Philip Hammond said he wouldn’t be as good at pulling rabbits out of hats as his predecessor.
Indeed. He’s rather better at it.
Today he announced a £122bn increase in government borrowing, and seems to have convinced us that this isn’t a failure.
Previous Chancellors sat behind him must have been envious.
Mr Hammond has his new ‘get out of jail’ card, and he used it to maximum effect. Blame it on Brexit.
George Osborne’s last Budget contained projections for eliminating the budget deficit and moving into surplus that looked unrealistic, especially towards the end of the plan period. Even if the vote had been for Remain on June 23, it is highly unlikely they would have been met. Explaining away the failure to do so would have been tricky.
Now, Philip Hammond has changed the narrative. Gone is the Osborne focus on austerity. In its place is a new mantra – meeting the challenges of Brexit uncertainties. Or, as the Chancellor chose to put it, creating “fiscal headroom.” This, he hopes, could provide cover for potentially volatile borrowing figures for the rest of the Parliament.
The Chancellor had two other political strategies today.
The first was to declare his position at the heart of government. After the Cameron/Osborne era, and indeed the Blair/Brown era, the new occupants of Numbers 10 and 11 have a looser relationship. There is now more of a triangle at the centre of government, with the Prime Minister, Chancellor and the Brexit trio at its corners. The Treasury has become less dominant, and in any event its occupant is not by nature a flashy figure.
But it was in Mr Hammond’s interests today to send a clear message about the strength of the tie between himself and his Downing Street neighbour. That is why he repeated the Prime Minister’s mantra about an economy that works for everyone, and why he, unusually, introduced announcements with the ‘The Prime Minster and I …’
He would not need to do any of this had there not been a sense that the Treasury was just a tad marginalised from the government’s biggest decisions. In fact, it may be. But the language was at least designed to counter the atmospherics.
The second political strategy was to minimise any chance of Labour making any headway with voters on economic policy. Labour trails the Conservatives on economic competence by 30 points, and Mr Hammond wants to keep it that way. That’s the political headroom that underpins the fiscal headroom.
So the Chancellor continued his predecessor’s tactic of adopting policies that Labour has sought to build its own pitch around. Previous raids saw the government take over the policy of a national living wage. Now, the Chancellor has taken up the idea of claiming virtue for borrowing that funds investment, while maintaining tight constraints only on current spending. And, for good measure, he has handpicked a few details to narrow Labour’s ground even further, such as abolishing letting fees and easing back a bit of universal credit tapers.
The Chancellor’s calculation is that by peeling away usable bits of Labour’s narrative and adopting them for himself, he leaves his opponents dependent on policies and positions less palatable to mainstream voters.
Today, for the Chancellor, the politics was all about finding a credible context for a wide miss on fiscal plans, bolstering the Treasury’s place in Whitehall, and cementing his party’s advantage over Labour on economic credibility.
For now, he’s eased most of the pressures on him.
But they will be back when, as he expects, growth sags and inflation rises in 2017 and 2018.
Then we will really find out how durable is the strategy of Blame it on Brexit.