The job of Chancellor is a difficult one, and never more so than now. Since Hammond’s last Budget in the Spring, the UK has triggered Article 50, beginning the two-year process of leaving the EU, and economic conditions have changed. Despite Hammond’s attempts to crack jokes over the “economicky” section of the Budget, it is difficult to escape the significant downgrade of the OBR’s growth forecasts, which are now below 2% every year for the first time in decades. Against this environment, Hammond’s announcement that he has set aside £3 billion for Brexit, and is ready to allocate further funds if needed, has not gone down well with those who would rather we were not leaving at all.
The political backdrop has also changed immensely. Hammond’s Spring Budget was delivered at a time when the Conservatives were soaring in the polls whilst Labour were divided under Jeremy Corbyn’s leadership. After the General Election in June, Hammond has now been required to deliver a Budget that must appease both sides of an increasingly divided Conservative party which has only a very slim majority (thanks to the DUP), whilst the Labour party wait in the wings, ever ready to use their ‘Government-in-waiting’ line.
By nature, Hammond is fiscally cautious and as such, alongside the latest economic outlook announced today, the ‘radical’ Budget called for by some of his colleagues was always going to be difficult for him to deliver. However, Hammond had acknowledged that the public has tired of austerity, pledging more money for the NHS and a ‘balanced’ approach to the finances that allow the Government to help families with the cost of living.
With the Conservative Party’s eye on how to win back younger voters, Hammond’s more substantive measures announced today focused on housing. The flagship announcement was on stamp duty: this has been abolished for first-time buyers for homes worth up to £300,000, and for people buying a home worth up to £500,000, the first £300,000 will be exempt. Hammond is also channelling a total of £44 billion to support the housing market, including funding for the Housing Infrastructure Fund, and the Home Building Fund to support SME housebuilders. The Chancellor also confirmed the trailed new railcard, which will give 4.5 million people aged 26-30 a third off rail fares.
One of Hammond’s great passions – the productivity challenge – has been tied in with making Britain “fit for the future” as the UK leaves the EU in 2019. Hammond announced £2.3 billion of investment into research and development, including £500 million for artificial intelligence and 5G initiatives. The Government is also investing in STEM and attempting to encourage more pupils into Maths A-levels with a £600 premium for every student, as well as creating a new National Retraining Scheme that will initially focus on digital skills.
So after weeks of briefings against him, did the Chancellor do enough to save himself? This couldn’t really be described as a revolutionary Budget, but Hammond has attempted to toe a careful line between ‘boring’ and ‘bold’. It’s difficult to see a forced U-turn on any of the measures announced, and the avoidance of another ‘NICs’ moment may well be enough to keep Hammond in his job. For the business community, there was relatively little here to be alarmed about, and a number of measures on productivity, infrastructure, skills and taxation they will welcome. However, ultimately the question of Hammond’s future rests of the reaction of the Conservative party rather than businesses. The Chancellor knows he still has his opponents on his own backbenches, driven by his perceived lack of enthusiasm for Brexit . He will hope this Budget has kept them at bay for now, but he can expect more battles ahead.
You can read Cicero’s full summary and analysis here.