R41 – Ministerial Report from the Chancellor of the Exchequer (Parliament 27 Budget) Watch

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R41 – Ministerial Report from the Chancellor of the Exchequer (Parliament 27 Budget)


27th Parliament Budget Report 2018

Executive Summary

As of this budget our great nation is enduring difficult times as a result of the questionable decisions taken by prior governments and the economic uncertainty caused by the Brexit negotiation period. With the negotiation period soon to be over (we work on the assumption that there will be a withdrawal agreement) it is the objective of this budget that we shall begin to reshape the economy in a way that reduces needless examples of current spending and increases spending in areas that will deliver growth for our people while maintaining a firm commitment to fiscal conservatism such that we do not burden our children as a result of our own choices, this is no time to be profligate.

Macroeconomic Outlook

In order to create a more prosperous future for our people we must first assess where we stand in terms of the economic picture so that we can correctly assess our starting point. To that end this budget will assess where the UK currently stands with regards to four key areas..

Economic Growth and aggregate demand
Unemployment and Wages
Inflation
Fiscal Deficit and Debt

Economic Growth and aggregate demand
According to the Office Of National Statistics the UK economy grew at a rate of 0.4% in the second quarter of 2018 and translates to year on year economic growth of 1.2%, the lowest since 2012. Although household spending and retail sales have remained robust growing at a near moderate pace with service sector growth outpacing that of the wider economy for the second quarter in a row, business investment declined in the second quarter. The British manufacturing sector has also entered a technical recession with two consecutive quarters of negative growth and a decline in production, since the Office of National Statistics does highlight the fact that manufacturing export growth is still positive this highlights domestic weakness as the source of manufacturing woes (1). According to the Office for Budgetary Responsibility forecast economic growth for 2018 will be 1.3% and remain in the 1.3-1.6% range until at least 2023 (2).

Unemployment and Wages
According to the Office For National Statistics the unemployment rate in the UK for the June to August period was 4%, the lowest unemployment rate since 1975. In addition, the employment rate for the same period was 75.5%, a near record high and 289,000 jobs more than a year earlier, entirely driven by an increase in full time employment of 338,000 over the same period, there is also a record level of job vacancies. In addition to the unemployment statistics the Office for National Statistics also report that wage growth has also risen to 3.1% as the labour market tightens, the highest since 2008 (4). According to the Office For Budgetary Responsibility unemployment is forecast to 3.7% in 2019 before increasing steadily to 4% in 2023 as the economy creates 400,000 jobs (2). According to the Bank Of England UK wage growth will continue to increase to 3.5% over the coming years (5).

Inflation
According to the Office For National Statistics the consumer prices index reached 2.4% in the year to September, largely static in the three month period but at a lower level than earlier in 2018 (6). According to the Bank Of England the largest contribution to inflationary pressures came from rising transport and electricity costs while clothing prices actually fell. Rising transport and electricity costs can be easily explained by the increased price of Brent Crude which has risen by around 50% over the past year (from around $50 per barrel to around $80 per barrel) (7). According to the Bank Of England’s inflation expectations, they expect the consumer prices index to fall to 2% by 2021 (5).

Fiscal Deficit and Debt
According to the Office For Budgetary Responsibility In the 2009-2010 financial year the fiscal deficit peaked at £153.1bn or 9.9% of GDP. Over the ensuing eight year period ‘austerity’ measures have reduced this to £39.8bn or 1.9% GDP in the 2017-2018 financial year. For the current financial year (2018-2019) higher than forecast tax receipts (income and VAT especially) mean that the fiscal deficit is now projected to fall to £25.5bn or 1.2% GDP and then fall to £19.8bn or 0.8% in the 2023-2024 financial year. One notable success in deficit reduction has been the current fiscal deficit (day to day spending as opposed to capital investment) has been completely eradicated and the Office for Budgetary forecasts a current fiscal surplus exceeding 1.3% GDP by the 2023-2024 financial year. As a result of the significant fiscal deficit inherited from prior government, public sector net debt (the cumulative total of the fiscal deficit each year) peaked in the 2016-2017 financial year at a level of 85.2%, is projected to be 83.7% in the current 2018-2019 financial year and continue to decline through the 2023-2024 financial year to 75% GDP (2).

Overview
Since 2016 the UK economy has underperformed that of the Eurozone and USA with annual deficits in economic growth. At the same time the fall in the value of Sterling produced an inflationary shock which eroded real wage growth and in tandem with the uncertainty surrounding the Brexit negotiation period led to a reduced rate of GDP growth despite buoyant private sector employment and indeed is one of the factors responsible for the continued forecast of a fiscal deficit and high debt.

With the expectation of a withdrawal agreement and orderly exit from the EU on the 29th March 2019 this government does however find reasons to be namely optimistic with regards to future economic growth given that according to the International Monetary Fund the Outlook for global growth is expected to remain broadly static with growth in 2018 and 2019 forecast to reach 3.9%. In the major economies of the US, Eurozone and China growth is forecast to slow somewhat to 2.7%, 1.9% and 6.4% respectively in 2019 (3). Additionally this government believes that current economic growth forecasts from the Office For Budgetary Responsibility may be insufficiently dynamic in taking into account the potential for Sterling appreciation post-withdrawal agreement with ensuing implications on inflation and real wage growth supporting consumer spending. Although we do not doubt the methodology behind the forecasts from the Office for Budgetary Responsibility we do not expect persistence of weak business investment nor weak domestic demand for manufacturing services beyond 2019 and find the fact that service sector growth appears to be robustly recovering to be evidence of a likely post-withdrawal deal increase in GDP. This government does however acknowledge the threat of a Sterling appreciation to the manufacturing sector. Essentially, this government believes that there is likely upside potential to current economic growth forecasts.

The Starting Point

The starting point for Mhoc finances with this budget is very similar to that of the real world. Thanks to the passage of B1383 - Great Repeal Act 2018 the number of acts with a direct fiscal impact is minimal, indeed only B1425 and B1428 apply. These are outlined below.

B1425 abolishes NHS bursaries and replaces them with conventional student loans. This has the effect of reducing public spending by £0.4bn from the 2019-2020 financial year. It does however create an unfunded liability of an equal amount.

B1428 makes provisions for the created of a National Employment Database at a one off immediate cost of £0.1bn in the 2018-2019 financial year.

B1386 also makes provision for the levying of VAT at a rate of 20% on sales of reclassified class B narcotics but makes no attempt to cost this. According to the Guardian, the consumption of illegal narcotics in the UK generated £6.6bn in 2013 meaning that the estimated fiscal impact is a contribution assuming that 50% of illegal narcotics consumed would now be class B would be around £0.6bn per year (8). Although B1386 makes provision for this relaxation in 2023, this government will bring that forward to April 1st 2019 in the Finance Bill. Additionally, this government will levy an import duty on imports of these reclassified narcotics (rates and costing outlined further in this budget).

Although no other acts of parliament influence public spending directly, there are a number of bills with minor effects on public spending within the government departments, most notably the Home Office. Such examples are outlined below.

B1412 significantly relaxes the law surrounding the sex trade. Although this government does not believe that additional taxation is required (the firms and employees will pay income and business taxes just like any other) the potential exists for the policing budget to be reallocated or in the future withdrawn from the Home Office Budget. It should be noted that according to the Guardian the value of sexual services consumed in 2013 was £5.6bn (8). The same is true for B1386 which reformed the classification of narcotics and reduces the level of police resources required to tackle narcotic abuse. Further details surrounding the aforementioned impact will be outlined in the future Home Office Report.

The Budget Spending Review (S1) outlines all current direct spending impacts and the change resultant.

Negligible costs to the treasury arise from the Justice, Education and Home departmental reviews.

Taxation

At a time when the public debt remains excessively high, the government remains keen to ensure that tax revenues are maximised but in a manner that is fair and proportionate.
This Government believes that there is much needed reform in our tax system.
We want to see more money in the pockets of our hard working families, we want to encourage businesses to grow, we want people to achieve their aspirations and we want to inspire a greater quality of life for all people.

The measures that we will take to achieve this are:

On the basis that UK corporation tax is already set below the average rate for wealthy economies this budget will cancel the proposed cut in corporation tax from the current rate of 19% to 17% from 1st April 2020. According to the Office For Budgetary Responsibility this policy will save £0.9bn from the 2020-2021 financial year (10).

As per B1386 and the aforementioned 100% import duty to be applied, this government anticipates that legalising the consumption and production of now class B narcotics will generate around £2.2bn per year. Although hard figures are difficult to find this is based on the fact that Cannabis is the most widely consumed narcotic and that some evidence suggests that only about 35% is imported as opposed to grown domestically leaving a taxable market size of £2.2bn (11). This duty will take effect from 1st April 2019.

On the basis that vehicle ownership has a considerable cost to the environment and increases pressure on road infrastructure, this budget levies a 150% vehicle excise duty charge onto two car (or more) households. According to LV and based on research from the Office For National Statistics there are approximately 5.1 million two car households in the UK paying a minimum of £130 in vehicle excise duty for each car each year (12) (13). Allowing for the fact that two car households make up an estimated ~15% of car owning households and that there are 2.38 million registered disabled drivers, this government chooses not to impose this duty on such vulnerable people reducing the impacted number of households to around 4.7 million (14) (15). Charging 150% vehicle excise duty on each vehicle would therefore generate around £1.8bn per year. This measure will come into effect from 1st April 2019.

Our great nation contains an enormous amount of accumulated wealth with the value of all property in the UK exceeding £7tn (16). This government believes therefore that a small levy on the value of these properties paid annually is an appropriate way to spread the tax burden while relaxing it on the aspirational and working poor. To that end this government will levy a 1% tax on the value of properties exceeding £1m which number at 768,553 according to recent data (17). Basing the tax base on 768,553 properties valued at £1m each (the tax levied being £10,000 per year) then a tax base of approximately £7.6bn is formulated. This government has however opted against burdening those not in employment with this tax change and so will grant them an exemption. According to the Office For National Statistics the number of property owners not in employment stands at 39%, deducting this from our prior tax base means that the net benefit to the Treasury from this levy will be around £4.6bn and likely to grow as house price appreciation continues (18). The measure will come into effect from 1st April 2019.

Mr Speaker, it is now that we come to one of the flagship measures of this government, that is the removal of income tax from more than twenty million hard working people in our great nation. As of April 1st 2019 the tax threshold for the basic rate of income tax will be increased to £25,000 per annum ensuring that the average hard working citizen no longer bears the burden of excessive income taxation. Although the cost of this measure is high at an estimated £45bn per annum this government believes that a small redistribution of the tax burden via the reduction in the upper rate income tax threshold to £70,000 will more than pay for this measure through generating an estimated £45.2bn in revenues (19). This reform therefore generates a net gain of £0.2bn per year while any loss from additional avoidance is expected to be negated through increased consumption from those with a lower marginal propensity to save.

As part of this government's mission to establish sound finances while generating additional economic growth, this government believes that the plethora of small taxes designed by greedy governments should be tackled and as such seeks to abolish a number of them in the name of tax simplification and encouraging growth, these are..

1) Air passenger duty is levied on outgoing flights and substantially increases the cost of air travel. As of the 1st April 2019 this government does hereby abolish air passenger duty at a direct cost to the taxpayer of £4.6bn by the 2023-2024 financial year (2).

2) Insurance Premium tax is levied on a multitude of insurance types but primarily vehicles. It is a flagrant example of government greed serving no other purpose than making vehicle ownership more expensive. As of the 1st April 2019 this government does hereby abolish Insurance Premium Tax at a direct cost to the taxpayer of £6.3bn by the 2023-2024 financial year (2).

3) The Climate Change Levy is levied on firms with the aim of providing an incentive to use ‘cleaner’ forms of energy. Although this government accepts the nobility of such an idea we believe that it is too broad brush and that other measures such as a Carbon Tax could in future provide more effective and targeted results along with measures to be announced in the Infrastructure Review of 2019. As of the 1st April 2019 this government does hereby abolish the Climate Change Levy at a direct cost to the taxpayer of £2.5bn by the 2023-2024 financial year (2).

4) The banking levy and Banking surcharge are levied on the profits of banks. Although the global nature of banking allows for significant profit this government believes that the existence of these levies is an act of greed on the part of former governments and only serves to punish law abiding firms for their success at a time when the opportunities presented by leaving the European Union could allow the banking industry to thrive even more than it already does in the UK. As of the 1st April 2019 this government does hereby abolish the Banking Levy and Banking surcharge at a direct cost to the taxpayer of £3.2bn by the 2023-2024 financial year (2).

Expenditure

Mr Speaker, as part of preparing our great nation for the future trials to come it is important not just to skirt around the edges but to perform a wholesale review of current public spending decisions and assess whether what the state spends taxpayers money on now is appropriate, sustainable and fit for purpose.

To that effect, this government has taken a number of tough decisions which are as follows:

Despite the plethora of benefits that currently exist the taxpayer is currently forced to bear the burden of paying for the winter fuel allowance of pensioners. This is a policy which costs £2bn per year and is not means tested (2). This government takes the view that in addition to tax simplification, welfare simplification should also be a focus. As such from the 1st April 2019, the winter fuel payments will be abolished.

This government believes deeply in sustainability, reduced emissions and eventually becoming a net exporter of energy and as such it will outline a number of measures in the next infrastructure review in addition to other policies being considered such as a Carbon Tax. With that being said, what this government does not approve of are needless pet projects without sufficient funding to really make an impact vs ideas like the aforementioned Carbon Tax or renewable investment. As such, from the 1st April 2019, the Clean air fund is hereby abolished saving the taxpayer more than £0.2bn through a reduction in the Department for Communities and Local Government Budget (20).

This government believes that it is important that government policy keep up with modern society and technological change. Currently, government imposes a license fee on households in order to fund the BBC, radio stations and worse, local television (including a Welsh speaking channel) (21). This government fundamentally opposes this waste of taxpayers money! At a time when resources are strained we are funding Welsh Nationalism and free television for the elderly over cancer treatment. To that end, from the 1st April 2020 the license fee will be abolished with the BBC either moving to a subscription or advertising based funding model in addition to potential part privatisation of those things currently receiving license fee funding (final agreed measures will be announced in a future bill). This will generate a saving to the taxpayer of upto £3.9bn by the 2022-2023 financial year (2).

One of the greatest long term issues facing our great nation is that of demographic change and the increase in the number of pensioners. To address this long term threat to the taxpayer the majority of employees (along with their employer and government) pay into an occupational pension scheme based from the 1st April 2019 on a minimum salary split of 3% from an employer, 5% from the employee and then 1% from government (salary minus a pensions threshold of around £6k) (22). This cost to government exceeds more than £20bn per annum and that is something that this government cannot tolerate. To that end, from the 1st April 2019 the employer contribution to occupational pension schemes will increase by 2% to match that of employees and the government contribution to occupational pension schemes will be withdrawn. This is estimated to generate a saving to the taxpayer of around £26.4bn and rising along with increased net pension contribution. (23).

In this governments battle against wasted taxpayers money we come to foreign aid. In the 2017-2018 financial year the UK gave £13.9bn to foreign nations at a time when it burdens working people with taxation and businesses with insufficient infrastructure (24). Mr Speaker, this government finds that offensive! To that end, from the 1st April 2020 this government will hereby abolish the Department for International Development and reduce the foreign aid budget to a £1bn emergency fund managed by the Foreign Office to be allocated only during emergencies such as unexpected famine or earthquakes (25). This will save the taxpayer around £16.6bn per annum by 2023-2024.

As can be seen above this government is not afraid to take hard decisions when it is necessary for the national interest and that involves taking hard decisions with relation to the NHS. Currently the NHS must divert resources from important things like cancer to deal with things that are termed ‘outpatient services’ such as x-rays or keyhole surgery, this also strains the patient because they must join large waiting lists for several weeks or months after being referred by a doctor. To that end this government believes that it is best for patient and the national health service if the state no longer restricts choice for those who can afford it. To that end, from the 1st April 2019 those employed full time will along with their employers be required to contribute 1% of their salary redeemable in the form of a voucher with which they are required to purchase private outpatient insurance. On the basis that average earnings are £25,636 then this means that the average person employed full time will have £512 with which to purchase private outpatient insurance). On the basis that there are currently 23.9 million people in full time employment and that the NHS is no longer required to provide for in terms of their outpatient needs, this government will from the 1st April 2019 reduce the NHS budget by £11bn per annum allowing the NHS to divert the additional £1.2bn they would have spent on outpatient services into other areas (26).

Other Spending decisions

In the RL 2018 UK budget a number of decisions were taken which impact UK finances and that this Mhoc government disagrees with. These are outlined below in addition to their impact on UK finances.

1) At the Conservative Party Conference (and costed in the RL 2018 budget) Theresa May announced the cap on local authority borrowing for new house building will be lifted despite the fact that this will have to be paid for via central government or increased taxes at a local level, something this government does not support. Preventing this policy being enacted will save £1.2bn by 2022-2023. (9)

2) In the RL 2018 budget the Chancellor announced the creation of a new Digital Services Tax targeted at foreign multinationals. It is the view of this government that additional taxation is needlessly bureaucratic and exists only to cover up the failure of government to deal with tax avoidance measures such as transfer pricing. Not bringing in this tax is estimated to cost 0.4bn by 2022-2023 (9)

3) In the RL 2018 budget the government froze alcohol duty which this government considers to be a needless loss of tax revenue. Not enacting this freeze (this means alcohol duties will rise at CPI+2%) will generate a saving of £0.1bn by 2019-2020 (9).

4) In the RL 2018 budget the government announced that it would go ahead in around six months with a restriction on the play limit of fixed odds betting terminals to £2. Since this government believes that the domestic betting and gambling market should be largely unrestrained by government we oppose this chance. Preventing this limit from being enacted is estimated to generate a saving of £0.2bn by 2020-2021 (9).

5) During the summer and in the RL 2018 budget the government announced a significant increase in NHS spending averaging 3.4% per annum and amounting to an additional £27.6bn per annum by 2023-2024. This government believes that such an increase is extreme, excessive, immoral at a time when fiscal discipline is required and unsustainable. To that end, this government will restrain the increase in NHS spending to 2% per annum from the 1st April 2019. When factoring in a 2018-2019 health and social care departmental expenditure limit of £123.5bn as a base and factoring in the immediate increase of £7.3bn according to the Office Of Budget Responsibility we arrive at the 1st April 2019 with a total budget of £125.9bn for the 2019-2020 financial year, a £4.9bn saving on the updated forecast from the Office For Budgetary Responsibility. (27) (2). By allowing for a 2% rise in annual expenditure the taxpayer is able by 2023-2024 to save £6.6bn per annum even before allowing for the reduction in annual NHS spending as a result of the move to private outpatient insurance.

Having taken a number of decisions on tax and spend this government believes that it is vital to adequately fund key policy decisions as we strive for fiscal conservatism and economic prosperity. With this budget having so far generated more than £70bn per annum in revenue and having made tax reforms with a net cost of less than £10bn (more than made up for by other expenditure and spending decisions) this government does hereby allocate funds to key areas:

1) This government's commitment to the nations defensive and offensive operations is absolute. In the 2019-2020 financial year UK defense spending is forecast to be £38.8bn or 1.7% GDP based on a nominal GDP forecast of 2.198tn according to the Office For Budget Responsibility (28) (2). This government will from 1st April 2020 increase annual defense spending by £15bn per annum (2.3% of nominal GDP in the 2020-2021 financial year). Future defense spending plans will be laid out as part of a 2019 Defense Review.

2) One of the most important components in delivering sound economic prosperity is ensuring that our nation's infrastructure is world class and delivers for both people and business. Net Capital expenditure in the 2019-2020 financial year is forecast to be £48.4bn or 2.2% GDP based on a nominal GDP forecast of £2.198tn according to the Office For Budget Responsibility (2). This government will from the 1st April 2020 increase the infrastructure budget by £15bn per annum (in the Mhoc this includes housing, transport, energy, telecommunications and water). Future Infrastructure Spending Plans will be laid out as part of a 2019 Infrastructure Review.

3) As part of this government's belief in fiscal conservatism this government believes that the current and ongoing fiscal deficits are not something that should be tolerated by the people of this great nation and that reducing national debt over time should be a priority in order to reduce the long term tax burden on future generations and ensure our long term economic prosperity rather than live at the mercy of debt markets. Currently the fiscal deficit for the 2019-2020 financial year is forecast to be £31.8bn or 1.4% GDP based on a GDP forecast of £2.198tn according to the Office For Budgetary Responsibility (2). This government will from the 1st April 2020 spend £10bn less than it receives in revenue per annum such that on this measure alone we would reach surplus in the 2021-2022 financial year and continue to build a fiscal surplus.

4) The final measure to be announced in this budget cements the aforementioned belief in prudent government investments and fiscal conservatism into a single policy in order to put our great nation on a path to economic greatness. From the 1st April 2020 this government will create a Sovereign wealth Fund and British Business Bank. Using £15bn in starting capital this sovereign wealth fund will replicate the Norwegian sovereign wealth fund model (it’s value is greater than that of the entire Norwegian economy - zero net debt!) and via the British Business Bank invest in British exporters through a £15bn per annum automation fund from 1st April 2021 in addition to hedging overseas and having access to any fiscal surplus exceeding 3% GDP (it is the government's long term intention to maintain a fiscal surplus of 4% GDP) (29). Through this long term economic strategy we can tackle long term issues like debt and our current trade deficit.

Concluding remarks

Mr Speaker, at eleven pages long, with more than a page of sourcing and two spreadsheets (one containing itemised costing) this budget aims to set a new gold standard for future budgets. However, it does even more than that. This budget stimulates additional consumption via reducing the tax burden on millions of people. This budget stimulates additional investment via the abolition of a plethora of small taxes. This budget reduces current government spending and deals with big future issues like pensions and defense spending. This budget finally addresses both productivity and our trade deficit by creating a British Business Bank and automation fund to directly reduce the cost of production for our great British firms making them the most competitive in the world. Most of all Mr Speaker, this budget commits the Mhoc to fiscal conservatism and sustainable future economic prosperity.

Mr Speaker, i commend this budget to the House!

Spreadsheets

(S1)
https://docs.google.com/spreadsheets...it?usp=sharing
(S1 - Tab 2)
https://docs.google.com/spreadsheets...it?usp=sharing

Legislation and Items Resultant

- Finance Bill
- Pensions Bill
- Foreign Aid Bill
- Outpatient Bill
- Sovereign Wealth/Automation Fund Bill
- Departmental Spending Motion

Bibliography

1) https://www.ons.gov.uk/economy/gross...ries/ihyr/ukea
2) https://cdn.obr.uk/EFO_October-2018.pdf
3) https://www.imf.org/en/Publications/...date-july-2018
4) https://www.ons.gov.uk/employmentand...et/october2018
5) https://www.bankofengland.co.uk/-/me...F752BF9DF0E19B
6) https://www.ons.gov.uk/economy/infla...18#main-points
7) https://www.bloomberg.com/quote/CO1:COM
8) https://www.theguardian.com/society/...to-the-economy
9) https://assets.publishing.service.go...stings_PDF.pdf
10) https://assets.publishing.service.go...ublication.pdf
11) https://theconversation.com/mr-nice-...own-weed-57707
12) https://www.express.co.uk/life-style...ng-family-trip
13) https://www.gov.uk/calculate-vehicle-tax-rates
14) https://assets.publishing.service.go...17-revised.pdf
15) https://www.gov.uk/government/statis...tatistics-2017
16) https://www.savills.co.uk/insight-an...irst-time-ever
17) https://www.independent.co.uk/news/b...-a8202056.html
18) https://assets.publishing.service.go..._ownership.pdf
19) https://assets.publishing.service.go.../Table_2.5.pdf
20) https://assets.publishing.service.go...-responses.pdf
21) https://www.tvlicensing.co.uk/check-...-pay-for-top13
22) https://www.gov.uk/workplace-pension...government-pay
23) https://assets.publishing.service.go...ublication.pdf
24) https://assets.publishing.service.go...-spend2017.pdf
25) https://www.ifs.org.uk/uploads/publi...gb2018/GB8.pdf
26) https://www.ons.gov.uk/employmentand...eekly-earnings
27) https://assets.publishing.service.go...Accessible.pdf
28) researchbriefings.files.parliame nt.uk/documents/CBP-8175/CBP-8175.pdf
29) https://www.nbim.no/en/the-fund/

Easier to Read Version - Google Doc

https://docs.google.com/document/d/1...it?usp=sharing
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Jammy Duel
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Off to a great start, the first fifth of the budget are not at all original, it's simply a rewrite of the assorted RL reports such as inflation and growth forecasts.

We then get 300 words of overview

1100 words of taxation (so the tax isn't as long as the opening padding)

Then 900 words on expenditure

1100 words on assorted little bits and pieces

150 words of closing statement
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Jammy Duel
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I am unsurprised that the supporting documents do not support at all, S2 merely states changes and not how they are derived (I will come to how many are right and how wrong the rest are later)

TL;DR on taxes:
Corp tax increased relative to RL
New taxation on car owners for having the audacity to work away from home
A mansion tax of 1% on properties over £1m
Personal allowance increase to £25k
45% taxation starting at £70k
APD, IPT, CCL, Banking Levy and surcharge abolition

Notable ommission, the manifesto reduction of VAT to 15%

Expenditure TL;DR
Means test Winter Fuel Allowance
Clean air fund abbolished
Abolition of licence fee
Force even greater pension contributions
All but abolish foreign aid
Force people to pay for outpatient treatments and cut NHS budget

Other spending TL;DR
Re-cap local authority borrowing
Abolish digital services tax
Increase the price of a pint
Remove the £2 FOB limit
NHS funding increase to be reduced to 2%
Increase defence spending to 2.3%, i.e. the IRL level of spending
£15bn extra capx with nothing to spend it on (legally dubous to do)
Creation of a sovereign weath fund, because who needs to reduce the debt!
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Life_peer
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Counting the number of words. :facepalm:
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Andrew97
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A strong budget from a strong chancellor. Aye.
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Jammy Duel
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(Original post by Andrew97)
A strong budget from a strong chancellor. Aye.
You support a tax hike on the rich and corporations?
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Jammy Duel
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(Original post by Life_peer)
Counting the number of words. :facepalm:
Worth noting that even here it underperforms, earlier we were told by the Chancellor it would be 5100, falls several hundred short of that, was also more to highlight the padding
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(Original post by Jammy Duel)
You support a tax hike on the rich and corporations?
There's not a tax hike.
Last edited by Andrew97; 1 year ago
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Connor27
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Anyone who claims to support fiscal conservatism should not support this budget.

The Tories have proposed a cancellation of the much needed cuts to corporation tax, which stops us from being undercut by Trump’s America following their own tax bill for international business. I can not stress enough how much this cancellation will damage our economy - the City of London contributes the largest % to our GDP relative to every other European capital city except Moscow. The reversal of this tax cuts to corporation tax will, I fear, create capital flight with severe repurcussions.

Additionally, the Tories fail to honour their own manifesto commitment to cut the rate of VAT, showing that despite the chancellor’s rhetoric, he does NOT want to “lower the tax burden for everyone.”

Finally, the creation of the mansion tax is a spit in the face to all that aspire to and have achieved success. This faux-Conservative Party and it’s one nation ideology does not care about you, and just wants you to keep feeding their nanny state.

This Keynesian mess that has taken nearly 6 months to produce, despite the fact that it has occurred in a term with a great repeal, massively reducing the amount of fiscal modelling of prior legislation required; is extremely sub-par.

I call on all of Libertarian colleagues, and any Conservative MPs who feel brave enough to stand up for free market principles and low taxes to join me in rejecting the darkness of this left wing budget.

(Further analysis to come when I look at the chancellor’s figures)
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I wholeheartedly support this Budget and urge the House to recognise the hard decisions made by the government and throw their weight behind it too.
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(Original post by Jammy Duel)
I am unsurprised that the supporting documents do not support at all, S2 merely states changes and not how they are derived (I will come to how many are right and how wrong the rest are later)

TL;DR on taxes:
Corp tax increased relative to RL
New taxation on car owners for having the audacity to work away from home
A mansion tax of 1% on properties over £1m
Personal allowance increase to £25k
45% taxation starting at £70k
APD, IPT, CCL, Banking Levy and surcharge abolition

Notable ommission, the manifesto reduction of VAT to 15%

Expenditure TL;DR
Means test Winter Fuel Allowance
Clean air fund abbolished
Abolition of licence fee
Force even greater pension contributions
All but abolish foreign aid
Force people to pay for outpatient treatments and cut NHS budget

Other spending TL;DR
Re-cap local authority borrowing
Abolish digital services tax
Increase the price of a pint
Remove the £2 FOB limit
NHS funding increase to be reduced to 2%
Increase defence spending to 2.3%, i.e. the IRL level of spending
£15bn extra capx with nothing to spend it on (legally dubous to do)
Creation of a sovereign weath fund, because who needs to reduce the debt!
Debt to GDP would reduce significantly because of this government.

......................

For those who wish to know what this budget means for them..

- raises the tax threshold to 25k
- Cuts foreign aid
- Allows for tens of billions for infra projects over the next decade
- Increases defense budget
- Creates a big sovereign wealth fund like Norway
- Creates a large fiscal surplus.
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Connor27
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#12
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(Original post by Rakas21)
Debt to GDP would reduce significantly because of this government.

......................

For those who wish to know what this budget means for them..

- raises the tax threshold to 25k
- Cuts foreign aid
- Allows for tens of billions for infra projects over the next decade
- Increases defense budget
- Creates a big sovereign wealth fund like Norway
- Creates a large fiscal surplus.
So it funds a social democratic nanny state where the Fake Tory Party doesn’t trust the people with their own money?

Much like Norway indeed!
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Jammy Duel
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(Original post by Andrew97)
There's not a tax hike.
If there is not a tax hike then how come the upper rate income tax (by which I assume the Chancellor means additional rate) to £70,000, a decrease of £80,000, and with this reduction perhaps the Chancellor could explain what is being done with the existing loss of personal allowance for high earners.
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Jammy Duel
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Once skipping over the intial waffle we get to the first policy of substance, a de facto increase in corporation tax. by cancelling the current decrease from 19% to 17% (which is incorrectly costed I might add), this is all part of the govenrment's desperate struggle to buy votes from the left and cut the deficit raising, by their reckoning, less than £1bn per annum and forgoing any economic benefit of lower taxation, the very source used to arrive at the £900m a year "saving" itself states a 0-6-1.1% increase in GDP as a consequence of the reduction in corporation tax from 28% in 2010.

Now of course the costing on this policy is incorrect, a closer inspection of the source reveals that this £900m figure is actually the OBr's cost of the cut from an already announced and legislated for reduction to 18% to the new 17%. Could the government clarify whether the tax increase is expected to raise £945m a year with the reduction to 18% going ahead, or is the tax increase to be bigger and even that cut to 18% canceled?

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For the 100% tariff on narcotics where does this £2.2bn untilmately derive? If we work backwards we get a total spend on class B narcotics of £6.3bn (2.2bn/0.35) and that is assuming 0% margin in the UK for any imports, in comparison the total spenf on cannabis in 2017 is estimated to only be about £2.6bn, if we again assume zero margin in the UK we get a revenue from cannabis of £910m, but of course there is margin in the UK which reduces this figure. On top of that we get that tariffs are inherently detrimental to imports and push towards greater output in the domestic market to avoid these tariffs which further decreases the figure, alterntiavely the increased costs reduce demand and by extension imports, all in all the final figure will be a far cry from the £2.2bn stated, unless of course other narcotics make up a signficiantly larger portion that I am assuming.

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We then move on to the increase in VED for multi car households, this is simply an abomination and an assault on working families finances, while the government talks of cutting income tax later this is paid for by increasing other taxes. The Chancellor also makes it three for three when it comes to accurate costing. ONS data shows that 28% of households have 2 cars/vans and 7% have 3 or more and all this is based on the number of households being 27,210,000 which means there are approximately 9.5m households with more than one vehicle, even if we look at the chancellor's source it states there are 7,618,800 two car homes (this is consistent with the ONS data). We will also assume that the 3+ vehicle households all have only 3 vehicles, from this we find a whopping 20,951,700 vehicles are being hit by this extra tax. Using the same £130 figure as the chancellor we get revenues of £4.085bn, an average of £430 per multi-car household. If the 150% is just a 50% premium over the base rate then the costing by the government is ultiamtely not far off, just not for the right reasons, and the increased revenues are £1.36bn, after considering households with more than 3 cars, cars worth over £40,000 having additional duties, etc £1.8bn might be the end result

This is, of course, a tax on work for those who live outside of major cities, according to the Chancellor's source 40% of people require a car for work and 37% stated this as the main reason for having more than one car in the household, one must remember that most households have multiple adults in. It should also be noted that the second car could ultimately be better for roads and the environment, even in cases where the second car is not needed for things like work, for instance if the second car is a larger car so there is more boot space, for instance to do shopping or go on holiday, it makes total emissions lower as a smaller car is being used the rest of the time, if only one car is to be owned it would be the larger one.
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Mr Eurosceptic
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We were promised a feast. Since it is Christmas, this would not be considered a feast for the subjects of Bob Geldof's Band Aid, let alone hungry Westerners waiting for a quality budget.

The budget claims the fiscal deficit will fall to £19.8bn in 2023 (which should be the TSR figures to make the budget make sense) from the current one of £39.8bn. Sounds fine, however, the spending proposals do not meet that.

- £0.6bn from class B drug VAT.
- Unknown costs from managing prostitution. These costs should have been in the Home Office report but they were not.
- £0.9bn from abandoning Corporation Tax cut down to 17%.
- £2.2bn from cannabis taxation, except that is the total size of the taxable market, not the tax revenue so the figure will be £600bn at the most assuming a tax above 20% on a slightly bigger market given home grown production will increase.
- £1.8bn from taxing cars.
- £4.6bn from 1% mansion tax.
- £0.2bn from income tax changes.
- -£4.6bn from abolishing APD.
- -£6.3bn from abolish Insurance Premium Tax.
- -£2.5bn from abolishing Climate Change Levy.
- -£3.2bn from abolishing Banking Levy and Banking Surcharge.
- £2bn from ending fuel payments.
- £0.2bn abolishing Clean air fund.
- £3.9bn from abolishing Licence Fee.
- £26bn from abolishing pension contributions.
- £11bn from reducing NHS budget through forceful insurance.
- 1.2bn from abolishing house building cap.
- -£0.4 from abolishing Digital Services Tax.
- £6.6bn from reducing increase in NHS spending.
- £0.3bn from unfreezing alcohol duty and removing cap on gambling.
- -£15bn from defence budget increases in 2020.
- -£15bn from infrastructure spending.
Ignoring one-off sovereign wealth fund set-up costs.

Policies:

Three car tax - this flies in the face of the conservative mantra to create jobs. Most three car households are not millionaires hogging cars, they are teenagers owning their first car when living at home or adults living at home. The tax is a tax on jobs, not excessive car use. Teenagers will be forced to pay extortionate taxes which will reduce their car ownership, restrict their mobility, and ultimately make it harder for them to work. The same can be said for adult children living at home. For the Chancellor who once said people should be prepared to commute to work, his policy makes that commute harder. The policy targets hard working people the most. The Chancellor dismissing these concerns by claiming it affects a small proportion of car-owning households is an insult to the hardworking young adults who are experiencing their first tastes of adult independence after passing their test and the adult children living at home. The latter raises another important point: housing stock. At a time when housing supply is limited, incentives to force adult children to leave their family house should not be implemented. Adult children should not suffer by paying more tax because they live at home.

1% mansion tax - a tax on home ownership from the Chancellor who wants to see a home-owning democracy. The inflated UK property market - which will never correct itself given the structural issues - means the tax targets people living in London and those who have kept a property in the family for many generations. For example, a house bought in London for half a million when this MHoC created would now be worth over 1 million. It has doubled in value. For a family who saved for years to be able to afford that London house, this new taxes pushes them out of their houses because their property values have exponentially grown. Even worse, let's take a young couple who bough an average-sized, detached family house in Birmingham in the early 90s (when most of our parents met), they would now be paying this tax given the ridiculously high price increases. Imposing at least a £10000 annual tax on hard-working families is not something that should be seen as desirable. The Chancellor has used the Labour argument of 'Ew, rich millionaires' to justify icky tax policies when the reality is the rich millionaires are not really hit hard. Millionaires will see the charge as pocket change and won't really care that much. The middle classes will be further squeezed because they were lucky with their property investment when they decided to settle down and start a family.

Income tax changes - regardless of the principle of taxing people more because you can, the costing is very pie-in-the-sky. Firstly, the principle. The Chancellor rudely and naively likes to portray those earning over £70000 per year as wealthy individuals: the reality is not true. Usually, these individuals are the breadwinners and leave their wife, who is not employed, to rear their offspring. To these families, the £70000 is household income as well as personal income. They are fortunate enough to be able to live off one salary so the woman usually chooses not to work. Less than three quarters of women with children work and among professional women - where the salaries are higher - the work rate is less. Given professional women tend to marry professional men and people do stay inside their social classes when marrying (a trend which has actually been steadily increasing in proportion of marriages since the 1950s) it can bee seen most of the £70000+ earning men will have a stay at home wife and the men earning lower salaries, say around £35000 will have working wives to help boost the household income. For two families, the single-worker family will pay double the amount of tax as two families each earning £35000. It's true this phenomenon will always exist, however, this policy change magnifies its effects and makes it more visible. It's a tax on middle classism.

Secondly, 829000 taxpayers earn between £70000 and £100000 in the UK. Assuming all of them earn £99999, that's a total collective income of £83bn for tax revenue in the new system of £37bn. Add on the tax from workers earning over £150000 (£55.6bn) which is unchanged, and that of workers between £100000 and £150000, the total new tax revenue would be £116.3bn.

Under the current system, workers earning over over £150000 currently pay £55.6bn in tax, earners between £50000 and £150000 pay £33.1bn, and those in the middle pay £16.6bn. This is found by simply adding up the tax liability figures on your own source. The new proposal would generate £116.3bn and the old one generates £105.6bn. That's an increase in tax revenues of £10.7bn. That's based on assuming everyone earning over £70000 earns £99999 which we all know is not true. £45.2bn is not going to be generated from this change. The costing is wrong. And that's just the costing for the tax threshold decrease, let alone the costing for the personal allowance increase which is wrong because ti is based on the dodgy assumption of normal distribution in a very specific bracket.

Cutting taxes, abolishing levies, cutting the licence fee is all fine but should not be funded by appealing the middle classes who have expensive houses, a third car for their teenage child, and a salary over £70000.

Pensions - Forcing employers to pay an extra 2% is wishful thinking. The result will be employers choosing to hire fewer workers because the pension costs of hiring them will be too much. Employers paying more in pensions is a direct incentive to doing more with fewer workers and keep wages as low as possible. Job cuts and further suppressing wages goes against beliefs the Chancellor has previously claimed to have. If you want to change pensions, copy the Norwegian model or aim for pension funds. Britain's infrastructure being predominantly owned by foreign pension funds shows how flawed the British approach to retirement is.

Medical insurance - this doesn't make sense. Not only does the employer contribution reduce employment, but when insurance companies know there will be more demand for insurance, the prices are going to go up. And even then, the £600 an average full-time employee has isn't going to that far when some insurance can be in the thousands if medical conditions exist. Workers with everything from diabetes to disabilities will be forced to pay extra out of their pocket for things they currently receive for free. The result will be less disposable income and reduced tax revenue from consumption. And the reduction of £11bn is ridiculously arbitrary given outpatient services do not cost that exact amount and outpatient services have disproportional demand across society. Those who most use the NHS outpatient services - children, the severely injured, and the elderly, who need constant treatment, aren't going to be working anyway so the savings would be minimal. All this does is provide an excuse to cut the NHS budget by £11bn without actually saying how the shortfall in services - and there will definitely have to be some cuts somewhere - will be made up. The UKIP medical insurance bill from a few years ago was by far superior if a mandated, NHS-Insurance model is going to be introduced.

Defence spending and infrastructure spending increases as fine. It is a shame the government was too lazy to even attempt to give some idea how these increases would be spent.

Overall, the policies in this budget should save just over £14bn per year by 2023, assuming all costing is correct which it is not. Yet, the deficit is going to be £20bn lower in 2023. Where do the other savings come from? Of course, the Chancellor has simply assumed real life projections hold true, however, the policies here change income, change disposable income, change employment, change the situation of elderly people, and change the general health of the population. The real life policies are not going to hold true so the projection is wrong. The budget fails to even predict itself going forward. The budget does not even use TSR figures in it's executive summary.

The budget would pass a test of being a mildly acceptable budget but it is not the new MHoC gold standard by any stretch of the imagination and definitely not something to be proud of given the bad costing, weird assumptions, and dodgy policies.
Last edited by Mr Eurosceptic; 1 year ago
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SoggyCabbages
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Highlight of this budget has to be the disgusting new charge levied on VED. How can a chancellor supposedly calling it "The People's Budget" create this?

The man in a van trying to make ends meat will gladly welcome this I'm sure! Definitely a working-class policy.

Then to get your willy out and go "oooo it's 11 pages long". No one cares about length it's about what is in it that counts. You can't just shave your pubes to make it look bigger you'll be found out.
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Jammy Duel
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Now on to the other 3 tax policies

It's concerning to see how far the government has fallen when it is proposing a mansion tax with a lower threashold and higher rates than even Labour who were only going to apply it to properties over £2m and starting at £3,000 a year, a similar property would come with a cost of nearly 7 times that under this plan.

On this is costing is very trivially wrong as it relies on very basic assumptions that a 10 year old could tell you are wrong. The biggest dodgy assumption used is that all properties taxed are worth £1m, this we know to be false. For instance 3 years ago, during the 2015 general election campaign, the number of properties estimated to be over £2m sat at approximately 100,000, if we assume that all properties worth at least £2m are exactly £2m and there has been no increase in properties worth at least £2m then we have an additional £1bn revenue. We can go a step further, in 2010 the Lib Dems advocated a similar policy, a 1% tax on value over £2m, they claim this would have rasied £1.7bn, this will have of course increased since then. Already £2.7bn has been found, and that's before considering that there will be more properties now in both brackets. We can further make the reasonable assumption that the structure of employment status for these asset rich individuals does not mirror that of the general population which makes the 39% decrease assumption dubious, further to this a number will have non-employment incomes; the government wishes to take away winter fuel payments of just a few hundred from poor pensioners but is willing to give those with incomes in the millions tax breaks of tens of thousands because they aren't technically employed?

Finally the chancellor openly admits that this will be a tax that hits more and more people as time passes as the threshold will not increase over time, just like national insurance and higher rates of tax it is a way to increase taxes by stealth.

https://www.bbc.co.uk/news/business-29326057

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I see the chancellor is not letting up on his costing errors as we come to the penultimate main tax policy, it comes as no surprise that he hides the derivation of his revenue figures.

The chancellor runs into the same problem as one of his predecessors here and that is data lacking resolution, but even then the costing is well off. First I shall provide derivation using his own sources, we shall make a crude assumption that wage growth offsets the RL increases, for simplicity sake, with more detailed figures coming later. We get a few things from the source provided:
1. Those earning under £20,000 pay £7.26bn income tax
2. There are 12,22m people earning over £30,000, the increase in personal allwance for these individuals will cost £30.55bn
3. The average tax of those earning between £20k and £30k is £2340, we will assume therefore that the median income of this group is ~£25,000, we will further assume that the distributions of incomes is fairly equal.
3a. We therefore get that 4.26m people in this group will cease paying income tax, given they earn an average of £22,500 this will be an average cut of £2000 for a total of £8.5bn
3b. The other £5.26m will receive a cut of £2,500 each or a total of £10.65bn

All told this means the cost is approximately £56.96bn, not the £45bn stated.

Now it gets even more laughable, where the hell does the chancellor get £45.2bn revenue increase from? Using his source there are 428,000 people earning in excess of £150k, the current higher rate limit, each of these people will pay an extra £4,000 as a consequence of the higher rate limit being dropped to £70,000, before considering any A&E this would raise a meagre £1.7bn. Let us now assume that everybody in the £100k-£150k range is earning £149,999.99, this gives another 558,000 people paying £4000 each or another £2.2bn, now let's go one step further and assume that all those in the £50k-£100k bracket are earning £99,999.99, now we get an extra 3,220,000 paying an extra £1500 each for a total of £4.8bn. Take all these together and we get a total of just shy of £8.8bn extra revenue. Again, all that is before any change in behavious of high earners to minimise tax liability.

To summarise using the Chancellor's figure we get his lost revenue understated by £12bn and gained revenue overstated by £36.4bn, all told the stated net benefit to the exchequer of £200m per annum becomes a net loss of about £50bn

Final note, the Chancellor states this measure will life over 20m people out of income tax, this is despite the fact that his own source puts the upper limit on the number removed at 18.78m and we have already established ~4.26m of these people will not be removed from income tax, bringing the number down to 14.52m, and that's before we take out those being removed by the already announced increase in personal allowance to £12,500. Once again the Chancellor failing to deliver

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With the simplification of taxation the chancellor finally gets some costing correct, although it would be concerning if even here he were to fail given it is simply copying figures off a table, it is intriguing though that he should choose to list the figures for 2023/4 rather than 2019/20 given that is the year this budget it for, although ultimately unsurprising because then he can make his tax cuts look bigger given the revenues increase as time goes on, although the significant decrease in the banking levy in 2021/22 means this is not wholly misleading as the 2023/24 total is only £200m greater than that in 2019/20.

As another note though I find it baffling that the Chancellor should choose to brand Insurance Premium tax as "a flagrant exmaple of government freed serving no purpose than making verhicle ownership more expensive" while introducing his own similar taxes.

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That is it for me today, expenditure and the little bits and pieces at the end will be tackled tomororw.

Thus far the deficit has ballooned from £25.5bn in 2019-20 to about £75bn, from 1.2% GDP to about 3.4%
Last edited by Jammy Duel; 1 year ago
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Baron of Sealand
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Joy to the world, the budget has come!
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Jammy Duel
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(Original post by The Champion.m4a)
Joy to the world, the budget has come!
And it's defied expectations!
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Hopefully I'll have some time in the coming days to read through this a bit and offer some comments of my own, though I note that Jammy is doing a very thorough commentary on this budget, and others have made some extensive comments also.
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