Category: Budget

REMEMBER THE ROCHDALE CHIPPY CHANCELLOR!

 

THE BUDGET AND BUSINESS RATES.

The coverage of the row over the hike in business rates has shown once again that the media generally sees things from a London and south of England perspective.

There are rumours that the Chancellor is going to take steps to soften the blow of this overdue review of business rates. If he does, it will mean he is not listening to the wise and under reported views of the leader of Rochdale Council. Richard Farnell has pointed out that he knows a chippy in Rochdale that is paying more per square metre than Harrods and says the south is squealing because it is being asked to pay its fair share. Farnell claims that most businesses in greater Manchester will be better off. Spot on Richard. Not before time this review is reflecting the soaring value of property in the overheated south eastern economy whereas some parts of the North have seen property values decrease. That should be reflected in what firms have to pay.

It is true that southern businesses shouldn’t be subjected to huge rises all at once, but the answer to that is for gutless politicians to review business rates more regularly irrespective of whether there is an election on the horizon. It is also true that we need to review the whole system to reflect the growth of on-line businesses that pay nothing, but that is for the future. If the Chancellor gives concessions next week it will be a victory for the effective southern Tory lobbying exercise and for south centric reporting by the media.

MAJOR BUDGET TASKS.

As we saw in his first autumn statement, Chancellor Philip Hammond is not inclined to dramatic and colourful gestures. Indeed, his most surprising announcement in November was to say that this will be the last spring Budget. Signals have been sent out that rebadged austerity is to continue with departments told to find savings in the run up to the next election.

It is true that the national debt stands at £1.8 trillion and the deficit is on track to be £68bn this year, but if this means we are set for a cautious budget then major problems facing the nation will continue to get worse.

Leaving the enormous uncertainties of the Brexit negotiations to one side there is a widespread belief that the government’s recent announcements on housing and skills are not adequate. The crisis in the NHS and particularly social care are laid bare on a daily basis. On the latter point, will we see the Chancellor break with caution and raise the possibility of dipping into people’s assets after they die to fund the rising cost of social care? The political problem is that, in opposition in 2007, the Tories denounced the suggestion, proposed by Labour, as a “death tax” and unveiled posters with the slogan “RIP OFF”.

However, some courage is required and with all the opposition parties so weak at the moment, there is no excuse for a lack of political courage in the budget.

GORTON PARLIAMENTARY SELECTION.

If Labour is serious about having MPs who reflect the area, then an Asian candidate should be chosen for the Gorton seat left vacant by the death of Sir Gerald Kaufman.

Although North West MEP, Afzal Khan, is the frontrunner, don’t be surprised if someone from outside that constituency or even Greater Manchester is chosen to avoid internal rivalries.

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THE COST OF BREXIT

 

THE EXIT FEE.

Extreme Brexiteers may rail against the figures, but the fact is we are going to pay a heavy price if we exit the European Union. That is the most important message from the Autumn Statement Some of us hope public opinion will change and we can yet halt this madness. But as it stands we are heading out and the Chancellor has spelt out the consequences of Brexit.

£59bn of the staggering £122bn of extra borrowing is directly attributable to Brexit according to the Office of Budget Responsibility (OBR). Because of that borrowing our debt to gross domestic product is set to peek at 90% in 2017-18. The weaker pound caused by the Brexit shock is forecast to lead to a 5% increase in food prices next year. A real problem for the Just About Managing.

AT LAST A MOVE AGAINST PENSIONERS ?

Perhaps it has been lost a little amidst the analysis of the immediate impact of the Autumn Statement but Philip Hammond this week flagged up a major area of controversy for the next parliament. The triple lock on pensions is to come under review. Rightly so, whilst some pensioners still struggle, most have never had it so good, to coin a phrase. In any case it is the young burdened by tuition fees, job uncertainty and the inability to buy a home that must be top priority for government in the third decade of this century, if not before. The problem is that up to now the elderly vote in larger numbers than the young. In the next parliament ministers will have to be courageous. I think pensioners will get the point but well done Mr Hammond for preparing the way for a change of policy.

NORTHERN POWERHOUSE.

At one point it looked as if George Osborne’s pet project was going to be quietly forgotten by his successor. However there was enough support for devolution to force the Chancellor to input significant funds into the Northern economy. £3bn for northern local enterprise partnerships in growth deals, a £400m investment fund to support smaller businesses and £60m in development funding for Northern Powerhouse Rail.

Areas about to elect city region mayors like Liverpool City Region and Greater manche4ster will get new borrowing powers. There is talk of a municipal bond to aid infrastructure investment. The continuing failure of Leeds to resolve the elected mayor issue and avail itself of these incentives is notable.

Specific road improvements include the highly congested part of the M60 near Worsley, the Waterfront Link in Warrington and dualling the A66 in the North Pennines.

MIXED PICTURE FOR BUSINESS.

The big challenge for business in the North is productivity. Nationally we are 30% less productive than the Germans and the North lags well behind London. A Productivity Investment Fund will help. There was relief that the increase in the Living Wage was modest and a welcome for the further cut in corporation tax. Some wanted a VAT cut to mitigate rising inflation but that wasn’t going to happen, nor apparently reform of business rates.

HAMMOND’S DEBUT.

There is widespread dismay that the Chancellor did not address the growing adult social care crisis but overall Philip Hammond showed himself to be a safe pair of hands on his début. He is not as close to the Prime Minister as George Osborne was to David Cameron but nor is there the ruinous rivalry of the Blair/Brown years.

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MIDTERM UNPOPULARITY COMES EARLY

 

BREXIT DANGER.

With death on the streets around the European Union Headquarters building and the Budget shambles at home, it has been a bad week for those of us wanting a remain vote in June’s EU referendum.

The disgusting terrorist atrocities suggest Europe is falling apart under a wave of violence. The events in Brussels come hard upon the migrant crisis where the EU did not cover itself in glory.

People should realise that the economic arguments for staying in the biggest market in the world and the perils of the unknown offered by the Brexiteers, should overwhelm concerns about terrorism and migrants. But after the Chancellor’s bungled budget, will they?

Labour actually edged ahead in one opinion poll and that was even before Iain Duncan Smith resigned. It is a sign that the traditional mid term unpopularity suffered by all governments has come early. People may look at the most senior advocates of remaining in the EU, the Prime Minister and Chancellor, and decide to give them a kicking for the way they are running the UK, rather than think about the dangers of leaving.

HE TURNED UP THE VOLUME AGAIN.

Iain Duncan Smith has been a disruptive force in Tory politics for two decades. In the nineties he helped to force the sitting Prime Minister, John Major, the resign and stand again for his own job over Europe. He then became Tory leader in 2003 but showed no signs of avoiding a third successive defeat and was replaced a couple of years later. In government since 2010 he has been on a single-minded crusade to reform the benefits system, so single minded that he clearly has been a nightmare to deal with. Faced with the Chancellor constantly demanding cuts, it is surprising the resignation didn’t come earlier.

Neither Osborne or Duncan Smith have emerged from the events of the last week with much credit. Universal credit is a good idea but it should have been rolled out to over 5 million people by now. The current figure is 200,000. That is failure.

The other failure is George Osborne’s failure to hit any of the targets that he floats at election time to woo the voters. The cap on welfare, reducing the National Debt and the ever receding promise to get the books in surplus by 2020. Even in the Budget it was going to be achieved with some sleight of hand involving Corporation Tax receipts. Now his only hope is a booming economy will fill in the four billion pound black hole.

The retreat on things like welfare cuts and the tampon tax can apparently be accommodated according to the Chancellor which begs the question why disabled people were put through the ringer in the first place.

The one nation Tory Party theme is holed below the water line. The true face of George Osborne was shown in that nasty jibe about abolishing the Lib Dems. Pride always comes before a fall and whilst the Lib Dems are on a long journey back, Jeremy Corbyn’s handling of the budget crisis (not overdoing the point scoring) may ensure a better set of election results in May than he could have hoped for a few weeks ago.

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A CONFUSING POTENTIAL SWANSONG

 

PICK AND MIX

You’ll look for an ideological thread in the Chancellor’s budget in vain. On the one hand he regards it as acceptable to cut disabled benefits whilst cutting Corporation Tax again. On the other hand the sugar tax is an intervention in the free market that met with the immediate approval of Jeremy Corbyn.

Then there was the missed opportunity to increase petrol duty at a time when the slump in world oil prices meant motorists would hardly have noticed. He didn’t do it apparently so as to appease Tory backbenchers who he wants to vote for him for leader. But earlier in his speech he referred to the Office of Budget Responsibility’s warning that leaving the EU would lead to “disruptive uncertainty.” The OBR are right, Osborne was right to refer to the biggest issue that could disrupt his Budget strategy, but it didn’t go down well with many of those Tory backbenchers.

NORTHERN POWERHOUSE.

It was a complex, somewhat incoherent Budget which nonetheless had some good things in it for small business and the Northern Powerhouse. I thought the Leeds-Manchester rail line had been given the go-head a few times already but, anyway, it was in the Budget along with creating a 4 lane M62 over the Pennines. News that a case will be developed for a Manchester-Sheffield road tunnel is good news too. Greater Manchester once again gets more powers, this time over justice issues. But ominously whilst elected mayoral deals were announced for some rural areas, there was silence on Leeds, Greater Yorkshire and Cumbria. Knowsley is to get the northern Shakespeare Theatre which is brilliant and a reward for the lobbying work of local MP George Howarth. Perhaps he could play Lear in the first production!

SMALL BUSINESS BONANZA.

600,000 small businesses will pay zero rates from next year when the payment threshold is lifted £15000. This is even higher than campaigners were hoping for but there was more good news in George Osborne’s red box. The annual rise in business rates will in future be pegged to the consumer price index rather than the higher retail price index. There are also likely to be more frequent reviews. Due to government delays, businesses are still paying tax based on property values dating back to the financial crisis.

The elected mayors of Greater Manchester and the Liverpool City Region are to be given full powers over spending business rates but there is a downside for them and all local government. Town Halls will soon depend on business rates for their income rather than central grant. If Chancellor’s keep reducing the rates, council services will suffer further.

They will anyway because the Chancellor is looking for another £3.5bn of public spending cuts in 2019 as part of his desperate attempt to leap from a deficit of £20bn in 2019 to a surplus of £10bn in election year.

By then, the theory goes, George Osborne will be Prime Minister. There are just the little problems of Brexit, Boris and the good old British economy in the way.