Open the spreadsheet and pour out the coffee Rishi, this could be a long session! – Owl

Jeremy Hunt and Rishi Sunak will spend the weekend scrambling to piece together Wednesday’s Budget after being warned of a £2bn black hole in their original plans.

Arj Singh inews.co.uk

The Chancellor and Prime Minister were dealt a blow on Wednesday night when the Budget watchdog said their draft proposals were £2bn more expensive than allowed by the Government’s “headroom” – the amount of spare cash against a promise to get debt falling in five years.

They have since been working to repackage the Budget amid intense pressure for tax cuts that can drive economic growth and help the Conservatives close the opinion poll gap to Labour in an election year.

The pair were hoping for better news when the Office for Budget Responsibility (OBR) delivered another key forecast late on Friday night, and were due to spend the weekend piecing together a near-final package before Wednesday.

Treasury sources have admitted that the process of pulling together the Budget had been “hard” amid a backdrop of weeks of gloomy forecasts from the OBR, which left Mr Hunt’s headroom before policy decisions of just £13bn, £6bn of which the Chancellor wants to hold in reserve to reassure markets.

It means Mr Hunt is deciding between a 1p cut to either income tax or national insurance – a smaller tax cut than he offered in the Autumn Statement – with hopes of a 2p cut or the unfreezing of some tax thresholds fading.

The Chancellor is still considering aping Labour’s policy to scrap the controversial “non-dom” tax status as he considers a range of measures to raise money to make the Budget add up.

Mr Sunak on Friday hinted at a cut to national insurance, which dropped from 12 per cent to 10 per cent in January after the Autumn Statement.

Asked if there could be further reductions in the tax announced on Wednesday, the Prime Minister said: “The Chancellor and the UK Government chose to cut national insurance; there were lots of reasons for that, but first and foremost it is a tax on work.

“I believe in a country and society where hard work is rewarded – that’s something that’s really important to me … and all the people in the Government, and cutting national insurance is rewarding hard work.”

The free-market Institute for Economic Affairs (IEA), a think-tank influential among right-leaning Tory MPs, said the UK’s “stagnating” economy was a “disaster” for living standards and should be the “priority” in the Budget.

IEA executive director Tom Clougherty called for the scrapping of stamp duty, although this has been ruled out by Mr Hunt.

Mr Clougherty said: “If there is fiscal headroom for tax cuts, priority should be given to reforms that could have a meaningful growth effect.

“The Chancellor could make some helpful changes to corporation tax and business rates at limited cost to the Exchequer.

“The real prize, though, would be the abolition of stamp duties. There would be a fiscal hit from abolishing Stamp Duty Land Tax, but the distortions it causes in a tight housing market are so destructive that the cost is clearly worth bearing.”

Mr Clougherty also warned against abolishing non-dom status, claiming it would risk “unintended negative consequences too – with little fiscal upside”.

He added: “I hope this speculation doesn’t indicate a last-minute scramble to keep to the fiscal rules.

“Tax policy should be made for the long term – not on the fly in response to a rolling (and changeable) five-year debt forecast.”

In his latest newsletter Simon Jupp announces that he will be leading a parliamentary debate on Tuesday.

Richard Foord seems to have got there first.

He will be hosting an event in the fringes of the House of Commons on Monday. His guests will include the End Sewage Pollution Coalition, which includes the Rivers Trust, British Canoeing, the Angling Trust, River Action, Swim England, Surfers Against Sewage and the Women’s Institute. So it might be more productive.

This follows up his tabling of a bill in January to hand over  responsibility for collecting and reporting data on the number and duration of spills to the environmental regulator.

Owl fears the debate Simon Jupp will lead will seek once again to divert attention  away from the government’s record of privatisation, lax regulation and underfunding of the regulator and place all the blame on the water companies. 

Here is Owl’s summary of the first debate at the end of February last year:

Simon Jupp led the debate. Unfortunately his fellow Tories from Devon followed his lead, especially Anthony Mangnall (Totnes) and Kevin Foster (Torbay). [Though to give Anne Marie Morris (Newton Abbot) her due, she did try to rise above this.]

They let SWW off the hook from the start:

For example, here is how Simon Jupp opened the debate:

….In recent years, a spotlight has been shone on storm overflows and CSOs. Water tourism is booming across our region, including windsurfing in places such as Exmouth and Sidmouth in my constituency. However, there is another reason why people have finally started talking about the issue: the Conservative Government have put in place a plan to improve our water, giving us all an opportunity to hold water companies to account.

People finally talking about the issue of sewage because the Tories have a plan? Really!

……Of course, in a perfect world, we would stop sewage spills completely and immediately. Sadly, that is virtually impossible in the short term; because of the pressure on our water infrastructure, we would risk the collapse of the entire water network, and the eye-watering costs involved mean we would need not just a magic money tree, but a whole forest.

No short term solution because it would cost? Why so little investment over the years?

Here is Owl’s summary of the second debate last September:

A second debate on South West Water’s record was hurriedly arranged to take place before MPs break up yet again. 

As a consequence of verbose schoolboy debating antics from the proposer, Mr Liddell-Grainger MP (Bridgwater and West Somerset), and nothing new from the Minister replying to him, the debate ran out of time and lapsed. 

Owl’s take

The Tories are still in denial over the consequences of privatisation and the effect austerity cuts have had on regulators, trying to blame everyone else.