All sides are anxious about this Budget

"In this country we have to look upon budget promises as made of the same stuff as lover's oaths." So said Lord Salisbury, three times Conservative PM, and his words are perhaps more apt than ever given that all the love drained out of the coalition's marriage some time ago. We need to sift carefully before being sure about what today really means.

As with all Budgets we should start this process by asking what impact it will have on the overall economy, who wins and loses, and what it will mean for the political strategies of different parties.

In terms of macroeconomics this budget was always going to be a non-event. It is broadly fiscally neutral, with only very minor upward ticks to growth forecasts. None of this is a surprise: this chancellor was always going to ignore those calling for more stimulus. This Budget, like all the others this Parliament, lives in the shadow of the choices made in the emergency Budget in June 2010 and subsequent spending review.

When it comes to the distributional effects, today will leave a mark, though in many ways a smaller one than other recent budgets. Politics between now and the Sunday papers will be all about trying to establish the narrative that sticks about who has won and lost.

Osborne's central claim is that the "bulk" of support on offer will go to low to middle income Britain. Yet it's very clear that 70 per cent of the gains from the hike in personal allowances - the key Budget measure - goes to the top half of the income distribution. The choice he made was to spread a small tax cut thinly to all individuals earning from £8,000 to over £100,000 - though it should be pointed out that, against expectations, the majority of the gains will be restricted to basic rate tax payers. And it's true that the increase in allowances is a less regressive way of cutting taxes than others. But that doesn't make it a good use of limited resources - it could have been better spent reversing the impending swinging cuts to tax credits for low-income working families.

Perhaps the best that can be said is that, unlike its predecessors, in this budget there has been no further assault on low income working families (though Osborne did put down a clear marker for a further £10bn of welfare cuts by 2016, which will make the 2014 spending review a complete quagmire for the Lib Dems) in order to pay for a thinly spread giveaway which disproportionately benefits better off households.

The party politics that result from today are hard to call. It's clear that all sides can claim some grounds for feeling upbeat about what the Budget will mean for them in the short term; yet in private each concedes that it is likely to expose an underlying vulnerability. The Lib Dems made the first move in the budget negotiations and will strongly assert the move to a personal allowance of over £9,000 surpasses expectations, vindicates their open source negotiating strategy, and demonstrates they are achieving results in government. The tax avoidance measures and hike in high end Stamp Duty will help placate their activists even if they remain grumpy about the cheapness with which Clegg conceded the 50p rate.

It certainly is good news for the Lib Dems that in raising the personal allowances they have alighted upon a popular flagship policy that Osborne feels the need to back. The bad news is that it appears to be a policy that isn't doing them any good electorally, which in part reflects the fact that very few voters seem to realise it belongs to them (a view borne out in focus groups). For all Clegg's persistence in talking about it, and despite the entire media class thinking it is very clearly his policy, it seems the public has yet to reach the same view. The risk for Clegg is that the budget makes clear that even when he manages to win, he still loses.

For their part Cameron and Osborne will think they have pulled off satisfying the rightwing of their party whilst binding in the Liberal Democrats, and steering Labour onto the ground of protest about unfairness rather than building up its credentials as an alternative government in waiting.

They will be pleased they have reduced the number affected by their Child Benefit horlicks (even if the price of this is horrendous complexity in the tax system) and have killed off calls for a new property tax in this Parliament - though I suspect right now they are starting to think they may have badly misjudged the reaction on pensioner allowances. And by taking the decision to tackle the 50p issue now in mid-term they will feel they've detonated a potentially explosive problem at a safe distance from the general election.

Yet for all their confidence there is no escaping the central fact that the Conservatives have acted very casually in relation to one of their biggest electoral weaknesses. The decision on the 50p tax is a further nail in the coffin of Cameron's original modernising agenda and it comes hot on the heels of the NHS debacle. However loudly they shout about taxing the rich over the next few days it will still be the case that in a few weeks time no one will recall a single anti-avoidance measure but many will remember the tax cut for the rich at a time when spending cuts for the rest are biting.

As well as affecting its constituent parts, the noisy budget process is likely to have implications for how the coalition works. The frantic nature of the briefing made it feel like a pre-election Budget. Let's not forget there are six more budgets and autumn statements this Parliament that need to be agreed. It's hard to see the politics of each getting much easier, or the Lib Dem desire for differentiation subsiding. That said, part of the intensity of the manoeuvring reflects the depths of the concerns among Liberal Democrat strategists about what they see as their dire prospects in the May elections - Clegg's moment of maximum vulnerability this parliament. If the coalition is to maintain a veneer of smooth functioning it will need to learn a more orderly way of disagreeing.

And what of Labour? Having been largely squeezed out of the pre budget debate by the Coalition's internal wranglings, the decision on 50p now provides them with a clear message which will be delivered with real gusto as Ed Miliband showed today in the Commons - and unlike the autumn statement it's not a message that can be caricatured as being about the desire for a larger deficit. But this will only serve for the short term. The big question the public are asking of Labour is not whether they are committed to tackling unfairness. At the start of the new year Labour chose to open a conversation about how they would govern in tough times. It's since been interrupted by the row about the welfare cap, the coalition's woes on the NHS, and then the Budget. Soon Labour will have to recommence that discussion on how they would govern with scant money, and when they do they'll need to be sure about where they really want to take it.

Don't be fooled by the upbeat assessments. All sides are anxious about where this Budget will take them.

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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The economic and moral case for global open borders

Few politicians are prepared to back a policy of free movement everywhere. Perhaps they should. 

Across the world, borders are being closed, not opened. In the US, Donald Trump has vowed to halve immigration to 500,000 and to cap the number of refugees at 50,000. In the UK, the Conservative government has reaffirmed its pledge to end free movement after Brexit is concluded. In Europe, Hungary, Poland and the Czech Republic are being sued by the EU for refusing to accept a mandatory share of refugees.

Even Jeremy Corbyn’s Labour Party has followed the rightward drift. Its general election manifesto promised to end free movement, and Corbyn recently complained of the “wholesale importation of underpaid workers from central Europe”.

Among economists, however, a diametrically opposed conversation prevails. They argue that rather than limiting free movement, leaders should expand it: from Europe to the world. Michael Clemens, a senior fellow at the Center for Global Development, likens the present system to leaving “trillion-dollar bills on the sidewalk”.

Economists estimate that allowing migrants to move to any country they choose would increase global GDP by between 67 and 147 per cent. A doubling of GDP (a $78trn increase) would correspond to 23 years of growth at 3 per cent. By contrast, the International Monetary Fund estimates that permitting the entirely free movement of capital would add a mere $65bn.

The moral case for open borders is similarly persuasive. As the Dutch historian Rutger Bregman writes in his recent book Utopia for Realists: “Borders are the single biggest cause of discrimination in all of world history. Inequality gaps between people living in the same country are nothing in comparison to those between separated global citizenries.” An unskilled Mexican worker who migrates to the US would raise their pay by around 150 per cent; an unskilled Nigerian by more than 1,000 per cent.

In his epochal 1971 work A Theory of Justice, the American philosopher John Rawls imagined individuals behind a “veil of ignorance”, knowing nothing of their talents, their wealth or their class. It follows, he argued, that they would choose an economic system in which inequalities are permitted only if they benefit the most disadvantaged. The risk of being penalised is too great to do otherwise. By the same logic, one could argue that, ignorant of their fortunes, individuals would favour a world of open borders in which birth does not determine destiny.

Yet beyond Rawls’s “original position”, the real-world obstacles to free movement are immense. Voters worry that migrants will depress their wages, take their jobs, burden the welfare state, increase crime and commit terrorism. The problem is worsened by demagogic politicians who seek to exploit such fears.

But research shows that host countries gain, rather than lose, from immigration. Migrants are usually younger and healthier than their domestic counterparts and contribute far more in tax revenue than they claim in benefits. Rather than merely “taking” jobs, migrants and their children create them (Steve Jobs, the son of a Syrian immigrant, is one example). In the US, newcomers are only a fifth as likely to be imprisoned as the native born. A Warwick University study of migration flows between 145 countries found that immigration helped to reduce terrorism by promoting economic development.

In a world of open borders, the right to move need not be an unqualified one (the pollster Gallup found that 630 million people – 13 per cent of the global population – would migrate permanently). Under the EU’s free movement system, migrants must prove after three months that they are working (employed or self-employed), a registered student, or have “sufficient resources” (savings or a pension) to support themselves and not be “a burden on the benefits system” – conditions that the UK, ironically, has never applied.

But so radical does the proposal sound that few politicians are prepared to give voice to it. An exception is the shadow chancellor, John McDonnell, who argued in 2016: “Inevitably, in this century, we will have open borders. We are seeing it in Europe already. The movement of peoples across the globe will mean that borders are almost going to become irrelevant by the end of this century, so we should be preparing for that and explaining why people move.”

At present, in a supposed era of opportunity, only 3 per cent of the global population live outside the country of their birth. As politicians contrive to ensure even fewer are able to do so, the case for free movement must be made anew.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear