Budget guessing games
Opinion
It’s a fool’s errand trying to predict the contents of the UK budget, but it doesn’t stop the newspapers trying, says Ray Snoddy.
Trying to predict the contents of the UK budget, winkle out leaks or receive trial balloons from the Treasury is an ancient and honoured journalistic tradition.
In olden times, one of the most dramatic leaks of all came in 1947 when the then Labour Chancellor Hugh Dalton told The Star’s John Carvel the main themes of the budget as he walked across the lobby on his way to the House of Lords where the budget speech was going to be delivered that year.
Unfortunately for Dalton, a special edition of The Star was on the streets around Westminster 20 minutes before he actually began his speech. The long-defunct evening newspaper and his folly cost Dalton his job.
In 2013, the now-nearly-defunct London Evening Standard seemed to get a comprehensive leak of George Osborne’s entire Budget.
A long, drawn-out affair
This time round, the game of trying to guess what Chancellor Rachael Reeves will come up with in her Autumn Budget on November 26th is a long, drawn-out affair.
Just as Christmas now seems in full swing by the middle of October, so the Budget prediction games got well underway the moment the summer holidays were over.
The media had one reliable fact to go on – that the first female Chancellor would have to increase taxes – although Reeves slightly complicated the guessing game by suggesting there would also be cost-cutting.
But with weeks still to go before reality strikes, the newspapers feel free to speculate that anything that moves, and a lot of things that don’t, could attract new, or higher taxes.
This week’s Mail on Sunday was adamant that the Labour Government was planning a “new class war bombshell” by imposing a 1% annual property tax on “mansions” worth more than £2m. The money would be paid on any valuation above the £2m figure, meaning that the owners of a £3m property would have to pay £10,000 a year in tax.
By Monday, Labour’s plan for a new mansion house tax was “hanging like a sword of Damocles” over the housing market as estate agents speculated that such a move would “hasten the stampede” of people leaving the country.
The media gave great significance to the fact that Housing Secretary Steve Reed refused to rule out the proposal four times.
Newspapers like to play such guessing games with ministers who cannot give answers to such price-sensitive questions, not least because they might not even know.
After all, the reason Hugh Dalton lost his job was because price-sensitive information had reached the marketplace before it had been formally announced in Parliament.
Will Labour ‘soak the rich’?
The story is already taking on a life of its own, and more than three weeks before the actual budget, the Daily Mail is already fulminating that Labour’s “ideologically driven bid to ‘soak the rich’ will further rip the heart out of this country’s economy, to the detriment of us all.”
The Daily Telegraph warned that thousands of pensioners – including many of the paper’s readers – whose homes had gone up in value over the years would end up paying the new tax even if they didn’t have much cash.
They might be forced to downsize or move out of the area, the paper suggested.
Whether the principle of such a tax is a good one or not, there are obvious practical difficulties – such as how the necessary valuations can be carried out.
There could be a surprising number of houses valued at £1.9m in future.
Such a tax would also heavily discriminate against people who live in London and the south of England, where the majority of mansions are to be found.
The drama is certainly gathering pace with the former governor of the Bank of England, Lord King, in The Times denouncing “the mansion tax” as a “back of a fag packet approach” that could damage the economy.
If you don’t like the mansion tax, there are so many other tax manoeuvres to choose from – according to the newspapers.
Reeves is also hoping to save £1bn a year by restricting the subsidised car scheme for the disabled.
She is also threatening to increase the gambling tax, something that would, according to the Sunday Times, lead Betfred to close its entire estate of 1,300 betting shops with the loss of 7,000 jobs.
Capital gain tax could be aligned with income tax rates, a new national tax could be imposed on homeowners selling a property over a specific value, new national insurance contributions on rental income for landlords introduced and new higher bands of council tax.
A financial horror show
According to top banker Ken Costa, once again in the Mail, the budget is “turning into a financial horror show” designed to demonise the wealthy.
More taxes on bankers like Costa –that too has been predicted for the November budget.
At least Rachael Reeves can look to the Sunday Times for advice from its new columnist, one of her Conservative predecessors, Rishi Sunak.
The former Chancellor and Prime Minister suggested that things might at least not be as grim for her as they might have been.
According to Sunak, the Office of Budget Responsibility forecasts envisage a hole closer to £20bn rather than the feared £30bn.
Sunak also revealed something of the pre-budget communications strategy, which means that some budget predictions in the press should be taken with a pinch of salt.
The “usual Treasury game” is to let speculation run that it is planning three budget bombshells when it is actually planning to detonate only one.
Sunak’s advice to the current Chancellor?
“The choice is simple: spending cuts or tax rises. If Reeves opts for the latter, it will crush confidence further and depress growth, making next year’s budget even more painful than this one.”
Ah, talk of next year’s budget already.
This is the first known reference to next year’s budget, which means predicting the content of budgets is now a year-long, never-ending sport.
And just in case, luckily I don’t have a £2m mansion. Journalism doesn’t usually pay enough for that.
Raymond Snoddy is a media consultant, national newspaper columnist and former presenter of NewsWatch on BBC News. He writes for The Media Leader on Wednesdays — bookmark his column here.