Over the coming days, the Office for Budget Responsibility (OBR), the Institute for Fiscal Studies and countless commentators will deliver their verdicts on Philip Hammond’s Budget; but one thing is certain. This sounds very much like the end of austerity.
Hammond seemed cautious on this point – austerity, he said, is “coming to an end” – but his words were undermined by his actions. This was a Budget full of spending splurges as well as new revenue-raising measures. He wasn’t helped by the Prime Minister’s commitment to giving the NHS a £20bn “birthday present” in June, but even still, Hammond was given a windfall by the OBR and today he spent it all.
This was also a highly technical Budget, from tax relief for toilets to VAT from village halls, Hammond resisted the urge for any big headline announcements. Spreadsheet Phil earned his moniker.
The headlines tomorrow might instead focus on what the Chancellor was trying to achieve: helping the high street by ensuring big tech companies pay their share of tax; more money for the NHS; backing entrepreneurs and innovators; and helping young people get on the housing ladder. They might focus on the barely concealed frustration from the OBR, which described the Budget as Augustinian: “Grant me chastity and continence, but not yet.”
There are also some substantive announcements. Chief among them, the end of PFI, slashing business rates for retail properties and throwing hundreds of millions at the High Streets as the likes of Debenhams and House of Fraser struggle.
However, the overarching theme of this Budget – even though largely unspoken – was Brexit. There was money in there to cover the UK’s departure from the European Investment Bank (though probably not enough), more money for UK Export Finance, even money for a Festival of Creativity to attract inward investment.
Perhaps the reason for Hammond’s giveaway was more economic than just purely political – as the UK needs the EU it might need a little Keynesian boost to keep it ticking along. The Government might not want to suggest that – but its actions speak louder than its words.
Perhaps the end of austerity isn’t all it’s cracked up to be. If finances take a turn, Hammond held out the prospect that the Spring Statement might become a more significant Spring Budget. He also promised that there will be a “full spending review” in 2019. There is still no deal – and this Budget assumes there will be one.
Hammond’s giveaway might not be the philanthropic celebration of economic prosperity that he wants us to believe – it might be driven by caution about what’s ahead.