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Budget blues

Created:
12 March 2008
Written by:
Jonathan Eley

My colleague Chris Dillow has long been of the view that the attention paid to the Budget is out of all proportion to its importance to the average investor. I couldn't agree more. And this year's was a particularly tedious exercise in deckchair-rearranging, delivered, as David Cameron pointed out, with all the panache of someone reading a telephone directory.

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A quick trawl through cyberspace reveals that the cuts to the growth forecast are the main headlines. But another look at the gilts, stock and foreign exchange markets shows that investors couldn't care less. They've known for ages that the Chancellor's forecasts are wrong. They always are. The margin of error on the Treasury's economic forecasts is so wide as to make them meaningless.

Elsewhere, the headlines are all about the willingness to legislate on plastic bags and social power tariffs, the reform of vehicle excise duty and the above-inflation increases in alcohol taxes. Again, nothing you didn't already know. The plastic bag ban was front-page news in yesterday's Daily Mail. A column on the side of today's FT was devoted to rising car and alcohol taxes. So much of the Budget is now leaked in advance that the Chancellor barely needs to bother going to the House.

There was a bit of about capital gains tax reform and taxation of non-domiciles, but all that really does is clarify some appallingly shoddy draft legislation. And then there was a myriad of tinkering and fiddling with this scheme or that, most of it largely inconsequential.

Take, for instance, the £200m pledged to "improve GCSE results". This sum represents precisely 0.2 per cent of the £81.1bn education budget. Or £34.78 per GCSE entered last year. Whichever way you look at it, it's a trivial sum of money. Yet the Budget is simply full of announcements like this, trumpted as if they will make a huge difference.

Nowhere is this more evident then in the 'green' arena. Politicians love this space, because within it they can draft more rules and impose more duties under the guise of saving the planet. All twaddle, of course. If the government were serious about cutting congestion and carbon emissions, it would invest to rebuild the public transport system so comprehensively eviscerated by the Conservatives over twenty years ago, instead of trying to bribe people into buying a Toyota Prius (which, depending on how you drive it, uses about the same amount of fuel as a small diesel, and contributes to congestion just as much as any other vehicle.)

So that's it. Drinkers and drivers will cop it this year in order to plug the holes in the public finances, all in the name of the environment and social responsbility. That's the budget summed up. And myself and Dillow aren't the only ones to feel this way; see Tim Harford in the FT.

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