Budgets in Britain follow a well-established ritual. On the morning of the big day, the chancellor of the exchequer parades for the photographers outside 11 Downing Street holding aloft the red box containing his speech. After they address the Commons and share the bits of the budget that haven’t already been leaked to the press, the spin machines of the two main parties take over: one lot saying the budget is the best in living memory, the other saying it is a complete dud.
Both sides, though, want to know what the Institute for Fiscal Studies thinks, and the process isn’t really over until it has delivered its verdict at a briefing the following day. The thinktank is sparing in its praise and liberal with its criticism, which is delivered in the spirit of sorrow more than anger.
Paul Johnson is the current director of the IFS, and has written a book covering all aspects of fiscal policy: how the government raises revenue through tax and what it spends it on. The aim is to provide – as the author puts it – an explanation of where the money comes from, where it goes to, how that has changed over time and how it needs to change in the future.
During a general election campaign in the 2000s, the pre-Johnson IFS took a look at Labour’s manifesto and said the sums didn’t add up. I was just starting to write my “IFS says there is a black hole in Labour’s spending plan” story when the phone rang. It was Ed Miliband, then one of chancellor Gordon Brown’s special advisers. “You are not taking this IFS stuff seriously, are you?” he inquired. “On the contrary,” I replied, “we are planning to splash the paper with it.” A couple of minutes later the phone rang again. This time it was Ed Balls, an even more senior Brown aide, making the argument that the IFS was peddling rightwing claptrap and we should treat its comments with extreme caution. I was polite but firm: we were running the story. A couple of minutes later the phone rang again. This time it was the chancellor himself, expressing disbelief that the Guardian would even think of running such a story.
I can’t remember whether our report led the paper or not. In retrospect, I think the two Eds and Brown were right to push back against the idea that there are black holes in the public finances that can only be filled by tax increases or spending cuts. But that’s not the point here; the point is that the IFS is a hugely influential organisation, and the person who runs it a hugely influential individual.
So Johnson is always worth listening to, and his book is worth a read, even though the lay reader’s eyes may start to glaze over at the barrage of fiscal facts and statistics. Despite some valiant efforts to leaven the tone with vignettes about the history of tax and how the postwar welfare state was shaped by the Beveridge report, it isn’t a page-turner. Two thirds of the way through, Johnson says: “I could bombard you with ever more statistics but you get the idea.” He’s right. We do.
His description of Kwasi Kwarteng’s go-for-growth mini-budget is somewhat more colourful: he calls it “scandalous” and “disastrous”. “Mr Kwarteng,” he writes, “seemed not to believe the constraints were real. They are.” Jeremy Hunt “had no choice” but to repudiate his sacked predecessor’s policies, and Rishi Sunak’s arrival in No 10 has cemented an approach much more in line with IFS thinking.
As a former treasury official, Johnson confesses to having a soft spot for his old department. It should, therefore, come as little surprise that he opposes some of the more radical ideas that have surfaced in recent years. He is no fan of a wealth tax, arguing that it would be better to fix existing taxes on wealth – such as capital gains tax – than levy a new one. Nor, to put it mildly, does he favour a universal basic income, a payment that would be made to every person in the UK regardless of means, and which he describes as “moonshine”, “fool’s gold”, and “snake oil”.
The book has some interesting ideas – a call for the long overdue reform of council tax, a flat-rate VAT, the devolution of more power over spending to local authorities – and the chapter on post-school education is excellent. But it doesn’t really break new ground, pushing up to the boundaries of orthodoxy but never beyond them.
Johnson’s big selling point is that being non-aligned means he can speak truth to power. “In all we do, we try to be objective. We are determinedly independent, we have no axe to grind and certainly no political affiliation.” It is true that he has disobliging things to say about almost every chancellor of the past 30 years, Labour and Conservative. But the left-leaning tax expert Richard Murphy says you can’t really be apolitical if you accept – as he says the IFS does – “all the assumptions of neo-classical economics”.
For any student prepping for a job at the Bank of England or the Treasury, Johnson’s book will prove invaluable. It provides not just a treasure trove of killer facts but also the sort of opinions that would go down well in an interview: different, but without really breaking with the conventional wisdom about what is and what isn’t possible when it comes to government money and how to spend it.
• Follow the Money: How Much Does Britain Cost? is published by Abacus (£25). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply
