Reflections on the Budget
17 Apr 2002
Before the Chancellor got up to deliver his Budget Statement, I looked to see who was sitting near him. This can give a clue to the content of the Budget. The Health Secretary was very close indeed – no surprises there, as he was tipped to be a big winner. But what was the Home Secretary doing next to the PM? And where was the Education Secretary? David Blunkett was not a big winner, but in view of reports in to-day’s papers of a rift between him and the Chancellor, he was on parade to show they were good friends. And the Home Secretary nodded and smiled at all the right places. The Education Secretary was almost at the other end of the bench – perhaps she is not going to get as much as she thinks she needs for education, and the contrast between the treatment for health and that for education is going to make life difficult for her.

Before he got up to speak, the Chancellor put three large volumes on top of the despatch book to bring his notes closer to his face, and to avoid the need to have to look down the whole time. And no one could fault the delivery – confident; or the speech – well constructed.

The opening section reverberated with the words “caution” “discipline” and “prudence”. Certainly, he is not going to take any risks and he didn’t. However, he assumes that the golden rules he has adopted have removed any prospect of recession – domestic or apparently worldwide. I hope he is right, but it must be the case that if there is a slowdown in the pace of growth of the economies we sell in to, that our domestic economy will be affected.. We have had sustainable growth for so long we have grown to believe it can never come to an end. I hope it doesn’t, but planning the economy for the next ten years on the basis of no recession is certainly bold.

The Chancellor loves to micro-manage the UK economy. He will analyse its social and economic problems and come up with specific solutions. The problem with this is that life becomes exceptionally complicated as individuals and companies grapple with a growing number of schemes, that often interface badly with each other. As I listened to the new tax credit schemes for pensioners and married couples caring for children, I wondered how many of my constituents would cope with the forms necessary to complete them.

Over time, there may be a reaction against the Chancellor’s approach. Individuals and companies may prefer a greatly simplified tax system, with fewer allowances , higher starting rates for taxes and a much lower standard rate.

On the NHS, he polarised the options open to the country – private insurance, social insurance or a tax funded NHS. I happen to prefer a mix of the two, but the Chancellor did not focus on this. I welcome the extra money promised for the NHS and as the Chancellor said that the extra money would have to be matched by results, I asked where I had heard that before. In July 1998, when the Chancellor delivered his first Comprehensive Spending Review. We were told then that there would be Public Service Agreements, linking extra funds to improved performance. But it didn’t happen. So why should it happen this time? This is the risk for the Government. They have put all their eggs in one basket; I am not sure there will be the step change in the quality of the NHS that we have been led to expect; if not, there will be growing interest in alternative methods of delivering health services.

The extra money for the NHS is being funded by an increase in National Insurance. Others are more expert than I am at the administration of National Insurance, but it sounds a nightmare to raise an extra 1% on all earnings over £4000, along side the existing system of raising a larger percentage on a narrower band.

In his reply, Iain Duncan Smith accepted the challenge. He criticised the raising of taxes to pour money into an unreformed NHS. The next General Election looks as if it will be fought on the NHS.
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Copyright Sir George Young Bt. 2015