The battered red box will have been filled with all the right papers. The leaks will have been placed in the newspapers, the Lib Dems brought on board, and the measures targeting swing voters in marginal seats will have been calibrated to help the Tories win the election. As he prepares his Budget for next week, George Osborne will no doubt make sure he has ticked all the right boxes.
And yet, in what in truth is likely to be his last Budget, Osborne should throw off the shackles and have a blast. Whatever he announces is likely to be quickly over-whelmed by the election campaign. There probably won’t even be time to implement it.
Instead of lots of tinkering, Osborne should take the opportunity to be radical – and make the kind of changes that chancellors usually shy away from. If he doesn’t, he won’t get another chance.
A good innings
Gordon Brown’s long reign got us used to the idea that occupants of No. 11 stick around forever. But by historical standards, the five years in the job that Osborne has now clocked up is a long innings. For all the debate about whether there should have been a bit more or a bit less austerity, history will certainly judge Osborne as one of the more competent holders of that office.
He took control in the wake of the worst recession in several generations, and with a huge deficit, and got the economy growing again, and at least stopped the national debt from becoming uncontrollable – even if he did not get it down by much.
Even so, this may well be the last Tory Budget for a long time. The fracturing of UK politics and the rise of minor parties, such as Ukip, the Greens, and the Scottish Nationalists, mean it is unlikely the Conservatives will get a majority. Nor are the Lib Dems likely to have enough seats to form another stable coalition.
The best the Conservatives can probably hope for is a minority government – but that won’t have the votes to do anything very radical. So Osborne should try to lock in some much-needed changes to the tax system while there is still time. Here are four good places he could start.
First, merge national insurance (NI) and income tax. To most people, they are virtually the same thing, but the one important thing that NI allows is to let chancellors sneak through a tax rise by calling it a hike in NI instead of an income-tax rise. It is usually dressed up in some fancy language about “saving the NHS”.
If you merged the two, you would close off that option, leaving Ed Balls with no choice but to call a tax rise a tax rise. You would also make the tax system simpler and more transparent.
Second, set up a Royal Commission to simplify the tax system. The volume of tax legislation has been growing relentlessly year after year and even accountants struggle to understand some of the rules. Regardless of whether you think the state should be raising 33%, 35% or 38% of GDP in taxes, which is about the range of opinions, there must be simpler ways of bringing in the cash. Set up a cross-party commission to work out what they are and then challenge the other parties to accept its findings. It will be hard for them to say no.
Third, devolving powers to the Scottish and Welsh assemblies without making them responsible for raising their own revenues is a recipe for disaster. It will encourage both to spend more than they need to, and breed resentment among English taxpayers, who, because of the overwhelming size of England within the UK, inevitably end up paying most of the bill.
Instead, tax-raising powers should be devolved to the Scottish and Welsh assemblies, but they should be forced to fund all their own spending. Scrap the Barnett formula that divides up spending between the countries – that will cause so much wrangling between Labour and the SNP that it will be impossible for them to form a coalition.
Finally, reverse one of Gordon Brown’s worst mistakes – the creation of the complicated system of tax credits. Although this might have been designed to make sure work pays, what it has done is to subsidise low-paid work – and so create more of it. Families end up paying a lot of tax, which then gets expensively recycled to the same people, creating a dependency culture – and allowing a lot of fraud and inefficiency to flourish.
They can’t be got rid of immediately because it would cause too much hardship. But a chancellor on his way out could set out a ten-year plan to phase them out, and at the same time replace them with tax cuts, which would be far simpler, and would encourage better-paid jobs.
Setting the agenda
Even if Osborne is heading for the exit himself, he can still be influential for a long time to come. Alistair Darling broke the taboo on raising the top rate of tax in his final year at Number 11. Five years later it is still higher than when he left office. The detail of the Budget itself will quickly get lost amid the heat of the election campaign – and forgotten about once the results come in.
But it is a final chance for Osborne to make some much-needed long-term reforms. By doing so, he can shape the political agenda for the next government, regardless of whether the Tories have been thrown out of office.