IT was meant to be a steady-as-you-go Budget, if not a plain dull affair. There was even talk in the lobbies of an early General Election to wipe out Labour, launched on the back of Theresa May triggering Brexit this week and Chancellor “Spreadsheet Phil” Hammond showing the Tories had the national finances tightly under control. But not anymore. Phil forgot to take his eyes off the spreadsheet long enough to consider the disaster of breaking a Conservative manifesto pledge not to raise National Insurance. So goodbye early election and goodbye Hammond’s political reputation.
Within hours of last Wednesday’s Budget shambles, 10 Downing Street was briefing against the Chancellor and landing him with the blame. Meanwhile angry Tory backbenchers set up an app to coordinate rebellion unless the hike in NI charges is reversed. The Prime Minister then announced a “delay” in implementing the changes, doubtless to give the Treasury time to find the cash from somebody else’s pocket. True, Number 10 must have signed off on the main lines of the Budget. But as the Red Book – which outlines the main Budget proposals — was barely half the length of a normal one, you have to ask if Number 10 was asleep on the job, or if the Prime Minister has merely decided to stick the blame on Hammond. Probably a bit of both.
For those of you who didn’t read it, the 2015 Conservative manifesto stated on no less than four occasions that it would not raise taxes, “Instead, we will ease the burden of taxation,” it promised. The incoming Tory government actually legislated to that effect under George Osborne. So why did Philip Hammond lose his political marbles by raising taxes on White Van Man and Woman, who might be expected to be core Tory voters? Note that this Budget was virtually neutral, in that it did not add a net fiscal boost to the economy. Actually, Hammond did that in his Autumn Statement last November, when he raised borrowing by a whopping £122bn. The point is that he has squirreled away this cash till after the UK leaves the EU, as a war chest in case – when – the economy really nosedives. Expect a lot of that to go in massive tax-breaks, as the Tories turn Britain into a massive casino economy.
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Meanwhile, as Hammond sits on a pile of cash, the English NHS and care system has all but collapsed after years of underfunding. The International Red Cross likened the state of English hospitals over Christmas to a “humanitarian disaster”. While funding pressures remain in Scotland, the situation here is very different. During the peak pressure in January, A&E units north of the Border were meeting their four-hour waiting target 90 per cent of the time. Scotland’s better health service performance is down to local councils and the NHS working together. Budgets have been pooled, encouraging a close working relationship. That’s what you get with a social democratic and public service ethos rather than the market-driven Tory approach in England.
The English schools system is just as bad. The Tories (with a lot of early help from Tony Blair, when he ran things) have turned English education into a monstrous factory dedicated to pressurising children through endless exams, to provide cheap, professional fodder for the service economy. As a result, children in English schools are suffering horrendous stress while teaching staff are quitting in record numbers. Pay rises in England are capped for most teachers at one per cent till 2020. Academy schools, which are funded directly from Whitehall, pay classroom teachers on average less than those in local authority ones (surprise, surprise!) but give heads on average much more – often in six figures. Welcome to the market place in education. Let’s keep it out of Scotland.
Which brings us back to Mr Hammond’s Budget. With the wreck that is English public services, Hammond was under immense pressure from Tory backbench MPs to ante up extra taxpayer’s cash – there’s no one so hypocritical as a “free market” Conservative when it comes to special pleading. The meltdown in care services in English local authorities has reached disaster proportions and Hammond needed to find £2bn as a sticking plaster. On top of that, May wanted extra spending to create more autonomous grammar schools, as part of the push to dismantle completely what’s left of local authority education in England (thus killing off the National Union of Teachers).
Hammond was unwilling to fund this extra spending by dipping into his massive Brexit kitty. So he raised taxes. He started with a bunch of stealth taxes: you will now pay more for motor insurance plus pay VAT on mobile phone calls on your next holiday in Florida. But that did not raise enough loot, so Hammond picked on NI paid by the self-employed — who now make up 15 per cent of the workforce thanks to the “gig” economy. Phil claims it is an anomaly that the self-employed pay National Insurance at a lower rate than mainstream employees. Yet there’s a good reason for this: most self-employed have no holiday entitlement or sick leave.
We’ve been here before: it was Gordon Brown who started the trend to raise National Insurance contributions as a way of hiking Treasury revenues by stealth. But doing so is massively regressive. NI is a surcharge on employment. It is a tax you (or your employer) pay just from being on the payroll, not on your income or productivity. Which means the one fiscal idea Labour and the Tories can agree on is that we should tax putting people into work, whether as employees or as self-employed. To create jobs we should be cutting NI, not raising it.
Meanwhile, since 2008 the Bank of England has printed £425bn and (effectively) used it to boost share prices artificially. Anyone with shares is now much richer. A 2013 report from the Bank admitted that this Quantitative Easing had made the top five per cent of UK households richer by an average of £128k each. Helpfully, in this Budget, the Chancellor increased investment allowances so these families can buy more shares tax-free and get even richer! The amount one can save annually in an ISA has gone from £15,240 to £20,000. Hammond’s Budget implosion proves this Tory government is weak, clueless and making it up as it goes along. Theresa May sits in her Downing Street bunker blaming everyone but herself for the Brexit mess. Her Chancellor has turned out an over-promoted duffer. And the three key Brexit ministries are run by ideologues – Messers Johnson, Davies and Fox — who privately desire as hard an exit from Europe as possible.
Well over 200,000 folk in Scotland are registered self-employed – more than the number who work for the NHS. Polling taken shortly before the 2014 referendum indicated that 61 per cent of Scotland’s freelancers, contractors and self-employed professionals were opposed to independence. Doubtless they saw independence as just another risk to bear. But if there is a next time, they should reflect on this: England wants to tax you to fund its crumbling public services. While Scotland cherishes you as the entrepreneurs who will rebuild our local economy.