I welcome the extension of help to individuals and companies. All the time people cannot go to work or businesses cannot trade and all the time that there are pandemic regulations and social distancing that impede people going about their normal business, it is vital that the Government offer alternative income and support. I am pleased that the Government came up with a big response originally, and it is necessary to carry it on for as long as these restrictive measures remain in place.
I also welcome the fact that the OBR has decided that we will be borrowing Ā£39 billion less in the current year than in its recent November forecast. I think that serves as a reminder or a warning to all those trying to debate the economy based on a set of figures; these are very uncertain times. It is difficult for the official forecasters to come up with accurate figures, and we should be especially suspicious of ideas based on what the deficit might be in a couple of yearsā time. This deficit will fall very rapidly.
Assuming the great success of the vaccines continues, and assuming that we can relax and get people back to normal work and normal business within a few weeks or months, we will then see the deficit come down because so much of the deficit has been caused by the special pandemic measures.
The figures confirm that around Ā£250 billion of extra spending in 2020-21 was the direct result of the special pandemic measures, and that there will be another large figure in the first part of 2021-22. We want to see the end of all those special expendituresābecause people have better-paid jobs to go back to, businesses are trading successfully, and there is turnover and profit coming back to our small and large businessesāand so much of that expenditure was a poor substitute for being able to do the thing itself.
There was of course some loss of tax revenue, and again, we would expect to see tax revenue rise quite rapidly as soon as people can trade properly again, as soon as there are more transactions in the economy, and as soon as we are making more goods and providing more services to each other, as I am sure we will. So the Chancellor is right to say that the crucial step to getting the economy back to health, the deficit down and the numbers back into shape is to promote a recovery. He is right to want more investment in our economy.
The public sector numbers show public sector investment going up, and it is very important that good projects are chosen that will have a good payback. It is very important, too, that the tax incentives are correctly honed so that we get the boost in private sector investment that we want. The Chancellor is also right not to rush out any new fiscal rules.
We will need a new set of rules in due course, however, and they must be geared to a faster growth policy and a policy about levelling up and investing in great projects around the United Kingdom.
That must be linked to sensible discipline on public finances and, above all, to keeping the good control of inflation that we have had for a number of years now. It is reassuring that the OBR and the Bank of England are very confident that inflation will remain low, which gives us a bit more flexibility, but we need to watch that inflation situation.
I note that the OBR thinks the balance of payments is going to be weak for two or three years, and that provides an opportunity. In the post-Brexit world there are huge opportunities that we can exploit more easily in import substitution. Why do we not, for example, with our great green policies, plant many more trees and make sure there is much more sustainable husbandry of trees so that we replace many of the timber imports?
And while we are about it, can we replace the pelleted timber coming in to produce power at Drax with home-produced sustainable timber? We should also put in sufficient electricity capacity, because if we want an electrical revolution we will need a lot more capacity, and while we are doing that we should get rid of the imported electricity through the interconnector, which we rely on more and more for no particular reason.
We used to be able to have all our own power provided in the UK with a decent margin and I suggest we return to that. We can do a lot more on food and fish, too. I urge the relevant Ministers and Departments to promote food and fish, and also to make sure that the grant schemes and regulations that are now under our control are used to increase our capacity so that we start to substitute many of the items that are coming in.
A recovery needs more orders and more investment in capacity; it requires excitement over new products and services and the restoration of old products and services. That must be the single thing that most motivates all the relevant Ministries and Government policy, because the only way to get this very big deficit down is to have more revenue and less expenditure, and the only legitimate expenditure to cut is all the spending we have been doing as a poor substitute for a decent economy with well-paid jobs and successful businesses.
So I say, letās go for growth; letās do everything we can to promote more things being made and grown and sold within the United Kingdom. There are huge opportunities, and that will be good economics.
March 5, 2021
Which are the āgreat green policiesā? Abolition of ICE powered cars? Retrofitting homes with electric appliances to replace satisfactory gas appliances?
I agree that growth should be strong going forward so why arenāt you challenging the deferred Corporation Tax increases based on evidence that increasing rates means a lower tax rate and slower growth please?
March 5, 2021
Still decimating freelancers with IR35, still failing to provide most with any covid safety net, still taxing foreign nationals here on work visas significantly less than Brits.
March 6, 2021
@Iain gill; IR35 does no such thing, it targets fake freelancing, those people who for taxation purposes should still be on the payroll of the company they are (often) solely) contracted to.
As for taxation of foreign nationals here on work visas, tell me, if these foreign nationals were to pay the full rate of tax would they be allowed all the same benefits etc as British nationals are?
March 6, 2021
this is a joke right?
March 6, 2021
@Iain Gill; What do you think is a joke?
March 5, 2021
The UK has most radical act of law in Europe with the Climate Act
Stop your moaning MiC
March 6, 2021
@MPC; No one is being forced to replace their non life expired existing cars or gas boiler etc!
Stop being so Luddite like, or would you have also complained when new technoligy allowed people to be rid of open coal fires and back-boilers…
March 6, 2021
Never fear Jerry, it’s coming… you can’t go abroad now without “papers please” good reason.
This Government is flexing its “authoritarian” muscles expect more to come š
Are you really saying the current generation of electric vehicles is new technology that we should embrace?
March 5, 2021
“…but we need to watch that inflation situation.” – we certainly do, especially as J. Powell’s Federal Reserve apparently (remarks reported yesterday) is willing to let it rip.
(Powell said the 2 per cent. target (the merits of which have never been satisfactorily explained) remains but there having been years of undershooting, he was content for there to be overshooting in future. This is all the more troubling as there is appreciable inflation now (in housing costs particularly and financial assets) but the Federal Reserve does not see those and include them in its measure. We do not want to be importing U.S. inflation nor aping its economic mismanagement.)
March 5, 2021
Public sector projects are rarely seen to be profitable. What is the projection for HS2. Dare you tell us what the ultimate size of the investment will be. When will it open for business. What will it cost to use and when will it produce a profit. As a great silence hangs over the above, who in the real world would finance it. It is a legacy of an EU instruction, followed by a past supine government to please their then masters. It now has a momentum that the current government can not afford to stop financially. This may be a dire example, but what public sector projects do you have in mind that will be profitable.
The only steps that government should take should be directional and financially supportive. For instance HMG should say we wish to be self sufficient in power generation by 2035. HMG will open financial doors and planning permission doors to ensure that anyone wishing to invest in UK technology will not be encombered by dissenting voices or disruptive protest. We have the technology to do it green, get it done.
How do we get a boost in private investment if CT is hiked from 19.5% to 25%. It should be going in the opposite direction. That is called an incentive to invest if the prospect is 14%.
For government I do not see borowing at the current level a problem. First because it ends when all are back working. Second because HMG will have borrowed long term at current rates. They are fools if borrowing rates can escalate to be vulnerable to the next economic crisis.
I did not see in this budget the level of incentive necessary to produce the explosion in investment we need. It had its good bits but lacked the “England and St George” drive necessary.
March 5, 2021
‘Dare you tell us what the ultimate size of the investment will be. When will it open for business. What will it cost to use and when will it produce a profit. ‘
I’ll give you my guess. Ā£120bn / 2032 / Ā£250 return / never.
March 5, 2021
I see a very clever tax hike in future years by Sunak.
Income Tax Personal allowance frozen, Tax thresholds frozen – increased revenue forecast by OBR.
Gain from 2022 rising over 4 years:- Ā£1.5bn / Ā£3.6bn / Ā£5.8bn / Ā£8bn.
So if and when recovery takes place significant gains in income levels and number of workers will produce numbers way in excess of the above gains.
March 5, 2021
I take it JR you were and still are, a big fan of that Fantasy Island TV Series (1977ā1984). You should team up with Jacob Rees-Mogg and form a comedy act that could rival the Two Ronnies and Morecambe and Wise. š
March 5, 2021
Have you seen the latest poll showing Sir Kneel’s Labour ten points behind the Conservatives.
March 5, 2021
I can only disagree with your comments about the EU (but I would disagree with you about any thing you say about the EU any way)
Other than that every thing else appears spot on.
March 5, 2021
Update from yesterday ā in full view of the Chinese cranes being delivered to Liverpool docks, Cammell Laird has laid off (not furlough) 180 shipbuilders today!!!
I just wonder what import tariff the Chinese have paid for 10 cranes and the cost to the country of 200 jobs lost???
March 6, 2021
I wonder if those private sector new unemployed are hsappy about public sector getting 1+ pay rise
March 5, 2021
And while we are about it, can we replace the pelleted timber coming in to produce power at Drax with home-produced sustainable timber?
Burning pelleted timber is bonkers wherever it comes from (delivered no doubt on diesel truck and ship and chopped down with petrol chain saws? You might as well burn natural gas or even coal (which is just old wood anyway). Better still just to get fracking. Ditch the insane war on plant food religion. The solutions only save trivial amounts of CO2 and anyway the trees will grow better with more CO2. Get real you daft virtue signalling art graduates.
March 5, 2021
It is frustrating that this government has espoused green policies without making any changes to generating capacity. Windmills and solar just don’t cut it. SMRs would appear to be the obvious route to energy independence. So why is the government silent on this topic?
March 5, 2021
John Hatfield
“It is frustrating that this government has espoused green policies without making any changes to generating capacity.”
………..or indeed without asking us first.
March 5, 2021
Entrepreneurs and other wealth creators from around the world will have been listening to this Budget. This is the message they will have received:
The policy stated by every Chancellor, Conservative or Labour, in every Budget for many years until 2020 and 2021 of making the UK an attractive place for investment is now at an end.
If you were considering investing and creating high paid jobs in cutting edge technology here, you will see that we will be increasing corporation tax from 2023, so you may now wish to instead invest in a country with a lower corporation tax rate. You can forget about our previously announced policy of steadily reducing corporation tax. The reason given by the Chancellor was that it is āonly fairā that your business, if you decide to invest here, should pay for the economic cost of the government having forced UK-based businesses to close.
You will appreciate that in view of the cost of the lockdown tax cuts may not have been possible. But there are lots of plans for selective government intervention and support for those types of activities we like, akin to the āpicking winnersā policy of past governments which have always failed. Likewise, despite our justification for the corporation tax rises to be imposed on you, we have managed to somehow find plenty of money for government spending on new projects. We are āproudā (to use the Chancellorās word) to have spent so much money fighting coronavirus. We shall send the bill to taxpayers, but you will have noted that the strategy of getting the deficit down by freezing personal tax allowances will only work if incomes grow, by virtue of inflation or other reasons.
If that were not enough, we have shown our determination to maintain our status as the second most complicated tax jurisdiction in the world, with several complexities added to the tax system.
It had been predicted in some of the media that the Chancellor would cut red tape for businesses. But the Sir Humphreys pointed out that this would entail a cut in the number of Civil Service jobs.
In other words, this was a Budget for short term consumption, not one for long term investment. We have rejected any idea of involving people like you in rebuilding from the Covid crisis for the long term.
To reinforce our policy, it has been reported in the media that any Conservative MP opposing any of this is likely to have the party Whip withdrawn.
March 6, 2021
Yes indeed
March 5, 2021
Keynes reborn. That noise you hear is MT turning in her grave, horrified at the shameless volte face now being undertaken by a party that has so lost its way it’s in danger of running up its own arse
Very sad because at some point in the future someone will have to pick up the cost of this backward government’s heroinesque adherence to spend now, pay later fiscal policy. This psychotic spending spree is an admission of failure and a refusal to reform born from a fear of having to confront Labour’s State vested interest and their unions
The Tory party’s become a deceit to itself
March 6, 2021
Yes
March 5, 2021
Whilst your speech is very optimistic Sir John deployment needs strict control and audit to avoid waste and criminals taking advantage of these “gifts” and handouts.
March 5, 2021
I cant quite remember the pre budget bonus or was it rise for all MP’s..
March 5, 2021
Something you and government need to get your heads round. Because the potential costs of a summer holiday in the UK have shot up markedly even more people will be looking to go abroad instead. Some mediteranean countries are today declaring that tourists with proof of two shots of covid vaccine will be allowed unrestricted access.
To date HMG has been ambivalent on the subject of vaccine visas. We need them for entering countries that accept them and re-entry to the UK. Please do not mess about with UK citizens, they have had restriction which they have accepted up to their eyebrows, activate the issue of vaccine visas now.
March 5, 2021
so agricola, after the despicable behaviour of the eu trying to punish Great Britain, are you really going to surrender your money to them as well. That’s unbelievable!
March 6, 2021
So only those UK citizens who have had the ‘vaccine’ may holiday abroad?
Vaccine visas ARE restrictions.
March 5, 2021
When is the government going to show some balls and make China pay for the cost to our economy of coronavirus ?
Or does government expect several generations of British taxpayers to foot the bill ?
March 6, 2021
So no conservative MP’s prepared to tell the emporer, the government, that it has no clothes?
March 6, 2021
So they found a job for Allegra.
Downing Street has spent more than Ā£2.6m on fitting out a new media briefing room, it has emerged.
No 10 plans to start televised daily press conferences, like those held at the White House – to be fronted by spokeswoman Allegra Stratton.
The Cabinet Office said the spending “is in the public interest” as it will “increase public accountability and transparency.”
Is there no end to this profligacy?
March 6, 2021
Were I in a position to set up a productive enterprise in the UK, say factory built housing, I would learn a lesson from the Globalistas. I would incorporate offshore, with whoever could offer stability politically and financially. I would then have plenty of retained cash to pay and pension well. Money to expand and invest without the burden of a set of houdini accountants to wage war on the tax warriors of UK government. My business plan would be part influenced by the Quakers with a tad of Ghengis Khan for cutting edge.
March 7, 2021
Really Sir John? No mention of the 25% corporation tax rate that will drive away any hope of any foreign investment, and negate any incentive to grow existing companies? And no mention of the failure of the 130% ‘super-deduction’ to include new buildings or R&D? This was a budget that was promising to be genuinely positive but then fell flat on its face at the last hurdle. What a terrible disappointment. It will NOT revive the British economy.
That 25% corporation tax must go. Contrary to Sunak’s deceitful or ignorant (you choose which) comments comparing Britain’s corporation tax rate with other countries, our major competitors are NOT the G7 countries of Italy, or Japan, or the US – our main competitor when it comes to trying to attract inward investment is Ireland. Same language, same timezone, same culture – but a corporation tax rate of HALF what ours will be. It doesn’t take a genius to guess which country will look more attractive to large foreign corporations – and it won’t be the UK. Is Sunak really too stupid to see this??
March 9, 2021
Why would Sunak announce a future tax rise unless he is tipping off businesses to leave the UK well in advance?
The businesses that follow low corporation taxes such as those in Southern Ireland are now informed to quit the UK prior to April 2023 when it goes up 6% to 25%. OK, he may trap some British family businesses but what is he saying “offshore now”. Why would he do that?