Managing bad news is a core, if under-rated, political art, but the run-up to yesterday’s Budget delivered an object lesson in how not to do it.
When the Office of Budget Responsibility’s forecasts were published before the Chancellor had even stood up in the House of Commons (sending gilts into a temporary tailspin) we could all have been forgiven for thinking panto season had arrived early.
Budget teasers leaked to the media in advance of the big day are nothing new. They are a way of helping governments control the news agenda, manage expectations, and cushion the landing of painful messages ahead of time.
However, the briefings, retractions and prevarications over recent weeks left the Chancellor looking hapless and exposed, and with no rabbit to pull out of the hat at the Despatch Box yesterday afternoon.
The cack-handed way in which speculation has been managed has only damaged the government’s reputation and strengthened the hand of its internal and external critics. And it has inflicted real economic damage, delaying investment decisions and undermining market confidence over the last few months.
The headline in Tuesday's Financial Times - “Currency traders bet against sterling ahead of Budget” – exemplifies this self-inflicted harm. The parliamentary Labour Party knows its government is living on borrowed time.
Although this was a more bullish, less diffident, Rachel Reeves than the woman who delivered last year’s Budget, the body language and facial expressions on the benches behind her told a different story.
Labour MPs can see that the UK is locked in a holding pattern of low growth, low productivity, high borrowing and high debt and that yesterday’s announcements will do little to shift the dial. Labour MPs have tended to be more reluctant to turn on incumbents than those of the official opposition, but it’s increasingly hard to see the party restoring its electoral fortunes under the current leadership.
In policy terms, this Budget was as notable for its omissions as its inclusions. The Energy Profits Levy, which is stifling investment and driving premature decline in the North Sea, remains stubbornly intact, despite intensive lobbying by industry.
Meanwhile, the flagship Clean Energy strategy, heralded only a year ago as a driver of economic growth and industrial renewal, merited hardly a mention. A modest increase in the Scottish block grant won’t compensate for policy choices that inhibit growth and deter investment.
Elsewhere, the ongoing freeze on tax thresholds means ever-growing numbers of middle earners will be pulled into higher-rate tax bands over the coming years.
Middle and higher earners who have taken advantage of salary sacrifice schemes to boost their pension savings will see the tax-free limit slashed to £2,000 from 2029 onwards. Salary sacrifice has been a useful policy lever to encourage those with disposable income to ‘do the right thing’ with it, whether by incentivising those extra pension contributions, or by nudging us towards electric vehicles.
With the widely trailed reduction in the cash ISA savings limit also confirmed, this was definitely not a budget for savers. It could also have implications for financial services providers. Notably, there could be unintended consequences for mortgage providers, some of whom depend on savers to finance their mortgage lending.
As the festive season approaches, the middle is certainly going to be feeling squeezed, with or without the mistletoe. There’s not much to celebrate in the Budget, and any lingering goodwill towards the government has been squandered by its failure to live up to the hopes and expectations of an exasperated electorate.
There may not be much Christmas cheer about, but I suspect the political pantomime will run for a while yet.