Parliament will have every opportunity to debate the progress of the Brexit negotiations over our future relationship with the EU. Right now Parliament needs to show resolve to get on and send the letter under Article 50. It is annoying many on the continent that the UK has delayed this process. The government is right to want a simple unamended Act of Parliament to allow the letter to go, to show that Parliament is united behind the democratic wishes of the public as expressed in the referendum. That is the way to increase the chances of a better deal for our future relationship. If Parliament seeks to bind the government it will be seen as a weakness by the rest of the EU in the talks that follow.
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A budget for Brexit
The Chancellor intends to move to one budget a year. He also made clear that budget will be each Autumn. The budget we have just witnessed was designed to change little, and to launch various consultations ahead of the main event. It is therefore a little unfair of some to complain that the March budget did not set out what he intends to do post Brexit, nor did it herald and develop the economic opportunities Brexit presents. Let’s hope that comes in the autumn.
Over the next few weeks I will include some articles on this site looking at the opportunities in various departments and sectors. The first general point to make in today’s opening article is that post Brexit the government will have more money at its disposal to cut taxes, increase spending or reduce the running deficit, thanks to the cancellation of our substantial net contributions. The balance of payments will get an immediate and substantial continuing boost once we cease making those payments abroad for our financial contributions. As the balance of payments deficit has been all too large during our years in the EU and especially in recent years, this will be a welcome improvement.
The Leave campaign by way of illustration of the advantages of cancelling the payments said it could be spent on the NHS. They always made clear it would in practice be up to the government of the day to decide what to do about the saved money. As part of the Vote Leave campaign I set out a detailed possible post Brexit budget, which combined increased NHS spending with more money for social care and a series of tax cuts taking VAT off tampons, green products and domestic fuel. These proposals made it to the Today programme and the Telegraph amongst others. That illustrative budget had some worthwhile ideas in it. Indeed, the extra money for social care has just appeared in the latest budget and is welcome.
One of the big advantages of Brexit will be the restoration of our own control over taxes. The VAT cuts I suggested should be popular across the political spectrum, tackling excessive energy bills which fall hardest on people on low incomes, and encouraging more energy saving which makes sense. I would also like to see in the Autumn budget measures to cut tax rates where the rates are currently too high to maximise the revenues. It seems clear, for example, that the last Chancellor’s penal Stamp Duty rates have cut property transactions markedly, to the detriment of total revenues and getting in the way of people improving their property and tailoring their home to their latest family and income circumstances.
The European Parliament
The European Parliament reminds us they can veto or approve any EU/UK deal on the future relationship.Some of them also say they want to offer EU citizen rights to individual UK citizens who want it. This appears to be a generous offer, as of course the UK will no longer be paying in or accepting the judgements of the Parliament, Council and Court.
It is difficult to reconcile this with their wish as well to ensure insofar as they can influence it that we will not be better off out. Fortunately whether we are better off or not will be mainly up to us, based on the approach we follow when we are free to make our own decisions.
I trust the European army will not be making conscripts of European citizens.
Self employed status
I am glad the PM has agreed to delay NI proposals and has confirmed that the Chancellor will listen to concerns. They will receive a report on the wider issue of self employed status and will also consider the differences in benefits between the self employed and other employees.
I am still consulting my constituents on the issue and will welcome their views on these wider issues as well as on Mr Hammond’s tax increase proposal.I will then put suggestions to the Chancellor.
Fairer funding for schools
I along with MPs with similarly placed constituencies urged the Coalition government to narrow the large gap between the money going to schools in some parts of the country and the much smaller sums going to schools in places like West Berkshire and Wokingham. Conservatives were not able to get agreement in coalition, but did put a commitment to fairer funding in the Conservative 2015 Manifesto.
Ministers have since been working on a scheme. This is currently out to consultation. The request for people to write in on the “National Funding Formula” was first issued on 14 December. The closing date is 22 March. I am writing to remind those interested as they might like to send in their thoughts.
I have put the case to Ministers along with other MPs on several occasions. I will be having another meeting with the Secretary of State shortly about it again. The case is very simple. The main cost of education for each pupil is similar around the country, as it is based on teacher pay and other staff wages paid at national rates. Of course there should be extra money for pupils that require more support, and to recognise problems in deprived areas. There also needs to be some recognition of higher property and support costs in expensive parts of the country. The current gap between the highest and lowest funding, at more than 100% of the lowest level, is too great.
I have asked for the introduction of a new system as soon as possible, and for further transitional increases in money whilst we are awaiting a fair funding answer. The total support per pupil needs to be sufficient for decent provision. Individual schools may have other budget problems. If a school is unable to recruit sufficient pupils then its total funding will drop, and that may force it to reduce the number of subject options as it adjusts its teaching numbers to the lesser number of pupils.
In 2014-15 the per pupil funding of English schools ranged from £8595 per head in the City of London to just £3950 in the lowest funded authority. The average was £4550. Wokingham received £4125 and West Berkshire £4367.
The contact is SchoolsNationalFundingFormula.CONSULTATION@education.gov.uk
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Budget 2017 – Not much changes
Lots of money moved around in the Budget arithmetic. Practically all of the changes resulted from new forecasts. At last the Treasury and OBR have thrown off the inaccurate gloom they were enveloped in from the time of Brexit vote, and have brought their figures more into line with reality. As a result revenues leapt £10.5bn for 2016-17 compared to the November forecast! Borrowing is now scheduled to be £51.7bn instead of the £68bn estimated in November, as spending is down a bit as well. I assume they have at last got their 2016-17 forecasts broadly right, as they must know most of the numbers by now.
I raised the issue of wildly inaccurate forecasts and the danger that they drag Ministers into policy responses that are not warranted by the underlying situation.
The Chancellor himself moved very little money around for next year. He took us through a number of detailed spending pledges, itemising £5m for a commemoration for women’s voting rights, £25 million for small business rate relief recipients, £25 million for a one off pubs rates relief, and £20 million for free schools capital. The one major item which is also welcome is the £1200 million more for social care. There is also £250 million for NHS improvements.
The Budget also proposed tax changes for later years, including an increase in Self employed rates of NIC and a reduction in the tax free dividend payable from a company. I would be interested in opinions on those measures, which come in during the likely run up to the next election.
Budget Spring 2017
In the March 2016 budget the government decided to increase total public spending from £681 bn last year, to £694bn this year and to £706 bn next year. For 2017-18 we are going to need a higher total, given the pressures on social care, the NHS and schools budgets.
The argument over the budget is less about the need for some more spending on priorities than on how this will be paid for. Some of us say that as the Treasury will be able to report stronger revenues than the Autumn Statement there is no need to hike individual tax rates or find new taxes to impose. Indeed, some selective cuts in rates on enterprise would be welcome, and likely to augment the revenues. Mr Osborne’s Spring budget last year slashed property transactions with higher Stamp Duties. The revaluation of Business rates will damage some smaller businesses that face high increases with no small premises exemptions.
It is most important that the budget promotes growth, investment and more productive working, rather than taxing it more. Treasury officials are ever minded to look for new sources of income, but the Ministers are there to protect taxpayers and to be a voice of commonsense about how far we can go with increasing tax rates. The UK economy has done relatively well in 2016 and so far this year, but could do better. It will need substantial new investment in broadband, water, electricity, and transport to overcome obstacles to growth and to lift it further. Anything the budget can do to speed these ideas, the better.
With the USA planning major tax cuts and with places like Ireland and Luxembourg also offering an attractive tax package to investors and business, the UK must stay competitive.
Retail sales keep on growing
Today we will hear how non food sales in February fell. This is to take the British retail Consortium figures of sales for non foods on a like for like basis, adjusting for expansions in shop space. The overall true figure is total sales of all items grew by 0.4% on the month, with food especially strong showing growth of 2%. Non food was affected by a later date for Mothering Sunday delaying purchases compared to last year.
Many shops continue to be pessimistic, as more retail spending takes place on line rather than in shops, and as severe competitive pressures keep down prices.
How could the Chancellor help raise productivity?
The budget is billed as helping drive productivity higher. That would be a good idea. If we work smarter as a country then each person can earn more. The government seems to have in mind labour productivity in its plans, though making productive use of capital, energy and other inputs also matters and can help make a country richer if done well.
The way to encourage smarter working and higher earnings must begin with fair taxation with low rates of tax on enterprise and effort. Politicians of all parties regard work as a good, yet all agree it must be taxed. Given the volume of public service we want as a country, it is true there has to be some tax on work. It is also true that if you tax work too highly you send it abroad, you persuade higher earning people to value leisure time more, you encourage early retirement. I trust the leaks about higher National Insurance for the self employed are just Treasury officials greedy for revenue and not inspired briefing. Starting a productivity drive with a big increase in taxes on some of the most productive people in the economy is not a great idea. Small and new business offers us scope for major adjustments in our economy and improvements in its performance. It is the new fast moving smaller businesses that often pioneer the modern more productive techniques and technologies, offer the new goods and services, and use labour well. Cutting marginal rates of tax on enterprise, employment and business success will encourage more of what we need.
In both manufacturing and clerical work providing more machine power and computer power at the elbow of each employee raises productivity. UK productivity in factories in recent years has surged as elsewhere in the advanced world. What was done by hand and arm power in a sixties factory is now often done by robot or mechanical power. What was done in an office by people on typewriters, calculators and adding machines is now done by computers and electronic programmes with less human intervention. The full internet revolution has further to run to automate and take more of the routine out of office and factory working. The new jobs will be in machine minding, programming, managing and reviewing the output, and in designing and selling.
The waves of change that are often ascribed to imports and foreign competition also have been driven by automation. A more productive economy has to welcome these waves of technical progress and adopt more machine power to compete. It is then equally important that those who have lost their jobs as a result ar helped and trained to undertake the many new roles a machine driven culture produce. What can a Chancellor do to bring this about?
He can and should concentrate on helping the public sector to adopt the new ways of doing things that will be smarter, higher quality and more efficient by using computer power. Productivity performance has been disappointing in the public sector this century. He can and should with the rest of government to do more to ensure the casualties of such changes are also winners, by backing retraining and recruitment into the new more productive jobs investment can spawn.