Kwasi Kwarteng's ‘mini-Budget', his first outing in the Commons as chancellor, has certainly put the cat among the pigeons.
While no one can accuse Liz Truss of being backward in coming forward when discussing her plans for the economy (indeed, it is why I and many of my parliamentary colleagues supported her rival in this summer's leadership election) the arrival of Trussonomics – a low tax, deregulated market with an unflinching, unabashed focus on boosting growth – has nonetheless proven a rude awakening for many.
Taking bold and urgent action in the face of inflationary pressures and substantial cost of living concerns was absolutely the right thing to do. But introducing such a significant stimulus through a fiscal statement, rather than a proper Budget, has led to many of the problems we have subsequently seen. It meant the plan wasn't accompanied by an Office for Budget Responsibility (OBR) forecast, nor has it been through the mangle of parliamentary scrutiny.
For what it's worth, and despite the opprobrium, I agree with much of the thinking behind the plan. We do need to focus on growth and productivity, which can drive investment in public services but have long stagnated. Our planning system is frequently too slow and fragmented, and I have no qualms challenging Treasury orthodoxy in the same way that all thinking should be routinely prodded and poked to ensure it remains fit for purpose and stands the test of time.
I also warmly welcome a number of the announcements included in the plan, not least on IR35 and stamp duty, which is an economically unproductive tax and creates real sclerosis in the market. Without keeping a handle on inflation, however, the benefits this cut would ordinarily deliver will soon be eroded, while other proposals, like the decision to scrap the 45p top rate of income tax at a time when many less well-off are hard-pressed, was badly thought out.
Instead, the failure has been in the delivery of the Truss-Kwarteng vision and the communication of it. With very little meat on the bones, and so many questions about the long-term plan remaining unanswered, it is no wonder the markets are spooked. People are understandably concerned about the inflationary effect of unfunded tax cuts, and the Government should be moving at breakneck speed to restore confidence and provide reassurance, including by expediting its mid-term fiscal plan.
As a Conservative, I believe in a low-tax economy. But I also believe in sound public finances and respect for our institutions. Self-avowed free marketeers should clearly listen to the markets they are so keen to unshackle.
The streamlining of local growth funds to simplify the system for councils appears a positive step, while the significant announcement on investment zones provides a lot to mull over. The sticking point, of course, will depend on what form the proposed planning liberalisations take. Any move to wrestle decision-making away from local authorities and impose unwanted development onto communities will be strongly resisted, both in Parliament and at a local level.
Much of this begs the question: could these ambitions not be delivered just as well, if not better, by devolving more powers to local regions and giving local leaders the tools they need to incentivise growth? Until further details are announced, the jury is still out on that one.
On housing, the direction in recent years, although never fully brought to fruition, has been to increase supply through a more consensual and tailored form of development, where homes are built at the right height, in the right style and in the right places, rather than through stock, run-of-the-mill plans, regardless of location. While I am supportive of efforts to accelerate development and supercharge infrastructure, that cannot be done by doing away with the necessary checks and balances that protect the environment and ensure building safety. Again, we await further details that will apparently be published later this autumn.
Finally, local authorities will understandably be concerned by the lack of certainty on local government funding, not assuaged by the reversal of the Health and Social Care Levy which, in spite its faults, would have undoubtedly helped ease the burden. Rising costs and increase demand mean that councils in London alone will need to find £400m in savings this year, rising to £700m next year. A sustainable package is desperately required.
I think the District Councils' Network spoke for all of us in what was a rather understated conclusion to its corresponding press release: ‘We are keen to learn more about the Government's proposals.' Amen to that.
Sir Bob Neill is MP for Bromley and Chislehurst, a former local government minister and chair of the Commons Justice Committee
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