We wanted a Budget for No Deal – that’s to say, one in which Philip Hammond would spell out how he is preparing for what is now, arguably, the most likely end-result of the Brexit talks. The odds of Theresa May being able to get any settlement she agrees past her Cabinet, her Party and the Commons are long.
The Chancellor did nothing of the kind. Indeed, he did the very opposite.
His Budget is puzzling observers this morning. Perhaps he place to start is with the Office for Budget Responsibility’s assessment: the “largest discretionary fiscal loosening at any fiscal event since the creation of the OBR”. Why has the cautious Hammond – the ultimate repressed institutional spreadsheet-pondering Treasury man – risked discretion on the winds? Why is this Malvolio suddenly sporting yellow stockings?
You may reply that some of the spending announcements were relatively small beer – the £400 million for schools, for example, announced, with the deaf ear to political nuance to which we have become used, as money for “little extras”. You could also stand back from the Budget, and point out that only the NHS really benefits from the spending announcements. It will swallow up some £28 billion of the £30 billion further increases. You may point to some of the tax rises unveiled: in national insurance, capital gains, and pension relief, for example. And if you are on the Left, you will claim that austerity continues – whatever that elusive word may mean.
But these valid points miss the bigger picture. The Chancellor had £18 billion extra in his pocket because of buoyant tax revenues – “despite Brexit” – and could have put it towards balancing the Budget. He chose not to. Instead, he has settled for running what seems to be a permanent deficit of no less than £20 billion. This is not a huge sum in terms of the Government’s spend. But it is neither the end to the deficit nor the achievement of a surplus that George Osborne used variously to promise back in the departed days of the Cameron Government. Nor is it what Hammond himself aimed for when he first succeeded the former Chancellor.
There is a little bit of largesse for almost everyone. Step forward, Robert Halfon. The fuel duty freeze you champion is now in its ninth year. Take a bow, Jesse Norman. Yes, PFI was on the way out anyway, but Hammond’s announcement of an end of it has potential implications for the Government’s balance sheet none the less, and marks victory for your long, persistent, and justified campaign. Well done, Gavin Williamson – and a raft of backbench Conservative MPs. The Chancellor knows when he’s on to a political hiding, and has shelled out enough cash to keep the Defence budget afloat.
Look on with a smile, Nick Timothy. Hammond is not exactly your best friend, but in his “Amazon tax”, relatively modest though it may be, one can glimpse the ghost of the interventionist conservatism you favour. Campaigning backbenchers will breathe a sigh of relief at more support for Universal Credit. (The Resolution Foundation says that “the government’s flagship welfare reform is now more generous than the benefit system that it is replacing”.) Onward will like the fiscal loosening. Freer will support the tax cuts – which will be welcome by higher rate and basic rate taxpayers, not to mention Conservative MPs. Oh, and before we forget: the DUP will be happy, too.
There will be devils in details – for example, in tax changes to self-employment. We have yet to hear of what the Institute for Fiscal Studies makes of the figures, and the OBR is unhappy with ambiguities in them. On No Deal itself, the Chancellor announced another £500 million for Brexit preparations, bringing the total he has budgeted for to £4.2 billion. Some of this will be spent whatever the outcome. Certainly, Hammond didn’t dwell in any detail on what extra preparations he is now undertaking. The opportunity to send a message to the EU Commission and the 27 was not merely passed over: it was spurned.
This takes us to the heart of what he was up to yesterday – amidst his dry delivery, quick repartee, and buttock-clenchingly dire lavatorial jokes. (Carry On up The Hammond!) Some, baffled by this Budget, see a Chancellor tasked with delivering an “end to austerity” conceived in Downing Street: in other words, they see yesterday’s package as May’s Budget, not Hammond’s. Others are saying that it shows that the Chancellor is expecting a general election soon. They have a case. There was a smack of the staple pre-poll giveaway about the measures he announced yesterday.
But the real point of the Budget lies elsewhere.
Confronted by demands from Downing Street for the future, and bearing the legacy of the Cameron era from the past, Hammond has cast aside the latter, come to terms with the former – and produced what this site, which is not always a fan of the Chancellor, concedes to be a political master-stroke: perhaps the first in a Parliamentary career of over 20 years.
The real message of this Budget is not to any particular Tory MP (let alone to anyone else), but to the whole mass of them. This new money for mental health, for the armed forces, this relief for Universal Credit, these modest tax cuts, this “end to austerity” for which many of you have lobbied – all this, Hammond was intimating sotto voce, depends on you voting for any Brexit deal that May offers you. This is Malvolio turned mafioso.
It would be unfair to say that the Chancellor threatened an Osborne-type “punishment budget” on Sunday if there is No Deal. Rather, he returned to an earlier theme, first proclaimed to Welt, later resiled from, now re-cast. “Frankly, we’d need to have a new Budget that set out a different strategy for the future,” he proclaimed.
Critics portray this as Singapore-in-the-Atlantic: a slash-and-burn, axe-and-bonfire of tax and regulations. Leave aside for a moment this inaccurate portrayal of a very different society and culture and, too, the Conservative Manifesto’s ruling-out of a slew of social and environmental changes to regulation.
What one is none the less left to ponder though, in the event of No Deal, is a very different Budget from yesterday’s – to respond to short-term disruption. (The long-term implications are a separate-though-linked matter.) The stress would be on tax cuts for business, not taxpayers. And while Hammond wouldn’t rush to reduce spending growth, he would have far less fiscal room for manoeuvre.
So, then, we have neither a Budget for Downing Street nor exactly for a general election, but one with a crude, brutal message for Tory Parliamentarians: vote for May’s deal, or the economy gets it – and your seats too. Not all of his Cabinet colleagues endorse it.
For as one of them put it to ConservativeHome recently: “some of us think that we must deliver a deal, or else lose the next election, and others that must deliver Brexit, or lose the next election. And when I say Brexit, I mean something that palpably looks and feels like it.”