Incisive Health analysis of the March 2020 Budget
This is some baptism for the new Chancellor Rishi Sunak. To have to give a budget amidst market turmoil is challenging enough, but to have to give it in the foothills of what the World Health Organization has just declared a pandemic is harder still.
And then on top of these external factors are the internal ones exacerbating them. The departure of Sajid Javid with his budget plans held, half-formed, in mid-air. And the creation of the Joint Economic Unit bolting together Treasury advisers with Number 10’s. It is hard enough for a government department to cope with one set of advisers, and so Treasury officials should not be envied for having to develop a Budget whilst having to cope with two.
The result is a Budget strong on intent but undermined by uncertainty. It contains various figures setting out plans for future spending, but – let’s face it – no-one knows if they will come to pass. The £30 billion announced to support the cross-government coronavirus response should be taken entirely as a randomly-selected figure attached to what will be an entirely demand-led budget: at times like this, governments will borrow and resources will be made available whenever and wherever they are needed.
As the Budget indicates, probably only the Department of Health and Social Care has a meaningful grasp on what contingency resources are required – and a grasp mainly on the resources required to hold the NHS up. The Budget offers support for business too, but there is scepticism within Whitehall – possibly for good reason – that the other big public sector delivery departments (the Home Office, Ministry of Justice, Department for Transport, local government and so on) really know what is required. The DHSC has been leading the response to the coronavirus until now, but at some point – and soon – the centre really needs to get a grip.
The shocks – as economists would say – which make planning so hard at least help with a short-term answer to the debate on the Government’s fiscal rules. There is an acceptance that borrowing will surge in response to coronavirus, and that the fiscal rules will be reviewed. But the Treasury has defended its rules for now and lives to fight another day. Everyone saves some face, and the battle is suspended until the autumn – but it is by no means settled.
And this uncertainty contaminates every aspect of government. Although we see the pale echoes today of the agenda that Number 10 fought so hard to inject into the Treasury – with announcements of £175 billion on infrastructure, R&D investments of £22 billion a year, and a slug of money for the NHS – all the figures should have an asterisk attached. We simply will not know until later this year what damage has been done to the economy, how much of a rebuilding job is required on the public finances, and which of these promised public sector investments can be pursued. In this context, the intention to conclude a Spending Review in July seems somewhat ambitious too.
The Treasury was keen today (in a way Number 10 is not) to trumpet fiscal policy of the last 10 years, and how it has helped – to use an unfashionable phrase – fix the roof whilst the sun was shining. So a final word, maybe, on social care: an area studiously neglected for a decade and more.
Make no mistake, DHSC would have been pressing – since the election – for this Budget to be the point when a proper plan to fix social care was unveiled. The letter Matt Hancock sent to all MPs last week at this rather odd time, inviting them to cross-party talks, was therefore an admission of defeat – not a sign of progress – and the extra money announced today ‘to stabilise the system’ is nothing more than another sticking plaster over all the others that have been applied in recent years.
We have heard a lot in recent weeks about how well prepared the NHS is for the pressures it is about to be placed under – but precious little about social care. We will find out soon just how costly the inaction of recent decades has been. Maybe by the next Budget, with the country looking a little different, the Treasury will have been persuaded of the need for change.