Budget ‘24 - A Relational Alternative
By Dr. Paul Mills
Chancellor Jeremy Hunt delivered the UK government’s 2024 Budget statement on March 6th. Commentators were near-unanimous in their assessment of its lacklustre nature and depressing underlying message. With an already high debt level, significant fiscal deficit, shrinking GDP per head, near non-existent productivity growth and near-record tax burden, the Chancellor had little room for manoeuvre yet even managed to underperform low expectations. The only significant measure was a two percentage point cut in workers’ National Insurance contribution rate effectively paid for by freezing income tax allowances, thereby marginally shifting the tax burden from employment income to pensions and other sources of income. Despite engaging in the usual political point-scoring, the UK’s opposition parties also seemed devoid of big ideas and hope.
The debt-based, money-printing growth model adopted by the UK over the past 30 years has come to a standstill, with the catastrophe of lockdowns in 2020-21 the final nail in the coffin. Christians are people to be characterised by hope (Romans 5:4; 1 Corinthians 13:7), based on our faith in God’s providential control of earthly affairs and victory over the spiritual powers of evil. Therefore, to combat the mood of pessimism, here are a few ideas that the Chancellor might have deployed if he adopted a radical relational agenda to bolster marriage and families, address poverty and encourage the spreading of wealth throughout society, while discouraging the indebtedness of companies and government.
Strengthening marriage and multi-generational families:
- Stable, two-parent families are by far the healthiest context for the rearing of children, with married couples much more likely to remain in a long-term committed relationship. It is therefore in the strong financial interest of government to encourage marriage, yet hardly does so.[1] One way to significantly bolster marriage would be to allow full transferability of tax-free allowances between spouses.
- Care of the elderly is placing a growing burden on health and local authority budgets, in part due to the spatial dispersal of parents and their adult children. To help reverse the trend, a tax break could be given to working children who live in the same postal area (or within five miles) of their older parents.
Encouraging the dispersal of wealth:
- More and more estates are being dragged into the inheritance tax net due to elevated house prices and frozen tax-free allowances. An alternative to abolition would be to give every citizen a sizeable lifetime tax-free allowance for inheritance so as to give benefactors, when writing their wills, an incentive to spread wealth to those who have, thus far, inherited little.
Addressing poverty:
- A quick way to alleviate poverty would be to eliminate subsidies to ‘renewable’ sources of electricity. These are forecast to rise to £11.5 bn[2] (c.£400 per household) in 2024-25 that are included in energy bills, with further costs accruing to taxpayers and grid operators, to produce unreliable, expensive electricity. These subsidies act as a regressive tax on the poorest households. In addition, the ‘Net Zero’ target by 2050 needs to be rescinded as it was introduced without any cost-benefit analysis and is resulting in the deindustrialisation of the UK for no purpose.
Reducing company and government debt:
- UK companies still receive tax advantages for raising funds through debt rather than equity, and recent changes to expensing for investment have made the debt subsidy even greater. The bias to debt encourages companies to run with riskier balance sheets (thereby making a recession worse) while giving tax breaks to Private Equity companies to buy up others and add debt to their balance sheets. The tax bias favouring debt over equity needs to be eliminated, if not reversed, to reflect the societal harms caused by heavy corporate indebtedness.
- Successive UK governments have set themselves long-term debt targets and fiscal rules, failed to meet them and then fudged the targets. A cross-party political consensus is needed to agree on a declining debt target that takes the interests of future generations into account.[3]
To become politically feasible, these measures would require a transformation in policy objectives towards encouraging healthy relationships, in all their dimensions, the overarching goal of government policy. National renewal is always possible, with God’s gracious intervention, and these suggestions offer some possible options for a change of direction.
18th March 2024
[1] Currently, married couples can transfer 10% of their single person’s income tax allowance to a spouse. This is currently worth around £250 pa for a basic rate taxpayer.
[2] Office for Budget Responsibility, Economic and fiscal outlook – March 2024, Detailed forecast tables – receipts, Table 3.8, https://obr.uk/download/march-2024-economic-and-fiscal-outlook-detailed-forecast-tables-receipts/?tmstv=1710455468
[3] Mills, P.S., 2015, The Looming Government Debt Crisis, Cambridge Papers, January, https://www.cambridgepapers.org/the-looming-government-debt-crisis/
The views and opinions expressed above are those of the author alone and do not necessarily reflect those of the Jubilee Centre or its trustees.
