What’s really happening in the Budget? These are the signals so far

The noise of protesting lobbyists following Wednesday’s Budget risks obscuring the bigger picture, says Hamish McRae

Let’s see what the chancellor says, but I think it is important to have a sense of perspective (PA Archive)

The autumn Budget is on Wednesday, when we will get the usual tsunami of numbers about the economy and public finances, together with a string of things that the government is spending money on. That will be followed by a series of protests from the various lobby groups about the underfunding of their areas of interest, plus another set of protests from other lobbyists about the rising burden of taxes to pay for all this.

There is nothing wrong with all this. Quite the reverse, for it is a key part of the whole democratic process that public spending and taxation should be scrutinised in this way. But the noise of the competing interest groups drowns out the signals that might tell us what is really happening.

So what might those signals be?

Well, the first thing is what is happening to the economy. There are two ways to catch a feeling for this. One is to look at the Office for Budget Responsibility forecasts and that is a good place to start. They will be somewhat more optimistic about what has been happening now than they were in the spring, but will couch that in cautious terms. They have been far too glum about the trends of both the economy and of public finances in the past, so their forecasts should be seen as just that: forecasts that may or may not be right.

The other thing to look for is the mass of real-time data. This does not come on Wednesday but is the stream of information about things such as road traffic, Google searches, VAT receipts, aircraft movements, and so on, that tell us how fast the economy is recovering. The big question there is whether the recovery is starting to slow down or whether it still has legs. Does the OBR view tally with real-time data?

The second area to look at is the priorities of government spending. Which areas are being favoured, which cut back? Are the plans affordable? There is such a mass of detail that it is hard to focus on the big numbers that matter. Indeed the Treasury has already started to announce bits and pieces of its spending plans. Thus on Saturday it revealed that the government would be spending £70m on coastal patrol ships and a further £628m on digital border and immigration controls. That is fair enough, assuming the boats and the computer systems work, but while those numbers are pretty big for most of us, relative to public spending as a whole, this is detail. It is not the big picture.

The best way to catch a feeling for that big picture is to go to the Institute for Fiscal Studies, which is independent and apolitical. It produced its so-called green budget ahead of the real one, given the background. On Thursday its experts give their verdict. Let’s wait and see what they say before cheering – or tearing out our hair.

The third area to look for is whether there are any indications about the longer-term prospects for spending and taxation, any hints about what Rishi Sunak is thinking about. There is the fundamental problem that an ageing society needs to spend more of the available pot on older people: their health, social care, pensions and so on. He has increased the size of the public pot a little by that increase in national insurance contributions he announced in the spring. But the country will somehow or other have to do more, perhaps by putting up the retirement age further as suggested by the OECD.

Let’s see what the chancellor says, but I think it is important to have a sense of perspective. For example, the UK actually has a less serious demographic outlook than most developed countries. Its population, and particularly its working age population, is projected to rise through to 2050, perhaps beyond. The reverse is true in much of Europe. Taxes, while high by UK peacetime standards, are not as high as in many other developed countries. We are desperately uneven in all sorts of ways, but at least this government is aware of that. You cannot fix a problem until you acknowledge there is one that needs fixing.

So let’s see what the IFS makes of the numbers, but also think longer term about both the uncertainties and the potential surprises, positive and negative. If the past 18 months has taught us anything it is that we need, as individuals as much as a society, to be resilient in the face of all the stuff thrown at us.