Reaction from Iain Anderson, Executive Chairman, Cicero Group
Reaction from James Plaskitt, Senior Counsel Cicero Group
It’s all about perspective.
Things are worse than they were a while back, but as not as bad as we thought they were going to be yesterday.
That seems to be the Chancellor’s position in what he tells us will be his last ‘spring budget’.
What’s worse? Growth from 2018-20 is expected to be slower than previously predicted. Inflation is rising. Public borrowing over the rest of the Parliament will be around £100 bn higher than was planned back in 2015.
Ah, but things are better too! Growth in the current year is revised up, and borrowing is not going to be as high as was forecast just 6 months ago.
Whether the outlook is better or worse depends on where you start from.
It’s all about timing too.
The Chancellor has indicated that bigger policy ideas are coming along later this year. For example, there will be Green Papers on Consumer Protection and the funding of Social Care. And he hinted that he will have more to say on the productivity issue when he delivers the next statement in the autumn.
That’s for the near future. But he also had to do things for the here and now. There were two big political pressures weighing down on the government – and causing nervousness on the government backbenches – namely the business rate revaluation and the severe strains in social care.
Mr Hammond tackled both. But he had to spend money to head off the problems.
Spending money, when there really isn’t any to spend, carries political risk. Mr Hammond bravely took one. By committing to higher National Insurance rates for the self-employed from 2018, he has put a bit of additional burden on part of his party’s core constituency, and he seems to have broken a 2015 manifesto pledge in the process. The announcements were met with silence amongst those behind him.
It’s all about politics too.
Every Budget statement is. Mr Hammond is adept at getting the politics right. In what was largely a holding operation – ahead of weightier stuff to come in the autumn – the Chancellor eased most of his party’s anxieties, at the same time as keeping his tanks firmly on Labour’s lawn, by, for example, pledges of additional funding – albeit modest – for schools and hospitals.
He has provided enough cheer for his own troops too. Good news for pubs is always good politics!
By taking the starting point he chose, Mr Hammond allowed himself to make a ‘feel good’ statement, without doing anything of deep significance.
He has to hope, however, that when the time comes to speak again in the autumn, he won’t have to find another starting point. By then, we will be deep into the Brexit negotiations and the impact of early decisions there could begin to move the ground under the Chancellor’s feet.