The traditional way of using the Budget to fit the political cycle is to be tough near the start of the Parliament and tender near the end of it.  Spending is cut and taxes raised after the first and taxes are cut and spending raised before the second.  This is broadly what the Thatcher and Blair governments did during their long tenures.  Obviously, the state of the economy does not always make this approach possible, and it will be claimed with some justice that it puts the short-term needs of politicians before the long-term good of the country.  But no savvy Prime Minister would want to approach matters the other way round.

It is therefore worth asking whether this is precisely where we are heading, and what it might mean for Conservative prospects in 2022, assuming that the Government lasts that long.  This morning’s papers suggest that reports that the Chancellor is planning a modestly reflationary Budget are correct.

  • The Sunday Times says that he will announce the cutting of the Universal Credit waiting time from six week to 31 days.
  • The Sunday Telegraph claims that he will offer a pay boost to nurses and to the NHS.
  • The Mail on Sunday reports that he will find about £5 billion for housing, less than the £50 billion that Sajid Javid would apparently like. They agree in principle on further supply-side reform.
  • The Sun on Sunday says that he will cut stamp duty, freeze tuition fees and offer special rail discounts to the under-30s….
  • …And the Observer makes do with the news that he will announce regulatory reforms to put driverless cars on the roads by 2021.

Much of this is along the lines we urged last week – and no great surprise.  The Chancellor can be expected to announce plans for more infrastructure and housing: a challenge is whether he can, as we put it, morph from Spreadsheet Sheet into Storyteller Phil – telling a tale of rising wages over time and of new tech. The briefing about driverless cars suggests that he may be getting the message.

A nagging question is how Hammond proposes to fund any spending rises and tax cuts, assuming that he sticks to the fiscal rules that he announced in his Autumn Statement last year.  There must surely be some tightening to compensate.  One possibility is that he will simply push it back towards the end of the Parliament, on the ground that Conservative MPs are in no mood to back it at the moment.  This would help him to ensure that he is not hit by a Budget backlash, that he gets through the week, and that his political position is strengthened, or at least made no worse, as Theresa May ponders a possible reshuffle.

But readers will have seen the catch.  It is that, assuming the next election takes place in 2022, the Chancellor will have reversed the traditional political cycle.  In other words, significant tax rise and spending cuts will be due to come in just before the voters go to the polls.  This mañana politics is not an invention of Hammond’s.  “The OBR continues to forecast a surplus, on the basis that a deficit of £21 billion or so in 2018-19 is transformed into a surplus of £10 billion or so the following year,” we wrote after the 2016 Budget. This assumption looks heroic. Osborne has pushed a lot of spending pain back and rushed a bit of tax gain early – personal as well as business, including marching down the hill on capital gains tax having previously marched up it.”

The then Chancellor had a referendum to win (which he lost).  He also had leadership ambitions, which tough budgeting might have endangered.  But there was a deeper logic to his plans.  Tory MPs were in no more accomodating a mood towards fiscal tightening then than now. Osborne had been forced to withdraw major changes to tax credits, and was understandably unwilling to put proposals to his colleagues that they might reject.  This resistance to one of the continuities between Thatcherism and the Cameron era – a stress on prioritising balanced budgets above tax cuts – is a grim sign for the future, whatever Hammond does on Wednesday.