Britain’s budget cuts taxes on the promise of productivity gains

JEREMY HUNT, Britain’s chancellor of the exchequer, was appointed for his technocratic manner by a government that increasingly resents technocracy. That tension was on display when he delivered a budget on March 6th. The speech was full of progress towards sensible aspirations: to fix a nonsensical benefit system for parents; reform the tax regime for temporary “non-dom” immigrants; and make workers, pensioners and landlords pay the same rate of tax. Yet the budget was ultimately governed by Mr Hunt’s baser political instincts, or at least those of the ruling Conservative Party. Those instincts called for big tax cuts to win votes in a general election to be held by January.

Mr Hunt therefore pruned national insurance, a payroll tax, by two percentage points, replicating a cut he announced in November. Because only workers pay national insurance and it sits atop tax on income of most kinds, this is a step towards the equal treatment to which Mr Hunt aspires. Yet the cut is expensive and comes at a time when the public finances are under pressure. It seems affordable only because of projections for future public spending that look less like a plan than a fantasy.