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Budget sweeteners and credit

There were a number of measures specifically targeted at specific geographies.

While the Chancellor is being given credit for eschewing a big pre-election giveaway in the final Budget of the parliament, his speech showed an acute sensitivity to the electoral geography of the UK and the general public mood.

There were a few reasonably eye-catching announcements designed to appeal to swing voters across the country – mostly amongst the middle classes. These are the usual fare of pre-election budgets. But there were also a number of measures specifically targeted at specific geographies. These have raised some eyebrows, and led the Opposition to accuse the Chancellor of dipping into the “pork barrel” – of using the Budget to hand out sweeteners to marginal constituencies in the hands of Conservative and Liberal Democrat MPs. When the Financial Times went through the Treasury’s Budget statement, it found 16 examples where “MPs in marginal seats have been offered assistance in the form of direct funding, housing or enterprise zones… from new rail links and enterprise zones to an anti-seagull fund”. This did not come as a huge shock: throughout Labour’s 13 years in power, it was criticised by the Conservatives for using its public spending to help its voters disproportionately. Those 16 examples do not, of course, constitute hard evidence of bias in Budget allocations. Yet there is academic literature that has focused on these types of issues more systematically and that lends support to the hypothesis that marginal constituencies play a particularly influential role in majoritarian political systems, including the UK Westminster model. We have recently reviewed this literature, concluding that the disproportionate influence of marginal constituencies – amplified in first-past-the-post electoral systems such as that of the UK – is a potential source of policy distortions/failure. Several empirical studies we reviewed found evidence that marginal constituencies in the UK are associated with key political outcomes such as turnout, party campaign spending, and the allocation of public spending. Another aspect of the Budget that chimes with our research on the political economy of growth is the announcement of a help-to-buy ISA. This is yet another measure designed to support demand, leaving intact the problems that afflict supply and that have been identified as the main culprit of the housing affordability crisis in parts of the south of England. Our research indicated that, in the context of weak or absent city-wide/regional/national planning co-ordination, there is a significant risk that local planning decisions may fail to allow for the full breadth of interests affected by development. The problem is compounded by limited fiscal autonomy of local authorities and a planning system based on “development control”. Governments of all stripes have shown an ambivalent approach to easing supply restrictions and putting a curb on rising house prices. This ambivalence is a reaction to the conflicting views and interests of the electorate: while homeowners are interested in protecting the value of their homes, renters and prospective buyers hope to see a fall in rents and house prices. But when asked what government can do to tackle the housing crisis, both homeowners and renters express a preference for policies that ease access to credit rather than those designed to foster house-building. That has not gone unnoticed in the making of this Budget.

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