It seems a pity that a government whose main economic problems are an inability to control government spending and low economic growth has responded to the local election results by writing a Queen’s speech that makes more spending commitments and imposes new regulatory burdens on business.
Firstly, let’s look at regulation. We are promised that fines for employers hiring illegal immigrants will be increased and checks will have to be made on immigration status by private landlords. There are not many functions that writers for this blog believe should belong with government, but surely policing borders is one of them. The use of draconian fines on small businesses for making mistakes when employing illegal immigrants is deeply damaging and makes businesses react by imposing costs on those with whom they contract. By way of example, I lecture for 90 minutes a year at a well-known university. For 20 years, HMRC have regarded this as a separate employment for which I have received 20 P60s. However, for each of the lecturers on this course, the course director has to photocopy their passports and fill out a group of forms which are then processed by the ‘human resources’ department. This government seems to have no appreciation of the disproportionate burdens that regulation and the threat of draconian fines imposes on the smallest businesses. Of course, the burdens on landlords come on top of the recent re-regulation of the private rented housing sector.
With regard to government spending, the government has followed its usual pattern of making promises now that will have to be borne by future generations – though there are also some promises that will cost money now. The Queen’s speech contains measures to increase the state pension and to increase state support for long-term care costs. In another respect too, this follows a pattern – spending cuts are falling on the young and spending increases benefiting the old. With 45 per cent of active voters being 55 or over, this is no surprise of course. However, with implicit and explicit government debts (including pension liabilities) over 500 per cent of national income these moves are unwelcome. As an exception to this general trend – and as an extension of the government’s policy of sending money round and round in circles so that families pay higher and higher taxes whilst receiving the same money back in benefits - parents will receive increased financial support for childcare. There are also further contingent liabilities in the form of government guarantees for especially risky mortgages that are granted to those to whom banks do not wish to lend on commercial terms.
As part of the crackdown on immigrants claiming benefits at the expense of UK-born taxpayers – a largely illusory problem – those with local associations will receive priority for social housing. It seems that this will reduce labour mobility. Indeed, it would be better to see so-called social housing privatised altogether. The UK has a relatively high level of ‘social’ houses by international standards.
By and large, promises to reduce business regulation were aspirational, whereas promises to increase regulation were specific. On the one hand: ‘A bill will be introduced to reduce the burden of excessive regulation on businesses’ (no details provided) but, on the other hand: ‘A new Immigration Bill…will make landlords of private housing check the immigration status of tenants and face fines if they don’t. The Government will consult, including on fines of thousands of pounds…[E]nable tough action against businesses that use illegal labour, including more substantial fines.’
Perhaps we would have been better off without a Queen’s speech at all. Parliament could go on holiday for a year. However, if we are to have government impose contingent liabilities on the next generation, how about some deferred tax cuts – for example, legislation to index all tax thresholds to the higher of RPI increases and wage increases to prevent the bracket creep that this government has used to increase its tax revenues? How about more planning reform and profit-making free schools? And how about time-limiting benefits and the imposition of work and training requirements for all those in receipt of benefits who do not have a reasonable contribution record? In addition, a really imaginative government would not be increasing state pensions and abolishing contracting out of state pensions and into private pensions (thus abolishing the most successful post-war pension privatisation in Europe with which even the extreme left of the Labour Party were content) but would be extending opportunities to promote private pension provision in place of state provision and thus reduce the fiscal burden on future generations.
In March, this blog expressed a hope that the Budget would be abolished. Perhaps, also, Parliament should only sit when absolutely necessary and Her Majesty should have put her feet up this morning.