I hate Budgets

Wednesday will be the most depressing day of the year – Budget day. Budgets encapsulate pretty much everything I despise about British politics.

1. Managerialism. Rightly, Chancellors have long ditched Keynesian fine-tuning – if, that is, they ever believed it in the first place. But they retain the belief that they can affect economic activity – in the form of incentives to work, save and invest - by pulling the right levers. Problems such as limited knowledge, unforeseeable consequences, ambiguous effects and deadweight costs – in short, almost all the interesting issues in policy-making – are systematically ignored.

2. Statistical ignorance. There’s one question you should always ask about any forecast: what are the margins of error? This rarely gets asked about Budgets. If Gordon Brown were honest, he would say on Wednesday that next year’s public sector net cash requirement would probably be somewhere between £25bn and £45bn, with a chance of it being outside even this range. But of course, if he were to be so honest, the dead tree industry would deride his “incompetence” and hound him out of office.

3. Redistribution without principle. If this Budget follows its predecessors, the Chancellor will try to do something – or appear to do something - for pensioners and families with children. Why should he? Are these the victims of injustice or bad luck? No. There’s no reason in justice why Budgets should favour them. All Mr Brown will demonstrate on Wednesday will be that a political system in which the petty prejudices and interests of the median voter are all that matters can never deliver a truly just society.

4. Incrementalism. We can all agree that the tax and benefit system needs radical reform. But annual Budgets are not the way to achieve this. Quite the opposite. In putting pressure on Chancellors to pull a rabbit out of the hat every year, they create a bias towards piecemeal ever-increasing complexity.

5. Killing self-reliance. On Wednesday afternoon the MSM will encourage me to ask: “what has the Chancellor done for me?” If I’m lucky, the answer will be: “the same as every Scotchman has done for me since Adam Smith died: bugger all*.” What matters, of course, is what we can do for ourselves.

6. Judgment. It’s not just Budgets I hate. It’s what follows. It’s so-called experts giving us their “judgment.” This brings economics into disrepute. Economics is not about fat pompous middle-aged men giving us their opinions. And it’s certainly not about crystal ball-gazing. It’s about formulating and testing interesting hypotheses.

7. Salience heuristics. How many Budgets have been genuinely important events in economic history? Very few: Sir Kingsley Wood’s 1941 Budget – thought to be the first Keynesian one; some of Dalton’s post-war ones; Howe’s 1979 Budget which formally buried the corpse of Keynesian fine-tuning; and Lawson’s cuts in top marginal taxes in 1988. That’s about it. Generally, Budgets are unimportant. Their effect on the macroeconomy is usually much smaller than the margins of error in macroeconomic forecasts. Journalists devote so much attention to Budgets not because they matter much, but because they are salient – they look like big events.

In truth, though, our economic future depends not on the man in Whitehall but upon millions of decisions made by savers, investors, workers and entrepreneurs around the world. It’s the causes and consequences of this decentralized decision-making that makes economics so interesting. If I thought so much depended on one man, I’d never have become an economist.

* I'm speaking in net terms here, not gross. Alex Ferguson, Simple Minds, John Reid and anyone who ever wore a skirt kilt are significant negatives (along with other indviduals I'd rather forget). On the other hand are Iain Banks, Alasdair Gray and Andy Gray.

Comments

[Blimpish]

And after getting knocked out of the Cup by a Dickov penalty, even worse. One day we'll be able to even get more than one shot on goal. Useless. Absolutely bloody useless.

On the actual point - agree entirely. One of the worst things about El Gordo, is that he gives us each year the Pre-Budget and the Budget, and then the Spending Review every other year. Attlee to Laski: "a period of silence would now be welcome."

[Snafu]

Reading the tea leaves at the bottom of my mug, I foresee minimal increases in personal tax allowances, more subsidies for the film industry, small changes to stamp duty, a lot of open mouthing by El Gordo and the obligatory penny increases on petrol, to save the environment, five pence on cigarettes, bad for your health don't you know. More benefits to the old "they were in the war" (but are also more likely to vote) and muggins here will be picking up the tab once again. Not once do I ever recall having become better off as a result of any of these budgets!!

[Jarndyce]

You missed Kenny Dalglish.

[Monjo]

Thought we had two budgets a year now?
Budgets are only *seen* to benefit pensioners and families with children.
The true facts is they do not. Letting a pensioner off the £110 a year licence fee may seem generous, but not if its instead of a £3/week pension increase.
A one-parent-working family of four (2 children, other parent as stay-at-home) earning over average income has the harshest tax burden in the UK and in the OECD for this old-fashioned style family. Also we do nothing to protect marrried couples as pensioners - you get more pension money by divorcing and getting 2 single person pensions, than you do by staying married.