirely unexpected bout of bonhomie, Jeremy Corbyn stood up and did a fankly epic live re-enactment of a Citizen Smith sketch.


All very puzzling, this outbreak of comedy and humour in of all things a budget statement. George Osborne must be turning in his grave!

Anything Good in the Budget At All ? Yes !

We have found, and will continue to find, plenty to be scathing about in 'Boy Genius' Osborne's 2nd Budget, but there was at least one thing very good. I refer, of course, to the announcement that NS&I are reintroducing inflation-plus tax-free bonds.

This is a touchstone of the Government's good faith. We all know that the savings of the prudent are under assault from all quarters: from greedy bankers and investment advisers looking to gull the unwary, through tax-and-spend socialists & LibDems seeking to advance their social engineering, to outright scam-artists and criminals (if there is any meaningful distinction to be made between all these rapacious groups). Oh, and of course indebted governments everywhere, who can't help but notice that inflation nibbles away at their problems. The attitude of all of these bastards is the same: why do they rob banks ? - because that's where the money is.

It was a hammer-blow when the inflation-plus bonds were withdrawn last year, and now we must give credit where it's due. Thank you, George.

Back to bashing next week ...

ND

Budget: Green Figleaf for Clegg's Shrunken Manhood

And so it came to pass as we foresaw back in January: Osborne has scrapped one of our few 'green taxes' the Fuel Duty Escalator (a move funded personally by CU in a noble & selfless gesture, via additional North Sea taxes to make good the reduction in Duty).

Proving once more that when push comes to shove, GDP trumps GHG. Come to that, public protests at the pump trump GHG as well. So what price the rest of the green agenda ?

Green fig-leaf, more like - just enough, perhaps to cover Clegg's shrunken manhood. The Green Investment Bank might just, one day, be allowed to issue debt. And the much-trumpeted 'Carbon Price Floor': which is in fact another tax, though it has the spin-off effect of being a windfall to existing nukes (= EDF) and wind-farms. (And no windfall tax - FFS !)

But does it satisfy the greedy greens ? Does it Hell.

'Ben Caldecott, head of policy at Climate Change Capital, said that although the carbon floor price would benefit investors in low-carbon generation, it did not give certainty because the level could be changed in future budgets. To give investors real certainty, he said, the level of tax should be guaranteed by long-term contracts.

"To highlight why low carbon investors might find it hard to trust this new tax based mechanism, just look at what else was announced today – scrapping the planned rise under the fuel duty escalator. The same could happen to planned rises in the carbon tax that sets the carbon price floor."'

Well spotted, Benny-boy: you've been reading C@W. He might have added last week's back-tracking on subsidies for solar farms. And Air Passenger Duty. GDP trumps GHG.

And the rest of Crapper Huhne's 'electricity market reforms' ? They will all go the same way as soon as the resulting electricity price-rises start hurting the government in the polls. It doesn't take long.

So: energy policy once more unraveling. The only thing that will keep the lights on is $150 oil followed by serious efforts at energy conservation, renewables that don't need subsidies at those prices - and demand reduced still further by another recession.

Switch off the light as you go, CU ...

ND

The Middle Classes & Mr Clarke's Uncomfortable Truth

Since the Blair-Brown spending spree kicked in, any educated middle-aged, middle-class lady at a loose end was able to become a ‘manager’ in the NHS. No formal qualifications, and rather little training required.

Just in case any of them are reading, to put ‘manager’ in inverted commas is not to diss the many ladies of my acquaintance who have followed this course: rather to indicate that the ‘programmes’ they run are, how shall we say, not always delivering bedrock healthcare necessities as would have been understood by Bevan, Bevin or Beveridge.

It’s not just the NHS. Who are the legions of small-firm solicitors who have fed off legal aid in pursuit of fatuous causes ? Of social workers who ensure that all manner of newly-minted ‘human rights’ are delivered ? Middle-class ladies, that’s who.

In other words, as government spending has soared out of control providing all manner of ‘services’ that could not really be described as adding to the GDP of the nation (or even, frankly, its well-being as properly understood), and though the ‘clients’ are frequently of the hoi polloi, as a cash transfer it has been significantly in favour of middle class ladies.

Which means that legal aid slasher Ken Clarke is indeed correct when he says that Middle England has yet to see the full force of what’s coming: disposable income in many a middle-class household is going to plummet - even if the Spectator thinks this is “one of those truths that should go unsaid”.

And for every protesting voice of a ‘client’ who is about to lose his or her service in t’Cutz, there will be another, rather more articulate voice of the about-to-be axed service-provider. The Budget could be very interesting.

ND

The electric car is coming. But not just yet...

Only last week all the motor press were slamming the [£2,000] electric car subsidy announcement as a "pointless sound bite." Today, reannounced with a bigger subsidy [£5,000] and to include hybrids, it seems last weeks kite flying is out for another float before next week's budget.

If it really is delayed for two years then the whole thing is probably more damaging to the electric car industry than doing nothing. HMG has poor form on making pronouncements that have yet to be thought through, just for the headline. {VED rise - Stamp duty cut - Scrappage tax - New cars discount boost...}. A delay in subsidy, surely only for a complete lack of government funds, will merely put potential buyers off for two years. How does this help the industry? The only sensible reason to wait two years would be to use the intervening time to build the necessary infrastructure to support such vehicles. There was already a special tax break on the Prius,that was so complicated even the dealers couldn't understand how to tell buyers to access it. Will this be any easier? The subsidy already exists in many other countries. China and the USA and Japan. If its offered there, and those countries are also, like Mr Brown, keen to position their countries as world leaders in electric/hybrid/alternative fuelled cars, then why are we waiting? To give them another 2 years head start on top of the decade they have already had?

The scrappage scheme seems to have been been dropped, even though there seems evidence that, amazingly,it works.The growing list of EU countries with scrappage schemes includes: Austria, Cyprus, France, Germany, Italy, Luxembourg, Portugal, Romania and Spain. It sounds Green enough for Gordon. Why so out of favour now? 0.01% of cars sold in the UK are currently electric. People looking to buy a Prius may be tempted by the £5,000 off. Many fleet operators will have a look, if they are looking at cars at all. But not vans though. Poor LDV. No help from HMG, even though they claim to want to become an electric van manufacturer.
And even if there was a brilliant design of electric car,that could manage 500 mile range, 80mph, was available as a family sized vehicle and complied with the tough safety tests available in 2 years time, would there be the power to run them? ND may have a view of 1,000,000 + cars all sitting on charge every night for 4 - 12 hours.

Ultimately I can't see the economic sense in any of this. What have I missed?