... and how recent events have thrown the structured timetable into disarray.
With a Fiscal Statement or ‘mini Budget’ planned for 23 September, it seems an opportune time to look back at the history of Budgets, and indeed why we have these events at all.
Income tax was introduced by William Pitt the Younger in 1798 to fund the Napoleonic Wars. It was abolished by Addington in 1802 and then reintroduced a year later, before being abolished in 1816 as a result of a defeat for the chancellor a year after the Battle of Waterloo, when the tax was repealed with ‘a thundering peal of applause’. It was reintroduced by Peel in 1842, with the intention that it would be temporary – but it is very much still with us, and has formed an increasingly important part of the fiscal arithmetic over the years.
We should, perhaps, be thankful that Budget speeches are not as long as they used to be. Gladstone’s speech in 1853 took almost five hours, and as well as a history of income tax, included his plans to abolish it within seven years. This was, however, very much a case of ‘jam tomorrow’ and income tax continued until the general election of 1873, when both parties promised to abolish it. Disraeli was elected and promptly failed to follow through on his promise – not the first, nor the last, time that a politician has failed to deliver on a manifesto pledge.
Traditionally, the Budget was held in March, so that tax changes could be announced prior to the beginning of the new tax year on 6 April. The Budget is, of course, an opportunity for a chancellor to stand in the limelight – and few have been able to resist the temptation. One chancellor – I think it was Nigel Lawson – said in a speech some years later that he regretted having ‘tinkered’ with the tax system.
In 2011, reform of the parliamentary timetable led to a second fiscal event, the Pre-Budget Report or Autumn Statement. While in theory this was meant to set out the broad economic status and the government’s spending review, it not infrequently also included tax changes, so it began to feel as if we were getting two Budgets in most years.
In November 2016, the chancellor, Philip Hammond, said that we would move to having a single Autumn Budget, and, in December 2017, a new Budget timetable was announced. The plan was to announce policy in the Autumn Budget and then have a period of consultation in the Autumn and Spring, with draft legislation in July and the Finance Bill the following Autumn. Whilst this was a more structured approach, giving more time for consultation, it has led to something of a treadmill for those who regularly respond to consultations: no sooner is one cycle over than the next one begins. And it is noticeable how many consultative documents are issued a week or so before Christmas, with a deadline early in the New Year.
The general election in 2019 threw this structured timetable into disarray. The Budget planned for 6 November 2019 was postponed to 11 March 2020, which turned out to be less than a month after Rishi Sunak was appointed chancellor, and with the shadow of Covid-19 hanging over his announcements. Very shortly afterwards, it became clear that extraordinary measures would be needed to support businesses and individuals during the period of the pandemic, and ultimately there were three further fiscal statements in 2020: ‘a plan for jobs’ on 8 July, the ‘Winter economic plan’ on 24 September, and an ‘economic statement’ on 5 November 2020. The Autumn Budget planned for late 2020 was postponed to March 2021, as it was clear that the pandemic was far from over. We then had the Autumn Budget and Spending Review on 27 October 2021 and a further Spring Statement on 23 March 2022.
What is astonishing, from a historical perspective, is the size of the fiscal adjustments which have been made outside the normal Budget cycle. If we look back at Philip Hammond’s last Budget on 29 October 2018, the total tax policy measures added up to a net reduction in taxes of about £5bn, almost all of which relates to the changes to the personal allowance and higher rate thresholds. The Autumn Budget 2021 had tax policy decisions totalling a net increase of £65bn, primarily due to the imposition of the health and social care levy. And the Covid measures involved spending some £169bn, while the energy support package is expected to cost some £100bn, with full details expected to be announced on 23 September along with other measures.
It is surely time to go back to a more predictable Budget cycle, with changes announced annually and properly scrutinised by Parliament. Perhaps the new chancellor could have as his motto ‘making tax boring’, for a few years at least.
... and how recent events have thrown the structured timetable into disarray.
With a Fiscal Statement or ‘mini Budget’ planned for 23 September, it seems an opportune time to look back at the history of Budgets, and indeed why we have these events at all.
Income tax was introduced by William Pitt the Younger in 1798 to fund the Napoleonic Wars. It was abolished by Addington in 1802 and then reintroduced a year later, before being abolished in 1816 as a result of a defeat for the chancellor a year after the Battle of Waterloo, when the tax was repealed with ‘a thundering peal of applause’. It was reintroduced by Peel in 1842, with the intention that it would be temporary – but it is very much still with us, and has formed an increasingly important part of the fiscal arithmetic over the years.
We should, perhaps, be thankful that Budget speeches are not as long as they used to be. Gladstone’s speech in 1853 took almost five hours, and as well as a history of income tax, included his plans to abolish it within seven years. This was, however, very much a case of ‘jam tomorrow’ and income tax continued until the general election of 1873, when both parties promised to abolish it. Disraeli was elected and promptly failed to follow through on his promise – not the first, nor the last, time that a politician has failed to deliver on a manifesto pledge.
Traditionally, the Budget was held in March, so that tax changes could be announced prior to the beginning of the new tax year on 6 April. The Budget is, of course, an opportunity for a chancellor to stand in the limelight – and few have been able to resist the temptation. One chancellor – I think it was Nigel Lawson – said in a speech some years later that he regretted having ‘tinkered’ with the tax system.
In 2011, reform of the parliamentary timetable led to a second fiscal event, the Pre-Budget Report or Autumn Statement. While in theory this was meant to set out the broad economic status and the government’s spending review, it not infrequently also included tax changes, so it began to feel as if we were getting two Budgets in most years.
In November 2016, the chancellor, Philip Hammond, said that we would move to having a single Autumn Budget, and, in December 2017, a new Budget timetable was announced. The plan was to announce policy in the Autumn Budget and then have a period of consultation in the Autumn and Spring, with draft legislation in July and the Finance Bill the following Autumn. Whilst this was a more structured approach, giving more time for consultation, it has led to something of a treadmill for those who regularly respond to consultations: no sooner is one cycle over than the next one begins. And it is noticeable how many consultative documents are issued a week or so before Christmas, with a deadline early in the New Year.
The general election in 2019 threw this structured timetable into disarray. The Budget planned for 6 November 2019 was postponed to 11 March 2020, which turned out to be less than a month after Rishi Sunak was appointed chancellor, and with the shadow of Covid-19 hanging over his announcements. Very shortly afterwards, it became clear that extraordinary measures would be needed to support businesses and individuals during the period of the pandemic, and ultimately there were three further fiscal statements in 2020: ‘a plan for jobs’ on 8 July, the ‘Winter economic plan’ on 24 September, and an ‘economic statement’ on 5 November 2020. The Autumn Budget planned for late 2020 was postponed to March 2021, as it was clear that the pandemic was far from over. We then had the Autumn Budget and Spending Review on 27 October 2021 and a further Spring Statement on 23 March 2022.
What is astonishing, from a historical perspective, is the size of the fiscal adjustments which have been made outside the normal Budget cycle. If we look back at Philip Hammond’s last Budget on 29 October 2018, the total tax policy measures added up to a net reduction in taxes of about £5bn, almost all of which relates to the changes to the personal allowance and higher rate thresholds. The Autumn Budget 2021 had tax policy decisions totalling a net increase of £65bn, primarily due to the imposition of the health and social care levy. And the Covid measures involved spending some £169bn, while the energy support package is expected to cost some £100bn, with full details expected to be announced on 23 September along with other measures.
It is surely time to go back to a more predictable Budget cycle, with changes announced annually and properly scrutinised by Parliament. Perhaps the new chancellor could have as his motto ‘making tax boring’, for a few years at least.
