23 March 2016

Chancellors have long relished their day in the sun. They jealously protect their Budget discretion and shield it from annoying intrusions – like collective Cabinet discussion. But, the day after the Chancellor was forced to return to the Commons to defend last week’s Budget, Jill Rutter suggests that any politician contemplating a move into No.11 might want to reflect on whether it’s time to rethink Budget decision-making.

David Cameron’s recent letter to Iain Duncan Smith (IDS) described his puzzlement and disappointment at IDS’s decision to resign over a policy designed in his department, agreed in his department, announced by his department (and now reversed).

On the face of it, the ‘pretexters’ have it – this was a bizarre issue over which to resign. It was agreed Department for Work and Pensions (DWP) policy (though even a less volatile Secretary of State might have been annoyed when the rug started to be pulled from under him on Question Time, then No.10 briefed climbdown while the DWP press office were sticking to the line that the policy was going ahead). There have also been a raft of other cuts to benefits while the Government was cutting Corporation Tax, raising tax thresholds and, in the last Parliament, reducing the top tax rate. So going now must surely have been all about Brexit, not Budget.

But the ‘contexters’  have a point too. While the Prime Minister was right to say that the changes to Personal Independence Payments (PIP) to disabled people were agreed with DWP, IDS was right to say that context matters – in particular that DWP was being asked to make another round of savings, which the Chancellor juxtaposed with tax reductions in the Budget. That was, of course, implicit in the Conservative manifesto on which the Party was elected. However, the first IDS would have heard about the overall Budget arithmetic was at the special Budget Cabinet last Wednesday morning. When the original moves were announced on 11 March (by a DWP junior minister in a written statement), they attracted some bad coverage from disability campaigners. They became politically untenable in the overall context of the Budget.

The Chancellor had other options: for example, not to proceed with tax cuts (easily justified on the basis of the deteriorating fiscal forecast); to raise fuel duty slightly in real terms; to let his own surplus rule slip a bit more, or even look again at the hand-outs to pensioners, as IDS himself has suggested. Those choices would have made for an interesting Cabinet discussion – but a discussion that never happens and, under current Budget decision-making processes, would never happen. By the time the Budget is unveiled to the Cabinet, just hours before the Chancellor makes his speech, the documents are printed, the speech is written and dissent is impossible.

Cabinet ministers on the receiving end of Chancellorial decisions on the Budget have to accept collective responsibility without any pretence at collective decision-making. That makes a lot hang on the political judgement of the Chancellor and Prime Minister. If they seem to be making the right judgements, ministers acquiesce.

But as austerity extends through this Parliament and beyond, and the top team develops form on unravelling Budgets, the case for exposing Budget choices to the same sort of collective discussion  as other policy decisions becomes stronger and stronger. That would have two benefits. First, it would mean some of the low-value-for-money crowd pleasers that Chancellors love would get a rough ride from those being forced to make serious reductions, exposing the Treasury to the same sort of scrutiny they give to spending ideas from other departments.

Second, it would mean that the Budget judgement was genuinely a collective one – for once the Cabinet really would be “all in it together”.

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