IFS Zooms In Live: How to make your first Budget a success

in those days budgets were completely different because the treasury had ruthless control of the whole process and the budget document was printed about midnight the night before we were changing the document at 11:30 p.m. and yeah and the last million phone calls are you at the prince can you change that 50 million to 30 million that kind of thing excited to be here at the British library with uh an audience in front of Introduction us uh we are of course also recording this so this will go out in a day or so as part of the IFS Zooms in series I'm Paul Johnson I'm director of The Institute for fiscal studies and today we're going to be talking about surprise surprise the upcoming budget uh but we're going to try not to just repeat everything that we've said over the last uh few weeks and months about the budget we're going to try and look at a little bit more historic uh context um how should Rachel Rees make it a success it's says here 117 days since Labor uh took uh office uh 117 days between at least it will be between uh the election and the budget in that time of course we've heard lots of Big Numbers 22 billion pound black holes suggestions there might actually be a 40 billion pound um black hole of course it's worth saying that before the election we may have pointed some of this out um so we're going to think a bit about some of the challenges uh facing the chancellor what she can learn from previous budget uh and how she might be able to navigate the difficulties coming up now to do that um I am as I often am on the ifs Zooms in joined by uh Helen Miller who is deputy director at the ifs but two special guests as well who will give us a little bit more I think of a political and historical perspective on this Steven Bush who's associate editor and a columnist at the financial times and Lord uh Stuart wood who is a labor peer an oord academic and a former special adviser to Gordon Brown I think probably most importantly for the purposes um of this evening but with no um further Ado we should probably start off with just looking a little bit at the context um for uh for the budget um we uh we know that this is a difficult um a difficult moment uh as I said um this is not something that we were shy about uh talking about in the runup to the election we referred to it as a conspiracy of Silence between the uh between the parties and I'll come to um step and Stewart in a minute to ask them uh how they think that uh the labor party the labor government is dealing with those problems but Helen perhaps you could start just by giving us some sense of what is the fiscal situation that the government is now facing is it Fiscal Situation and Economic Choices really the most difficult situation the new government has faced in uh Generations well at a high level I think there kind of three things to know are that taxes are relatively High historically in the UK and due to be rising that's in the Baseline before Rach where you've said anything spending is still higher than pre pandemic but part of that is because we're spending more on debt interest uh so not just fun stuff that we might want or you know things important stuff like doctors and nurses and teachers um and obviously I think as everyone acknowledges at least some public services are visibly straining right I'm thinking fear of courts or governments prisons there's obvious strain but actually despite the fact that you have taxes rising and a baseline in which spending is due to be cut so that's what Rachel Rees inherited to set of plans had spending being cut despite that debt is only just about stabilizing at the end of end of a fiveyear period so tax is high spending coming down debt only just about stable worth mentioning in parting that that's partly that debt situation is partly difficult because economic growth is so dismally poor so we can't grow ourselves out of that debt P where we may be used to um and that's basically where the the choice that rach's faces comes from She's either going to have to and we said this well before the election uh cut spending as in the plans raise taxes or increase borrowing and let debt rise for longer or do multiple of those three things I think at the election the conspira of silence is that nobody told us which of those things they would do I think now we're all pretty certain that she'll do at least two of the the three but that's you know underlying all this is the big choice that the government faces really a choice of the size of the state what should the state do and how to fund it and that's the challenge just is picking picking the answer to that yeah it's pretty miserable isn't it I mean as you say taxes are actually at the highest level ever uh borrowing is high debt is high so you'd think there'd be piles of money for public services but EV quite evidently uh there isn't and as you say that's partly because we're spending such a huge amount on debt interest I think that's actually a really important um uh thing to say because people often think of borrowing as a free lunch you know let's borrow and then we can have what we want but actually that comes back uh that comes back to bite you but it's also a reflection of long-term trends in terms of increased spending on health welfare and now for the first time in decades increased spending on um defense Stephen Political Strategies and Risks how do I mean as as a commentator on this I mean you all have seen the um uh the uh I the the economy with the actuality uh during the election campaign and then the um uh and then the gradual sort of softening us up for a really tough budget I mean how do you think they're doing on the Politics as we move towards this budget um so I'm was slightly ruin the exercise by saying in some ways it's too early to say right and they've successfully landed I think the argument that the conservatives left a huge mess that there is a problem in the Public Services the problem at the moment is they've also successfully convinced people that they can't solve it right then uh and if it turns out out they can solve the problem or if at the least make people feel like the problem is getting better by 20208 29 then we'll look back on this period and go actually that worked brilliantly right they successfully set up they left a mess things will be difficult um and then the delivery record takes care of their political problem however if we say for argument sake that they will end up increasing taxes by about 40 billion and increasing spending by about 30 now it's possible than 30 billion of extra public spending means that you get that sense of improvement by 28 29 but equally it's possible and you don't right you just end up with you just end up in the position that richy sonak and found himself in 2024 so it's it's I think it's slightly too early to say however not just because the historical Trend isn't first-term governments to be reelected and first time oppositions tend to stay that way it I I do actually think that they have handled the politics fairly well once you once you account for the decision which may have been right may have been wrong but you know they they've done it now they can't get out of it the decision that both parties took to go we think it's in our interest not to be honest about these trade-offs about tax and spend visibly that was the wrong choice for rishy S right it's I just think it's it is implausible to argue them a hypothetical in which they went into that election with any other strategy than the one they went into could have gone worse inless the strategy involved in going door too and punching voters in the fath it's just really hard to see how it could have gone worse now of course the the the gamble than K St and Rachel Reeves took before the the election was it would be easier to get out of the straight jacket they had set for themselves in government right once you've got the pulpit of government you can make the arguments do things differently yeah it obviously worked for labor in 1997 to 2001 but they inherit you know John Major was basically the world's best prime minister to have as your immediate predecessor uh and Rishi sonak wasn't that's an interesting way well well done Joe major I'm sure he'll be really delighted with that that particular bit of that particular bit of Praise um I mean Stuart I think the three of us have sort of agreed that um the uh prospectus that Labour's Promises and Public Expectations um labor had in their Manifesto in terms of taxes and spending at least wasn't um fully honest I mean I mean do you think we're in a world where it's inevitable that um that uh oppositions in particular just just just can't fess up to some of the difficult choices ahead of them and and and if so does that make it much more difficult in government than it need be yeah as a bit of that I think it's it's easy to say labor should have given a fuller account of the state of the public finances and the next 5 years but in opposition I'll defend them a little bit on this I think because I do agree that there there was room for more honesty definitely but once once labor in opposite imagine in the campaign labor said actually the state the public finances is die for the next six seven years and and we're going to then pay we're going to give you some Quantum of what how bad it is the next question from stevenh and his colleagues be right so what are you going to do right and they'd have had to paint out in opposition without knowing anything about neither the trajectory of the next few years nor the state of public finances in that much more detail they' have to give policies Galore or else they'd be accused of raising an analysis without a prescription so they did they made a gamble as Stephen said they took a gamble saying look it's it's the conservatives mess the public believes it's the conservative mess I kind of believe it's a conservative mess as well we'll win that battle and that means that once we get in we'll have latitude to make choices which are justified by the situation of course Paul Johnson's going to continue to say I've been telling you this for two years but we'll we'll face that we'll cross that bridge when we come to it so that that was a reasonable political gamble I think on their part I I just think the nature of the con the combination of tax debt public spending challenges C clearly is that but on top of that you've got to you've got to factor in the extra problems labor has in virtue of the promises they've made about the character of the policies that they'll have to meet this so they've promised no return to austerity and we may come on this later but what is austerity is an interesting question um what counts austerity what feels like austerity if you're Shaban and mmud in Ministry of Justice it might feel completely different if you're West treating what does it feel like to you guys to voters so you got that you got you got a principle that the those with the largest shoulders should bear the greatest burden and then you got the specific tax commitments on vat National Insurance um and income tax and those are further constraints in the sort of parameters of how they can respond so I I mean I'll be very surprised if it wasn't a mixture of all three things from what you said it has to be some mixture of all three and part of the problem of all three is that that means increasing spending and cutting spending at the same time and you're going to have different messages for things like Capital spending where you want to suggests that you know of the three of the three purposes of the budget right which are fixing the foundations and ending the fiscal fictions of the last few years starting to sort out Public Services by which they mean the NHS right they mean the NHS when they do about public services and then the third thing is getting growth kickstarted again through an investment Revolution right so you for the third message the investment Revolution you're going to have to have a more expansive fiscal position but for everything but but to make everything else possible you're going to have to have austerity in pockets and that's going to be a really difficult balancing out for them to to to try and convey as seems to be next week oh that that's going to leave nobody happy because they're going to increase taxes and they're going to have some Public Services struggling even further that's uh we'll see we we'll see where we end up with but that's um that is going to be a difficult one to land um I would have thought I mean on the specifics I mean what one of the most Taxation and Public Spending Dilemmas striking things in the manifesto was that no tax Rises on working people no increases in income tax National Insurance vat and corporation tax put those together if you take that seriously that's three qus of all taxes they can't raise um we've obviously had all sorts of suggestions that National Insurance doesn't really mean National Insurance it means employee Nation insurance and working people are only people who are defined in very particular um in very particular ways to what extent um Stephen do you think that uh there's a risk with you in a sense you do the right economic thing if you need to raise taxes actually you should break those Manifesto pledges you how how how how risky is that from a political point of view in terms of people just losing faith in the process if uh if they're seen to have broken those promises I I think the slly the slightly odd thing about those promises is broadly speaking people you know everyone in the unit King's heard of the labor party uh and people understand that they are the party that spends more money broadly speaking when people in this country vote for the labor party it's because they would like them to spend more money I think one of the Dynamics of that promise is that everyone when they hear the labor party state taxes won't go up they're like okay but they they will a bit right you're the labor party um and so I think there's there's this odd thing for them where there's a there is a risk of disillusion if taxes go up and people think think things haven't got better but I think it's striking that actually the thing which caused K's approval ratings to drop was him explicitly doubling down on the pledge I I think your history suggests then well the interesting thing is then in terms of the letter of the Pledge it is obviously easier to defend um fiscal drag and raising employers next right the most people I think wrongly but most people do think that employees employers Nicks are different from the ones than they pay the flip side of that is that we have pretty good evidence in 20124 that people feel the effect of fiscal drag and get grumpier about it than they do about the you know essentially the Mars Bar siiz tax cut than the National Insurance cut represented for the average earner so I think the bigger risk for them is that they will you have they end up in this position where they can say with a straight face well we haven't broken this promise but everyone feels like they've broken that promise and when you consider the stuff they want to do on the labor market if you pair that with some quite Hefty Rises on businesses you are asking an awful lot of the corporate world in terms of both raising revenue taking on greater cost because of employment and you can make a perfectly good argument for any one of those those things but I think there does need to be some balance in terms of attracting and retaining Innovation entrepreneurship and FDI given everything else yeah so you're sort of suggesting that there are uh challenges there maybe there are um contradictions between saying you we're absolutely going for growth and we're going to increase our employ National Insurance contributions and we're going to inrease increase employment regulation and we're going to increase some taxes on high earners or Capital um or what have you and people will feel fine about that if in three or four years time their wages are growing fine and their take- home pay is growing fine but if it's not then they're going to really start blaming the government and and the truth is what's happened to G in three or four years time it's a little bit down to the government but there's an awful lot of luck involved I mean Stuart you got quite lucky back in in the 2000s are you say saying that is that first Mark well well you very very lucky in many ways have all that fun in the treasury uh but the um but that labor government was lucky to Ste say have um have John Major as the predecessor actually the public finances doing quite well and growth uh doing so well that some uh economists foolishly seem to think that um it will go on uh go on forever but I if you if you look back in that period I mean it is fair to say isn't it that it looks like rachal re is going to have a series of considerably more difficult budgets than brown had certainly over his first you know several years yeah the Gordon Brown 19 1997 when he came into the treasury he uh I mean he's remembered not for the budget interest he's remembered there for the bank of England Independence moment more than budget but but the but the sort of budget moment was we've taken the tough decision to stick to the conservative spending limits in a context of secular growth which since 1992 have been taking off since we had the Deb barkle yeah and so he could afford to project toughness in public spending decisions and yet money was still rolling in and you know in the first I think he financed the 6 billion for the New Deal for jobs in the first budget so there was there was there was still money to play with in a way that's clearly not not same for Rachel re but Rachel re and gold brand have one massive thing in common in their approach obviously the context is very different as you said they're both politicians formed by the same moment which is the which is um John Smith's Shadow budget before the 1992 election that is still in the labor party I've been involved in I've been lucky enough to be involved in labor for 25 years or so um it is still the kind of Touchstone moment for most parts of the labor party apart from the left of the soft left and the coronight left because it it's the thing that the that the Blair right and the successor to Blair right part the party go back to and the brown knites which is that you labor loses when it's not trusted on tax that that is just you know it could be written on the on the walls of of the labor party offices and Rachel re I think has that in her DNA too and that's why and I think polling suggests I'm correct if I'm wrong Steve may know this better than me but po just the British public at the moment the two things they care most about the labor government delivering on are keeping the tax pledges and sorting out the NHS those are the two things so there is latitude either side of that as you say that's 75% of tax revenue but they they do have latitude to say the context demands more flexibility outside of those things but that's where they'll be judged on that's what and the really interesting about this budget I think is I think business will probably I think there there'll be issues for business on tax side but actually business in the on the first four months putting all the noise about Taylor Swift and freebies aside have been pretty happy with the priorities that that the labor government set set out um I think the really interesting thing businesses don't vote of course right the National Health Service is going to be the key thing that Labor's going to have to point to in four years five years saying this is getting better and that this budget has to engineer the start of that in a big way and that's the where the real current spending problem is going to come for them I I remember that uh the the 1992 um Shadow budget I actually was working at the ifs at the time um I did spend some time in between when I wasn't working at the ifs um and it was extraordinary the uh the the the Press coverage of it was Inc so negative um but uh we we at the ifs did as we do our pre-election um analysis and I remember standing up uh with a presentation about Labor's um plans and the first this was a time before PowerPoint and we had transparencies that you put on top of a um you one of those projector things um and I'd taken a transparency of the front page of private eye um and it basically had a um basically had a headline labor plan Slaughter of the firstborn um which gave you some sense of the um of the uh Cal and rational way in which the the budget was the shadow budget was covered I mean that that was the scale of the um of the negativity towards um uh towards that shadow budget now what one way Helen that um you know all politicians want to sort of talk about tax is to say someone else is going to pay it um there's a little say in tax don't tax you don't tax me tax that fellow behind the tree um but um uh the way that labor are talking about it is that those with the broadest shoulders um will um will pay the tax whether that's non-doms or private Equity people or or people who are in some way um uh Rich uh which is always defined that someone earns a bit more than I do yep um uh how far can they go with that as a sort of as a guiding as a Guiding Light and I mean do you think they'll actually keep to it uh what can they do first I guess I mean if you look at the taxes they haven't locked down there's not a great deal left some what's left actually does looks like politically you could increase fuel duties for example as not lock down are they going to do that massively no I doubt it um one of the things that's left that people obviously talking about is the capital taxes so stamp duties capital gains tax inheritance tax they are pretty small slice of overall Revenue so youve got to do really quite a lot to get any big chunky money and I think another thing it's hard is that not youve got to do quite a lot they're currently all badly designed for various different reasons so I think if you just put the rates up you actually get quite a lot of damage along the way so if you want to raise real money You' really got to do proper reforms to them and put them up which I think they could and should do but it's not like with income tax where you put a few Pennies on income tax suddenly the billions of pounds start fing to the treasury you've got to do quite a lot of work to redesign bits of tax or remove reliefs lots of battles along the way with the individual groups that like that particular relief that you're removing so you've got to do quite a lot of hard work to get quite a lot of money so could they get quite a lot of money I mean yeah I think they could get multiple billions um from from a combination of you know Capital taxes but I think you'd upset a lot of people and it' be quite a lot of hard work another bit of context that's worth bearing in mind is one of the things the conservatives did that they don't want to tell you tell people about very much is that they cut um direct taxes on average uh earners so actually although taxes Rose um they came down direct you know income tax and NX came down for average earners so actually we've moved to a situation where we're already getting more from high earners now you could get even more from high earners but I think there is a point where it gets harder and harder to do that so even if you're going to break a pledge and maybe you're going to break a pledge on income tax or you're going to find a way to deal with pension contributions or some other way to get the broad shoulders it just gets increasingly hard to raise a really big tax button without touching middle England middle England have actually been relatively well protected so I think you could go further but I think it's getting harder it's amazing isn't it I mean there another conspiracy of silence and the last conservative government really hit High earners and they're not going to tell you that and the labor party aren't going to tell you that so you know it's left to us to tell you that slightly funny about all of these kind of chin stroking things about oh the realignment how could it have happened you know why are very high earners you know voting not voting for The conservatives they just like I mean gee I don't know I mean if you're if you you know if you're a higher you know in your 30s or 40s in say sorry um you pay a lot more tax than you did in 2010 and you get having not asked for very much State broadly speaking you get very little of you get even less you of it I think one of the interesting things about this Parliament is we're slightly I think going to stress test this Theory some people have that the realignment is primarily cultural because actually yes some very very rich people voted for the lab party for the first time in 2024 but they had been given a they you know they had been kicked pretty hard for 14 years and I suspect we may see a slight unpicking of the re of the realignment for precisely that reason well was yeah you were saying that um they can't have voted labor expecting to have their cut their their taxes cut because if if anything they must have known that this is a government that's more likely to do it even uh to to go even further um it's it's interesting what your your colleague um uh J Jen Ganesh talked about how in a sense the sort of the um the suburbs and the and the rural bits kind of save London from Itself by uh you know by by by not voting for very leftwing things which might actually be really bad for the people who do vote for those leftwing things and um who knows maybe that'll uh that'll come home to roost um can I ask you about pension tax relief oh of course you can so so this is the ifs question asking me so higher rate pension tax relief there's a 40% rate pension tax relief on private contributions to your private pension so that I look this up that cost the treasury uh oh something like 60% of the total tax relief on pension contributions that over 60% is given to the top 20% of the income range so is straightforwardly a regressive subsidy big money 25 30 billion quid a year now that's working people right uh it's tax it's not raising a tax it's eliminating a tax relief there you start to get dancing around the head of a pin maybe but you know you might think that's a line I can um of course a lot of those people are public sector workers and there's all sorts of people that we what's feasible not feasible ith think it's hilarious there was was a headlines was it two weeks ago um sort of suggesting that labor had ruled out uh restricting the tax relief because suddenly they found out that this would affect a lot of public sector workers like we didn't we didn't know that um uh and like private sector workers don't matter but um I think there's lots of ask that yes of course it's true that most tax relief goes to higher ed because they pay nearly all the tax um you know the top 1% pay 30% of income tax the top 20% I can't remember them probably pay about 80% of income tax so of course any relief is going to go um is going to go more to them in terms of you know can you move away from um a higher rate relief uh you can but it's really quite complicated for Define benefit schemes in the public sector and it would hit out a lot of nurses and teachers on 40 graad because actually their pension contributions are so valuable that they might not be higher rate taxpayers now but they're only not higher rate taxpayers because they're effectively getting higher rate tax relief on their pension contribution so it would be incredibly unpopular I think there is also actually a principled argument for this um which is that um you know if I'm uh well certainly if I'm a higher rate taxpayer in retirement be unreasonable to go to give me basic rate relief now make me pay higher rate later on but actually even even if I'm a basic rate taxpayer in retirement I should be able to smooth my income across time it means I'm just not rich across my life the fact that I'm high income in one National Insurance Contributions Debate year and low income in another actually the tax system which gives you a chance to smooth that makes some sense but equally of course you this is a big number as you say it's going to be terribly yeah if you want a policy which gives you a big number which isn't which doesn't break the the pledges I can't think of many others well I think I the other alternative actually which I think would be much better would be the which has been um suggested is that at the moment you get uh you pay no National Insurance contributions like employer contributions into pension schemes now that's worth that that is a tax break worth about 15 billion something like that um and you pay no Nation insurance at all so there's no taxes you put it in no taxes it's accumulating and no taxes it come out that's ludicrously generous and and actually there's been lost briefing that might be something that uh that gets changed um so I'd be surprised and disappointed actually if they kind of restricted the income tax relief but I'd be quite pleased if they restricted the um National Insurance uh National Insurance relief now one of the things that's been very striking that's um been Election to Budget Timeline where I've been in a different position to a lot of the political commentators on this budget is as I said it's going to be 117 days between election and budget and lots of people saying oh God this is terrible because we don't know what the government's doing and that's why all these stories about glasses and suits and um Taylor Swift or whatever have been circulating uh if they only got on with it and done a budget much more quickly uh we'd know what the policy was that that whereas my view is 117 days that's that's no time at all to U work out what on Earth you're going to do with capital gains tax and National Insurance contributions and and and the spending review um and so on so so so what's what's your view about that balance between you have they gone too long should they done it quicker ashy you know my view they should have left it till the spring and really worked out what they going to do I think actually looking back I mean they won an election in July there's only two weeks of parliament until the summer break uh then they came back and it was two weeks again and then conference season it's very difficult to see they could have done it earlier in October perhaps but technically I don't see how they could out it much earlier that's the first thing to say I think also this is the they haven't been in power for 14 years is it's the first budget that labor has ever done with the office of budget responsibility process which which takes a bit longer plus they have this slight problem massive problem of doing a a mini spending review setting up a larger spending review next year at the same time as the budget interesting by the way that spend spending review alongside the budget is um a sort of recent development it's not something that normally happens and it has lots of pros and cons if you're in the treasury doing the two things at the same time but anyway so given they had to do all that plus they had to actually get their feet under the desk and think about how they were going to do the first the launch of their Manifesto pledges and key legislation like Great British energy I don't think it could have come that much early I mean I think I think that the problem they've had is that you lose control of the briefing because of that Speculations and Expectations Management period so Rachel stands up in July and says there's pain coming your way and then everyone goes away on holiday and what that means is that the telegraph the mail even the Ft everyone is like they can it's silly season right you can say oh are you going to are you going to put 100% tax on having a third child or and and they say we don't comment on budget bges oh and then they run for it right the refusal to deny there it is so every story Under the Sun has been sort of has been flagged and actually I suspect the treasury quite likes that now because there are so many hairs running now that actually it's quite a natur it's quite a good way of doing expectations management because it can't possibly be as bad as as the sum total of every Telegraph and Daily Mail story in the last two months I think there was a telegraph headline something along the lines of middle class is face Annihilation us there you go and a treasury refused to deny it because they because they wouldn't comment on the budget yeah there you go well it's right there is you're saying that the problem is not just they left it a long time right is the combination of you had an election where Budget Secrecy and Leaks they set out what they weren't going to do then you had a Summer Event where they're like actually change a plan guys lots of pain to come but hold on the Pain's coming of the winter fuel stuff um and then they locked down so much that every journalist rang us over summer saying well we've got the list of what they lot we've got list of what's left the pay must be coming from here tell us what it's going to be and they there wasn't much that was left they sort of left themselves open to obviously people are guessing that it's capital gains of course people are selling assets because they know it's one of the list of things that could happen so it seems to me it's the combination of having an election where you don't say very much then suddenly changing changing your tune and having restricted your choice your policy set quite a lot of course you've left yourself open haven't you for people selling assets and um yeah it's I mean you the trouble is we're we're dealing with um uh we're dealing with anecdote here but there's so much anecdote that it's all pretty much data I mean you talk to anyone in the financial services industry they'll say that people are taking their pension L sums people are cashing in capital gains on the you know just on the guess that something's going to happen um in the budget I don't I don't really know how you uh avoid that I have to say it's an incredibly hard thing um to avoid but people have often saying saying to me at the moment though that you know they can't remember a time when we knew so much about what's going to be in the budget so early but I feel rather the opposite I mean I kind of you know I know it's going to be a big budget but actually I don't actually know what I mean s of you think of some budgets recently certainly by the Sunday before you knew everything that was going to be in them I really don't know what's going to be in this I I think there will be some tax Rises and that might do something with you some bits of National Insurance I actually don't know which bits they might do something Capital gay tax I actually don't know what um they're going to do something all they make some decision on spending but I really don't know what I mean Stephen are you I mean from your journalistic position mean you are you are you in the camp of liby we really know loads or are you more in my C which is actually I don't know why people think they know lots or maybe I'm just the ignorant one here so this is a very Historical Budget Comparisons sensitive topic for me because I agree I feel I know less about this budget than anyone but I feel I should disclose at this point that my partner is Darren Jones's special adviser so it really is particularly embarrassing because it's just like you know it's like area journalist cannot get scoop in his own flat but um uh what what I think is interesting in is that it feels and loads of people do believe that they know stuff about what's in the budget but when you talk to them about it they their suggestions about what's going to be in it are just obviously not true yeah I mean I was talking to someone who works in the NHS and said oh well obviously we'll have less in cash terms next year and it's this thing that ain't going to happen I think the labor party likes existing uh yeah and there not so sure about the conserva and therefore they will they will want to continue to exist so I I think yeah the one thing we can all we can all bet on is that there will be more money for the NHS but then this yeah the slightly strange thing about this budget is and I think we feel we know a lot about it because as you was saying right they've ruled out so many levers in terms of Revenue raisers well it becomes quite obvious when you eliminate the things that you could do but would be economically disastrous or you eliminate the things that successive chances have looked at and go actually you know that that's a bad idea I'm not going to do that you end up with a very clear idea what they're going to do on Revenue if you're you know if you're the kind of cool person I am who loves looking at that stuff so you feel you know an awful lot but then in terms of the more tricky question which is obviously the NHS is going to get more money obviously they are going to do something that to Kier and Rachel's satisfaction allows them to say this is not a return to austerity and I think st's exactly right there's a fascinating historical debate then in some ways it will be actually a turn to 40 style austerity in some ways because it will be heavy tax Rises it will you be a bit like some of Stu how did but um we don't know what their definition of safeguarding the Public Services is we've got a pretty good idea what it means for the NHS because the Electoral imperative is what it is I think we all assume that there'll be more money for prisons and Justice because it's K st's passion project but then we look at the fact then one of the ministers who took the latest to settle was Shaban and mmud so we go like oh well who know but I think it is actually yeah and maybe this is just you know me making excuses of the fact I don't know when I feel I really should but uh I think it Treasury Ruses and Strategies is a budget which we know much less about than than almost any budget we've had for very I'm glad I'm glad you're confirming that three three quick things to look out for in Bud always look out in budgets but this one in particular one is Stephen's completely right about this there are things that we know we're going to have to spend more money on the question is when and is it is now the moment they start or is it going to be later defense is a big one for example right is now the or is defense going to have a tough year until the review and then it'll start to get better hopefully who knows that's one um second thing first budget for a new Chancellor is a chance to set things in train that you have your eye on the prize on down the line so it will be interesting on issues like social care for example whether a piece of work or a sort of great and the good commission is set up or another one I know I know not it could be social it could be things like reform of council tax if they touch that then you know good luck to them uh as a poison and chalice but everyone knows it needs to be done at some point business rates they said they want to look at at some point so there's all sorts of pieces of they're going to abolish little indeed so there's all sorts of pieces of work that could come out which which are sort of fruit down the line and the third thing are ruses the treasury is really good at rses my favorite Gordon Brown ruse was moving the date do you remember this one the date I know you're going to say now the oil Revenue tax revenue is collected from April to January so it moved into the tax year right before the 2005 election suddenly the treasury had billions more without without actually doing anything different other than changing the accounting deadline into an earlier fiscal year there are ruses in every budget there are very smart people whose entire job is to come up with roses uh Paul used to be one of them in the in the treasury himself um and keep an eye out for the r or the ifs will keep an eye out for you we will we will uh I me the other R the other thing that Gordon moved of course was the date of the economic cycle to allow him to keep his uh keep to his rules in terms of things we know because we can we can at you know we can look at tax policy and work then the interesting thing about and I think an argument for doing it in October is that they will gain Headroom purely by the device of the comprehensive spending review happening in Spring and I think that's going to be a thing which is quite rightly going to annoy all of us around this stable from a good yeah actually having a meaningful fiscal rule perspective but I suspect one of the other thing one of the other rues will be then this will allow them come February and then of course come the later comprehensive spending be like ah look we' we've created extra money just by moving by moving these three months yeah I mean part part of the problem here of course is that that is is clearly not real and actually if you look further down the line uh this is going to be another cheerful statement from us but um you know things look difficult now but they ain't going to get any easier in the next 5 10 15 20 25 um years I mean if you look at the OB numbers they look horrendous because we we end up spending so much on pensions and health and so on that we end up with with debt the size of um you know the size of the earth um and uh of course that is because things are getting harder if we want the current welfare state we got more and more old people and very old people and we spend more Final Thoughts and Predictions and more on health and you know we want to there's no point getting richer if we're going to be dead or sick so you know we're going to want to spend more on health and social care and all those things um push out one year and sort of some budgetary sort of magic might make it look a bit easier but the reality is that the next election and the elction after that the ifs is probably going to go oh it's going to be really hard over the next 5 years because we're going to you know going to have to raise taxes and sadly it's going to be true because we we we've had this extraordinary Parliament the last Parliament where taxes after 50 years of stability 50 years of stability taxes Rose by about you 70 or 80 billion pounds relative to up going to raise rise again over this Parliament probably going to rise again over the next Parliament we're just going to have to get used to a bigger State and bigger taxes one of the one of the things that Gordon Brown did but understandably didn't talk about is he did successfully unpick an awful lot of the fche era tax cuts right that that was a you that that was a that was an important part of them being able to afford the extra spending now yeah they did it in all sorts of ways involving fiscal drag and National Insurance for the NHS etc etc but the thing one of the many ways that it's a more difficult inheritance is that because under Osborne in particular the tax system did become more Progressive that unpicking is going to have to involve work people in some description I think one of the interesting hairs will be surely they'll want to do something right that allows them to make the argument for yeah for you know for for all of us to pay more taxes in the same way than they very skillfully from 1972 2001 did this kind of like I know you think you voted for us saying we wouldn't raise taxes but actually wouldn't you love to give us another Landslide promising that we will in fact raise all of your taxes because in some ways the thing about the cander deficit is only an incumbent government can fix the cander problem yeah it's regard yeah then ultimately at 2024 the fact we had this dishonest uh this dishonest section was R act's fault if we have another dishonest election in 2829 it will be K St assault because it is ultimately the Prime Minister who can sit the country down and go here are the trade-offs here's my solution to the tradeoff what is the oppositions and you know we're kind of living with an I think an underrated brexit cost which is that we basically stopped doing anything about public services after 2014 because the government understandably did that year before the election let's focus on getting reelected which is perfectly normal year before the referendum let's try and focus on the referendum which means essentially the last time anyone went hm how are we going to change how the Public Services operate in an aging population declining fuel Duty was a decade ago so of course everything's got worse yeah sorry I said given all this given how hard it is going to be and Rachel obviously knows that in five years it's going to be hard right that's not again not news to anybody I mean could she really surprise us and do something like put up vat I was looking back at where the big tax Rises have come in history and vat is often you know a place where chancellors look and they the big tax that tend to stick right we had the big increase to 15 to 17 and a half to 20 all things chancellors have done vat seems to be one of the Believers they can move that don't get unwar it would obviously be breaking a pledge so I'm not it's not a prediction but if you're going to break a pledge are you better off rather than trying to get some definition of employer Nicks not being attacks on working people which and you're really straining the English language at that point but but regardless of that why not why not break a pledge properly and F break it I mean Doan the bizarre thing if you think of the last government was I mean George Osborne increased vat in 2010 by two and a half% a huge tax rise and no I mean I remember nobody squeaked and then he suggest put it on pasties and the all World goes mad uh so it's kind of it's rather actually like what Rachel Reeves did in the summer you it's what actually is a tiny cut to um income for pensioners everyone goes absolutely nuts bin social care reform that they said before the election they were going to implement they would they would even noticed that's going be the danger here right she does a lot of lots of little things like tweak some capital gains tax remove some relief inheritance taxes Mays employ ni on pension contributions you upset a lot of people you might have to roll back on you had the Philip Hammond style got to go urn your Nick change or you have you know something got to get rolled back whereas if you just did something a bit bigger and a bit Bolder maybe actually a few percentage points of of V would would stick somehow it does seem that viig EAS sometimes I actually think that the the public debate is all about tax right at the moment Which tax are they going to raise what's going to and and we also know there's been some ding-dongs between cabinet ministers and the treasury my guess is that well those ding-dongs are probably about something completely different what they're about is I suspect the treasury is saying here's your efficiency savings Target for your current spend uh which you've got to recycle you know some ludicrous percentage of in order to justify increases in spending and they're looking at it going you've got to be kidding me that seems to be what's going on and I th that I suspect we are overestimating the role that tax increases will play in the budget in the budget spending review combination and underestimating quite how much the treasury is trying to enforce efficiency Savings in Baseline spend which the treasury always wants to do but I suspect they're doing a lot more of it now than they than they have done before and good luck that is a really difficult thing to do right so any um any hints and tips from your um your years working with Gordon get your sleep in before the budget usually um well I mean Gordon was whatever I'm sure there are different viws about Gordon Brown this room but he was the budgets in those days in those days i i s like an old man in a chair with a blanket over his legs talking about the war but um which I will be quite soon but um in those days budgets were completely different because the treasury had ruthless control of the whole process and the budget document was printed about midnight the night before it really was not 3:00 a.m. we were changing the document at 11:30 p.m. and yeah and the last million phone calls are you with the printers can you change that 50 million to 30 million that kind of thing so and you had total control over that think he's joking it's absolutely true absolutely true and what that meant we didn't have an OB process so the OB process means there's two weeks for things to leak uh which treasury act treasury on the whole is a very disciplined institution it doesn't brief against its ministers it's very very not always but mostly it's very self-disciplined you got the OB problem um and so in the old days Jord Brown used to have this sort of Ruthless control politically as well as the treasury's ruthless control within whiteall of a process where there was no obr so other departments had no idea what was in the budget number 10 had very little idea what was in the budget until the night before if they were lucky that meant that you Gordon Brown who was a a press comms person you know part of his brain was obsessed with that he could then sequence a lot of red herring stories and sequencing the growth stories first before you get to the tax stories so that became the sort of energy of the budget and I suspect what's happening now now I've never been in the treasury for an OB budget but once the OB finally seems to have got the got the documents that is now doing the the forecasting there's this sort of period where everyone's twiddling their thumbs I suspect what they're doing now is planning a sequence of of hints and you know briefings to the press in advance of next week um and that and that's quite important and it will of course raise all the questions about why they announcing it rather than do to Parliament and all that stuff but I suspect what we'll get is a sequence of announcements and you know laying Trails on things in the next few days well certainly what we've had over the last several years where there was one budget Rec where everything was uh was was was was known beforehand uh rather different to the um rather different to the good old days which uh I think even older than even older than we were when the bra seccy was taking really uh really seriously but what what I mean what an extraordinary I mean sh's description of how things used to work is exactly right I mean things changing right up till you less than 24 hours before the budget was produced um and and therefore actually part of that process resulted in mistakes I mean budgets continually actually have mistakes um in them have announcements that chancellors come to regret end up undoing um Ian you can think of pretty much everything from uh well I mean cap capital gains tax and the introduction of 10p starting rate of income tax uh early reforms of the last Labor government uh they abolish both of those reforms later on and got into terrible trouble um when they did so because the original reforms were mistakes actually the winter fuel allowance last La government this slav got got rid of done in a budget um as as as as a as a way of sort of you know giving something to everybody a state um May well have been an Autumn statement yeah but very uh but which was pretty much two budgets every year that we um uh that we had then um and I think one of the things Rachel re need to be very careful about this time is she doesn't do things which look nice now but which will actually end up uh losing a lot of political Capital undoing later on because they turn out to be too expensive or have the wrong uh the wrong kinds of incentive effects relative to what she was expecting and I that's that's a real risk with the with budgets our expectation this going to be a big budget um now lots of budgets are big in the sense they've got lots and lots of announcements in them it's a mad way of making policy really to have this one announcement where you sque as much possible stuff in it as you can you try and give something to um everybody and it's not surprising that you end up with um with with with errors um with errors along the line it's a m way to set tax bill I'm listening to the you know the tweaking at 3: a.m. does sound a little bit horrified I'm I'm frankly horrified that people are tweaking two weeks before the budget a month before the budget the idea that you're setting long-term tax policy is going to affect people for decades generations to come and you're making those decisions two weeks before the budget seems to be crazy and you're you're trying to findun things about have we got enough head can we fit this and can we squeeze this in that's that's not the way to design a tax policy I mean it's the way it's done but it's it was even worse than that because in the Gordon Brown era the key the key document wasn't the budget it was Gordon Brown's speech and Gordon Brown would write his speech and what was in the speech set what was in the actual budget documents and Ed Bulls who was a brilliant articulator sort of connecting tissue between Golden Brown and the treasury would sort of you suddenly get a call everyone all the officials would go in and say I'm afraid we scrap that and it would be like 3 days before cuz Gordon had decided it didn't fit the speech and so we'd have to change the budget in response to that so you know it's more precarious even than you think and and of course these things really matter to get it um you consistent over time the taxation of pension you'd thought if there's one thing you need to have consistency over time is how your pension is taxed and it's been changed and fiddled around with virtually every budget for the last goodness knows how long and last government corporation tax down corporation tax up personal allowances up personal allowances is down limits on um limits on um pension contributions down limits on pension contributions up it's no way to run a country I think it' be fair I think it'll be fair to say um well we've only got a week to wait now this this time next week um Helen and I will be in the office uh desperately trying to work out uh What uh what's just happened and putting together our analysis uh of the budget and hoping that we won't have to say that there were a whole bunch of silly things in there on the tax side um and elsewhere so um thank you to our uh live audience for this edition of the ifs Zooms in thank you to step and Stuart and to and to Helen um for being here thank you everyone who's been listening uh to this episode of the ifs Zooms in um to see more of our work do visit us at www.s.org UK thank you very much