Voices: The Budget will bring ‘a lost decade for living standards’ – haven’t we already had one of those?
The success of a Budget is measured in how long it takes to collapse. Some arrive pre-collapsed, others collapse in real time. In recent years, success has been if they haven’t collapsed by the time the Office for Budget Responsibility publishes its analysis, revealing in very clear detail all of the horrific things the chancellor deliberately chose not to say.
Kwasi Kwarteng’s mini-Budget didn’t suffer this fate, because he and Liz Truss wisely chose to block the Office for Budget Responsibility from analysing it, and just to be doubly careful, they also sacked the head of the treasury department, who they probably deep down knew was going to tell them that it was going to collapse with pyrotechnic effect but they’d rather not hear.
A very successful Budget is one that is still vaguely intact by the time economists, journalists and occasionally government ministers have assembled the morning after to hear what Paul Johnson, the of the Institute for Fiscal Studies, makes of it all, in his now traditional post-Budget briefing.
And if it hasn’t collapsed by the time Mr Johnson has finished with it, then it can be officially branded the most successful Budget of all time, on the basis that such a thing has never happened before.
It’s hard to tell if Jeremy Hunt’s Budget has or hasn’t collapsed. Its standout policy, the extension of 30 hours free childcare to one- and two-year-olds, is still just about up on its feet – but it’s looking increasingly unsteady, and you’d be brave to rule out some kind of tumble, the administration of a cold compress, and the inevitable yellow form for Mr Hunt to sign when he comes to pick it up.
When it landed in the newspapers the night before the Budget, it was standing tall and proud. The expectation was a direct copy and paste job of the existing provisions for three- and four-year-olds but it’s inevitably not that simple. It’s not merely that a two-and-a-half year delay before it’s fully in place (a time long after the next election and quite probably a new party of government).
Paul Johnson has done the numbers, run up the graphs, and there are even more concerns. At this point you may wish to locate your nearest tiny violin, but, bear with me here, if just one parent earns more than £100,000 they will receive no free hours at all. (The current system for three- and four-year-olds is 30 free hours if you’re on under £100,000, 15 if you’re on more).
Now, the reservoirs of public sympathy for those on more than £100,000 are not especially deep, but it is nonetheless quite remarkable that the country’s leading economic think tank has calculated that, if you have two children aged between nine months and 35 months old – not exactly uncommon – then the best thing you can do, if you earn anywhere between £100,000 and £134,000, is wander into the boss’s office and ask for an enormous pay cut, down to £99,999.
It’s probably not what your average doctor, or software engineer or what have you imagined themselves doing when they saw the news, finally, about affordable childcare, ringing up HR and arranging a meeting about massively docking their wages.
And of course, you can say it doesn’t matter, but the whole point of the Budget – the whole unifying theme – was about getting people back in to work, about removing the disincentives. Could anything be more disincentivising, to a young parent, in their early to mid-thirties, say, and earning £70,000 or £80,000, than knowing that if they go for that big promotion and actually get it they’ll have less money than when they started?
Jeremy Hunt’s other big announcement was scrapping the lifetime allowance of pensions, which he had calculated was incentivising too many NHS doctors in their mid-50s into taking early retirement. And that’s no good, because he rather needs them to be working, paying taxes and generally digging him out of the big lack-of-money-shaped hole in the public finances.
So it is a little bit peculiar that he has also incentivised young, ambitious people, at the point in their lives when they need as much money as they can possibly get hold of, to urgently tell the boss to stop paying them so much because it’s bleeding them dry.
He also announced he’s going to pay nurseries a higher rate for the “free” hours they provide. Where is this money going to come from? Well, there will be at least a fair chunk of it will not be being paid in income tax anymore, but will instead be going to HR managers’ bonus pools, congratulating them on reducing staffing costs so dramatically without actually having had to sack anyone. Unless they’ve got young kids of their own, of course.
Mr Johnson’s main analysis came down to one phrase. He had looked at the underlying data, he forecast, yet again, high taxes lasting a hell of a lot longer, combined with the unaffordability of housing, and all of the other terrible realities we have become almost inured against, and predicted “a lost decade for living standards”.
Which is pretty disappointing, because according to other recent bits of IFS analysis, we’ve already had one of those, starting in 2008, which is still ongoing. Those two lost decades of living standards add up, technically, to 25 years.
It’s quite a long time to lose, that. Longer by a very long way than your average life sentence. It is hardly surprising that young and indeed middle-aged people all over the country are wondering what exactly it was that they did to deserve it.