Those of us of a certain vintage will recall the phrase about buying on the ‘never, never’.
Times have moved on and credit cards, Klarna’s ‘buy now, pay later’ model and personal contract deals for cars are all the rage.
The objective of such approaches is to postpone the evil day or stretch cost out over time.
It is perfectly reasonable for governments to do the same by stretching their balance sheets, especially for capital investment. Yet we have entered an age of pre-announcements when governments say they are going to do something… but not until the next Parliament.
Andy Burnham’s speech in Liverpool is a case in point. The triple lock on pensions will eventually go, but don’t worry – it will not happen until after 2030.
Similarly, a national care service is on the same trajectory. Pledges are easy to make.
John Healey talks of the need for ‘breathing space’ and there is speculation of a quieter budget on October 28
But in Britain’s era of chop and change, pronouncements made by one politician – such as Rachel Reeves’ vow to deliver a third runway at Heathrow – may never happen.
It is different on the revenue raising side of the Government’s balance sheet. Gordon Brown invented the Pre-Budget Report preparing the Civil Service, HMRC and voters for changes a few months later.
Recent budgets have taken this to a whole new level. Instead of Chancellors opting for tax changes at midnight on budget day, two pence on a pint of beer or a penny on income tax, they have chosen a slow burn over several years.
In this way the impact on taxpayers is easily buried and calibrated increases become a series of ticking, less-noticed time-bombs.
Reeves and the Treasury under her command were experts at this. It is among the reasons her successor John Healey talks of the need for ‘breathing space’ and there is speculation of a quieter budget on October 28.
There is so much baked in the cake that consumers and businesses are in danger of severe indigestion.
Mobile taxpayers, such as the wealthy and senior business executives, can act by heading offshore. Avoidance for most citizens is harder.
A perusal of Reeves’ November budget last year offers a reminder of how much pain is to come.
The freeze on tax-free allowances (started by the Tories) doesn’t end until 2030-31, beyond this Parliament and the next election. It will raise stupendous sums and gift the Exchequer £12.4billion in its final year. It is the tip of an iceberg of increases in levies still to be witnessed.
There are new income tax rates for property owners starting next year. The severe limits on the salary sacrifice scheme for pensions is scheduled for 2029. A soft drinks levy comes into effect in January 2028. Excise duties on EVs and hybrids start in April 2029, and so on.
All of this is tax raising on the never, never as the Government seeks to meet fiscal rules or glide into levies with a social or green purpose. How realistic the revenue forecasts for many of these changes will turn out, given current geo-political turmoil and the speed of AI adoption, is anyone’s guess.
The Government’s interest rate bill, which could hit £130billion this year, is causing havoc.
The much-vaunted key fiscal rule – borrowing only for current spending – is a budgetary fiction designed to outfox all of us. It should come as no surprise that bond markets players are sceptical.