Several commentators on Britain’s latest Budget are saying that, with so much Brexit uncertainty around, it doesn’t really matter too much.
I’d agree that Budgets aren’t exactly the most exciting events on the calendar.
And as the Chancellor admitted yesterday, this year’s most significant announcement – the government’s £20bn extra commitment to the NHS – had already been released more than four months ago.
So, should we still worry about the annual Budget ritual?
Or is there something else on the horizon that’s potentially a lot more concerning…?
My rant for today…
Please forgive me for starting with a rant.
In the minds of our politicians, Brexit is The. Most. Important. Event. of our times.
Politicians always think like that. They have a hugely exaggerated sense of self-worth. They’ve become convinced that their continued existence is vital to making the rules.
Worse, they’ve deluded themselves into believing that even more laws are necessary to ensure that the original versions are obeyed. They’re certain that without this ever-increasing supply of legislation, ‘society’ would fall apart.
In my view that’s a complete load of rubbish!
I believe there’s far too much legislation. And that it’s compiled by too many busybody parliamentarians and implemented by endless quantities of mindless bureaucrats with one main purpose – to keep themselves in jobs.
OK, I accept that at this stage, my rant could get out of control. So I’ll stop it here. Though as evidence to support my case, I’ll refer to Belgium a few years ago.
For a world-record period of 19 months until early-December 2011, Belgium was without a government. That exceeded even war-torn Iraq for being government-free.
Even when government was restored, this consisted of a fragile six-party coalition led by a French-only speaking socialist, which wouldn’t have found favour with everyone in a country where the majority of the population talks mainly in Dutch.
Anyway, I promised to stop ranting. My point here is this: did the absence of a government cause any major problems in Belgium?
Did it heck! The country worked fine!
And it still is working fine. Despite media efforts to portray the lack of a government as a ‘crisis’, less political interference has done Belgium no harm whatsoever.
Back to yesterday…
Back to yesterday’s UK Budget and Brexit.
The Chancellor was able to present an ‘end of Austerity’ Budget that showed that “the hard work of the British people is paying off”.
State borrowing is lower than initially expected by the independent OBR (Office of Budget Responsibility) that supplies the Budget forecasts.
As a result, the public sector net borrowing requirement for the current fiscal year to 5 April 2019 is just 1.2% of GDP, down from 10% in 2010 after the great financial crisis.
That means the government can pour even more money into, sorry, invest further in, the ‘wonderful’ NHS (that’s the subject of a rant for another day!), etc. etc. as promised by Mrs May back in June.
For anyone who sat through the whole Budget saga, though, this was a plethora of new rules. Or changes to existing legislation that the government now reckons is necessary because the previous renditions aren’t working as well as hoped.
But then there was a caveat. If there’s no Brexit deal, all bets are off.
Having abolished the March Budget – or was that the Spring Statement? – ‘Spreadsheet Phil’ Hammond is now prepared to reactivate it if things start looking ropey on the Brexit front.
Now I still expect to see some sort of last-minute agreement over Britain’s divorce from the EU. Even if it’s a compromise that will leave almost nobody – except perhaps Theresa May if she manages to keep her job – happy with the outcome.
If I’m wrong, though, what we’ll get is an altered new round of ‘end of austerity’ Budget legislation from politicians who’ve decided they can’t implement the original plan because of their previous failure to sort out another set of rules, i.e. Brexit.
You see why I reckon that most of the time we’d be better off without a government.
Even if the Budget proceeds without a hitch, though, the OBR’s growth forecasts will hardly get pulses racing.
We’re looking at annual GDP rises of only around 1.5% a year for the next five years, according to the government’s finances watchdog. And the UK is still expected to be borrowing money every year until at least 2023.
Not great. Of course, the OBR might be as wrong with its forecasts over the next five years as it’s been recently. In which case, a few more bets could be down the drain.
But if Brexit blues do blow over, what am I worried about then?
I’ve more-than-slightly slagged off the OBR today. But in its favour, last year it produced this stunning chart:
It’s a 10-year throwback to the time of the great financial crisis.
The names along the bottom axis are the great and the good of the financial forecasting community (including HM Treasury in red) with their March 2008 estimates for GDP growth in 2008 and 2009.
The black line on the extreme left shows what actually happened.
Only one of the assembled company – Economic Perspectives – was anywhere near getting it right. Remember, this truly horrendous failure to forecast recession was just a decade ago.
When will the next recession – or indeed depression – turn up?
I’ve no idea. But as the OBR notes, there have been seven UK recessions over the last 61 years. On that basis, there’s one due fairly soon.
Chances are that it wouldn’t be just the UK being hit, though. It would likely be a global event, prompted by downturns in the US or China – or both.
And if that happens, we’ll have a lot more to fret about than either the Budget or Brexit.