After months of Tory nerves, Philip Hammond has just finished presenting his Autumn Budget in the Chamber. Among the main giveaways, the Chancellor announced more funding for the NHS as well as pitching to the young with his housing proposals and 18-30 railcard. He also announced measures to ease out the rollout of Universal Credit – including a one week reduction to the wait time.
However, although the Chancellor was at pains to sound optimistic and shake off his Eyesore image, this was made difficult thanks to some grim statistics from the OBR. The OBR has revised down its forecast for annual growth quite significantly – lower than envisaged after the Brexit vote. It’s the weakest official long term forecast for UK economic growth since at least 1983.
Fit for the future
Philip Hammond’s first autumn Budget was meant to get the country ‘Fit for the Future’. But just three minutes into his speech, the Chancellor himself revealed that in coming years Britannia would be as fit as an ageing smoker with a weight problem. And that’s even before Brexit.
The UK’s vital statistics from the official Office for Budget Responsibility were not just bad, they were very bad. Dragged down by our low productivity, the nation will grow much less than expected, taking a whopping £65bn out of our economy over the next five years, compared to previous forecasts. That downgrade was the worst since 1983, when Geoffrey Howe was in the middle of his Thatcherite revolution.
Hammond trilled on about his plans for the highest infrastructure spending in 25 years and the “first sustained decline in debt” in 17 years. But it was that growth reduction that trumped them both in the historic stats stakes. And the OBR had more bad news: it expects wages to rise by just 2.3% next year, down from 2.7% previously. Pay increases won’t hit 3% (the current inflation rate) until 2021, a year later than thought. Those are figures that really matter to millions.
Unveiling a £25bn spending spree, Hammond undermined his own ‘Fiscal Phil’ reputation by spending cash he’d squirreled away last year. The OBR dubbed this a “significant near-term fiscal giveaway”. It further sprinkled yet more salt into his wounds, predicting that Hammond would break his new fiscal rule of getting a surplus by 2025, and warning it may not happen until 2031. Oh, and it said borrowing would increase by £53 billion by 2021/22. Worst of all for those looking for light at the end of the tunnel, the Institute for Fiscal Studies warned yet more austerity and spending cuts would loom after Brexit. The Chancellor’s Budget was full of lame gags, but if the voters think the joke is on them, they’ll have the last laugh.
When he was at the IFS, Robert Chote made a name for himself as the man who could unravel a Budget quicker and better than anyone. He’s now the head of the OBR, but it seems old habits die hard. Hammond had barely sat down when the watchdog bared its teeth and bit deep into his battered red box.
The traditional IFS ‘Day Two Takedown’ certainly felt like it had come a day early as the OBR proceeded to shoot the Chancellor’s big Budget ‘rabbit’– his stamp duty cut – right between the eyes. In the traditional briefing with journalists outside the Commons chamber, Treasury officials trumpeted the policy and declared it would help a million people.
But as Hammond’s aides spoke, the OBR verdict filtered through and it was withering: the stamp duty cut would help sellers more than buyers, was open to abuse and would at most mean a paltry 3,500 more people getting a new home than otherwise. Just as worryingly, stamp duty was not the only housing policy that was peed on. The wider package seemed thinner than first sold, and not a single new home is guaranteed by the new set of loans and incentives. The £44bn trumpeted by Hammond was in fact just £15bn in new money and little of that will go on actual construction, critics claimed.
For those worried about losing their homes due to Universal Credit, there was some relief in the announcement of a cut in waiting time to five weeks. Yet the extra funding won’t come into effect until January, leaving the Government still facing the PR nightmare of families going without benefit over Christmas as UC rolls out to new areas. The small print included a hint of changes to the ‘taper rate’ next year though, so maybe David Gauke is being listened to.
There’s been much talk about Brexit bills of late, but Hammond added a new twist to that phrase as he set aside £3.7bn in spending on preparations for our exit from the EU (that’s £3bn to come and £700m already spent). He went further and said: “I stand ready to allocate further sums if and when needed. No one should doubt our resolve!” That exclamation mark is not mine, it’s actually on the official Treasury record of his speech.
Labour went swiftly on the offensive about how that £3.7bn figure was in fact more than Hammond was devoting to extra spending on the NHS – and was never plastered on Boris’s bus. Yet few Brexiteers have ever held any love for the Chancellor and some wonder if he really ever intends to spend the money promised. Their suspicions were heightened by a Red Book table that suggested the UK would continue to contribute £3.5bn every year even after 2019. The Treasury said this was a mere academic accounting quirk and shouldn’t be taken seriously.
Meanwhile, Robert Chote’s OBR was pretty scathing about the lack of ‘no Brexit’ or ‘soft Brexit’ or indeed ‘any Brexit’ assumptions. The watchdog’s report reveals that when they asked the Government for Brexit details, they were pointed towards the PM’s Florence speech. “Given the uncertainty regarding how the Government will respond to the choices and tradeoffs it faces during the negotiations, we still have no meaningful basis on which to form a judgement,” it says. I think that’s what young people call a ‘burn’. The OBR also repeats its warning that Brexit “slows the pace of import and export growth over the 10 years” after the EU referendum. Chote is impeccably independent, but that sounded like a riposte to Tory MPs who have dismissed his “lunatic” “soothsayer” forecasts in the past.
The NIESR think tank added its own warning that “an exit involving a sudden stop” [aka Hardest of Hard Brexits] would pose a “significant upside risk to productivity, as well as the prospects for a sustained world recovery”. One more thing on Brexit may worry some Tory MPs. Hammond welcomed the OBR forecast that there would be 600,000 more in employment by 2022. What he failed to mention was that the OBR expects three-quarters of those jobs will have to be filled by new migrants.
The Budget’s £2.8bn package of measures for the NHS includes an immediate £350m to allow trusts to plan for winter, a further £1.6bn in 2018-19 and the rest in 2019-20. But the emergency cash medicine was nowhere near the £4bn of extra funding demanded by NHS chief exec Simon Stevens and think tanks such as the King’s Fund.
Even Sir Bruce Keogh, the medical director for NHS England and a loyal ally of Jeremy Hunt in pushing through the junior doctor contract, was moved to protest. He tweeted his ‘personal view’ that the Budget failed to plug the “funding gap”, adding it was “worrying that longer waits seem likely/unavoidable”. NHS England chairman Sir Malcolm Grant added: “We can no longer avoid the difficult debate about what it is possible to deliver for patients with the money available.” And those are not politicians, they’re public officials.
Health Service Journal said that the Government and the NHS were now ‘on collision course’ and as Stevens’ high-stakes poker game has failed, questions may now be asked about how much longer he will stick around. Critics also pointed out that not a penny extra on social care was allocated today, with Hammond preferring to keep the whole thing in the long grass of a policy review. A Tory whip saying Corbyn should be in a care home wasn’t a good look either.
Hammond’s offer to fund nurses’ pay from Treasury coffers was significant, though the lack of specifics today leaves many staff wondering when the ‘jam tomorrow’ will be delivered, and whether it will be bittersweet. Just as worrying for all those Tory MPs who were told on the doorstep in June that it was time for a pay rise for public sector workers, the Treasury suggests only nurses will get special treatment.
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