Due to the apparently precarious state of Brexit negotiations over Northern Ireland, our letter begins with a part of France which has no border with its non-EU neighbour.
Our newsletter carried a photograph of the border between French Guiana and Brazil, proving that the European Union is in no position to use the absence of a border to beat us into customs union submission. Indeed, this part of France (for that’s what its overseas dependencies are) has much greater issues to be concerned about with neighbouring Brazil, as this comment on the website Quora points out. So – time to stop the ‘holier than thou’ stance in Brussels – we should just follow the France-Brazil example.
The Budget - a difficult balancing act
“The Budget is not just a collection of numbers, but an expression of our values and aspirations.”
Jacob Lew
In just two weeks’ time, Philip Hammond will deliver his second autumn Budget: deliberately set early in order to avoid co-inciding with the anticipated culmination of Brexit negotiations.
Will he assume that those negotiations conclude satisfactorily, giving us a benign picture of the sunny uplands - keeping in reserve an emergency budget for the New Year if things go dreadfully wrong? Or will he give us two variants for ‘deal’ or ‘no deal’ scenarios?
We assume it will be the first of these, not least because there is clearly some cautious confidence that a solution will be found due to the diligent work of the redoubtable Olly Robbins, the civil servant feted in the FT and Times over the weekend as the Brexit-fixer. We hope our lead exposé drawing a comparison between the French Guiana – Brazil border and the Northern Ireland situation will help in this regard.
The Budget will still, however, be a difficult balancing act. The need for the Government to look to moderate opposition MPs for support with the final Brexit outcome means that increasing commitments must be made to phase in universal credit, as last week’s report on the impact on poorer families make clear. This will reduce the scope for easing back on taxation and, in any case, any leeway will be given to corporation tax rather than income tax - as we need all the encouragement possible to keep businesses in Britain post Brexit.
I will be surprised, however, if we do not see the first details of the new tax on online retailer revenues, albeit at initially modest levels. This may give him some scope for relief on business rates for hard-pressed high street stores. The social impact of the hollowing-out of British towns, as more people use retail stores as a showroom before buying online, cannot be ignored, as we have drawn attention to in a number of past comment pieces.
But aside from a range of domestic considerations the Chancellor must also retain some caution in respect of gathering financial and economic storms overseas. The rise in central bank interest rates being driven by the Fed’s reaction to Trump’s over-stimulation of the US markets has spooked stock markets severely over the past week. Meanwhile his protectionist trade policy has shaken growth predictions, even if it has attracted some grudging support from Christine Lagarde.
Closer to home, however, is growing concern over the Italian government’s expansionist agenda, which is now pushing against the threshold for Italian exit from the Eurozone. The chaos that would follow is much more serious than the impact of Brexit, as we anticipated on 16th July.
So Philip Hammond has to steer the economic ship of state very carefully to ensure that investment flows remain attracted to the United Kingdom post Brexit, and that we can continue to be a secure haven in the face of international turmoil.
Meanwhile, political opinion requires more of the Budget than just a steady hand on the economic tiller, as our quotation above says: it means visibly giving hope and encouragement to disadvantaged young people, a much greater focus on financial capability, and a determination to ensure that the free market works for the benefit of everyone in our society.
And I’m confident that those who have the broadest shoulders will be prepared to carry more of the load - but not on an obligatory basis. That’s why my personal Budget representation has proposed a voluntary payment system for their use of universal services: not that those services should be withdrawn, but that higher rate taxpayers should be invited to pay for their use of them.
But the top of my personal wish list for this Budget remains the Child Trust Fund, the account held by more than six million children aged between 7 and 16. The total value of these accounts is over £9 billion: that’s more than the Church Commissioners hold to support the whole of the Church of England. Over a third of that value comprises taxpayer contributions to this both universal and progressive scheme.
With the oldest recipients now well into their seventeenth year, my concern is that during the two years before adulthood - when these young people are allowed to take control of their own accounts before getting access to their money - the Child Trust Fund should become what it was always intended to be: a tool for financial education. Plus, the Government should put in place a determined programme to re-link the more than one million ‘addressee gone away’ accounts worth a total of £1.5 billion, as recommended by The Share Foundation.
I’ll be speaking about how to use this opportunity of Child Trust Funds to the full, at this week’s London Investor Show and in Manchester on 9th November. Please come and join in the discussion!
Gavin Oldham
Share Radio