March 16, 2012 7:26 pm

The UK’s Budget box deserves reverence

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Compared with other western countries, Britain’s system makes it a paragon of budgetary virtue

Leafing through the second volume of Harold Macmillan’s diaries, I ran across a photograph from April 1959. In it, Derick Heathcoat-Amory, chancellor of the exchequer, holds Gladstone’s Budget box aloft for photographers. It was a quaint ritual even half a century ago. Next week George Osborne will carry it out again, albeit with a newer box. Now, that is England. To a foreigner, no British institution is odder than the rigmarole over Budget day. That red box of Gladstone, the presentation of the Budget to the Queen, the tradition that chancellors are allowed to drink (as Ken Clarke and Geoffrey Howe used to) during their Budget speeches, but are not required to (both Gordon Brown and George Osborne have begged off) ... until recently all of this struck me as outdated and preposterous.

Not any more. Now it strikes me as nothing more than the reverence due to the institution of budget-making. The slough of financial despond in which the western world is now mired makes it clear that, in certain circumstances, budgets can be everything. Compared with other western countries, Britain’s system makes it a paragon of budgetary virtue.

Once a political organisation gets bigger than a band of hunter-gatherers, it either budgets its own resources (in which case it has self-rule and sovereignty) or it does not (in which case it is either a colony or a band of mercenaries). What is a government? A government is a thing that makes a budget. If it doesn’t make a budget it is not a government.

That is why, these days, there is rioting in Athens every few weeks. Greeks are certainly not complaining about having their debts written off. And fewer and fewer Greeks are confident that any government will be able to protect them from the cuts being demanded. It is the surrender of sovereignty that is the problem. To the extent that “fiscal union” or “fiscal supervision” means surrendering budgetary authority to Brussels, it means disbanding countries. The protesters think: no budget, no Greece. They are right.

“Oh, it’s nothing so portentous as that,” defenders of a fiscal union will say. And of course it doesn’t seem so portentous – if it did, the peoples of Europe would never consent to it. Yet whenever politicians even hint that their citizens’ real allegiance is not to the nation but to the continent-wide bureaucracy, they get slapped. Angela Merkel’s offer to campaign for Nicolas Sarkozy in France’s presidential elections was hailed by certain people as a first step towards a pan-European politics. Those people tended not to be from France. This week Mr Sarkozy announced in a radio interview that, in fact, Ms Merkel would not be campaigning for him because “an election campaign is the business of the French”.

The US is in a different kind of predicament. While its leaders have not been bullied into surrendering their budgetary authority, they have been too cowardly to use the authority that rightfully belongs to them. Unlike Britain, the US has a thoroughly “reformed” and streamlined budget process. A 1974 act of Congress created a standing budget committee in the Senate. The result? The historic nadir of the US Senate’s standing as a budget-making body. Terrified of imposing either the tax rises or the services cuts that are so manifestly needed to bring accounts into balance, it has not even bothered to pass a budget in almost three years. Far from balancing the budget, the government borrows one of every three dollars it spends. Whatever the pros and cons of the US “modernisation” of 1974, it did not produce a better system than the UK’s.

Among the big western democracies, the British are the last responsible budgeters. We should be precise about what that means. It does not mean that they make good budgets, only that they are good at making budgets. Britain is in financial trouble, certainly, with debts totalling 507 per cent of output, according to a recent McKinsey report. But it is in credit-card and bank debt that the country is a world beater. Its government debt remains a manageable 81 per cent of output, roughly where Germany is, and where the US was until it lost control of its government finances.

There are bound to be mistakes in this upcoming Budget. On such questions as whether to increase the personal tax allowance to £10,000, whether to slash fuel duties, whether to eliminate stamp duty loopholes and whether to continue the 50p top rate, the people’s representatives may choose well and they may choose ill. But at least it will be the people’s representatives who choose. It has been a while since that could be said in the US or Europe or any other place where they snicker at parliamentarians drinking gin and tonics and waving around beat-up old briefcases.

The writer is a senior editor at The Weekly Standard

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