The Budget contains some welcome measures, especially on childcare costs and raising the personal tax allowance to £10,000 next year. The latter is a Liberal Democrat commitment being delivered in government, and will go some way to ease the spiraling cost of living faced by millions of households, but it’s nowhere near bold enough to tackle the deep economic problems the UK faces.
This should have been a budget for growth – where was the action required to get the banks lending, builders building and investment flowing? The small increase in capital spending (to begin not now but in 2015) is on nothing like the required scale, as it is funded by cuts elsewhere in the budget – not borrowing at low rates as we’ve advocated, nor new monetary instruments, which could have provided a significantly bigger investment boost. Of particular concern is the new limit on ‘annually managed expenditure,’ which signifies further painful reductions in the welfare budget are to come in the spending review this June – the consequence of a misguided attempt to remain fiscally neutral.
The Office of Budget Responsibility confirms that substantial growth will not return to the UK economy for some time yet, prolonging the squeeze on living standards until well after 2018. Without a significant change in public policy to restore investment and confidence, even this seems unlikely. Instead of an attempt to boost sub-prime mortgage spending through yet more loans and guarantees, we should have had a huge programme of house-building, as Vince Cable recently advocated.
The Social Liberal Forum is keen for Liberal Democrats in government to continue to press for a macro-economic policy suited to boosting the economy – there is widespread appetite within the party for a significant change of approach. Only by tackling the vast underlying challenges we face – that this budget skirted around – will we ensure prosperity returns to those who’ve been hit hardest by this ongoing crisis.