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March 22, 2006 2:54 pm

Martin Wolf: Why it is time to scrap annual Budgets

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Gordon Brown has just delivered his 10th Budget. It was my 20th as a commentator. I do not know what the chancellor has learnt from his experience. But I know what I have: it is time to scrap annual Budgets.

They are worse than a waste of time and energy; they are harmful. We understand this when it comes to spending. It is time we did so for how spending is financed as well.

A year is an astronomical phenomenon, not an economic one. It would be possible to have a Budget no more frequently than the rolling three-year comprehensive spending review.

Consider what a government has to decide and how those decisions affect the public.

It must determine how much money it wants, dares or can afford to spend and on what.

It must then decide how much to raise from taxpayers and how much to borrow.

Finally, it must decide how to collect that money at the least cost to the economy.

None of these should be short-term decisions. Businesses and individuals need to be able to plan their affairs on the basis of secure knowledge of the taxes they can expect to pay.

A multi-year budgetary cycle would give such security and allow a more considered view of the overall fiscal position.

This is how it would work. The chancellor would present his estimates of the amount of tax revenue he needs to raise to meet the government’s plans at much the same time as he sets the envelope for overall spending. This would be at most every two years. At the same time, he would announce the structure of taxation needed to achieve those objectives.

This shift would encourage paying greater attention to long-term solvency. It would create adequate time for full discussion of (increasingly needed) fundamental tax reforms.

Taxpayers would benefit, as would the quality of government. I commend the idea of infrequent, multi-year Budgets to the House.

Martin Wolf discusses global issues with influential economists. Follow the debate at www.ft.com/forumwolf martin.wolf@ft.com

Budgets could be no more frequent than the rolling three-year comprehensive spending review. Better still might be one per parliament

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