Anthony Hilton: We’re banking on you, Philip Hammond, to lift the mood of the nation

It will be Budget day again in a couple of weeks’ time, and if in a moment of mischief Chancellor Philip Hammond were to discard his prepared speech that day and read instead from Alice in Wonderland, you have to wonder whether anyone on the Labour frontbench would notice, so distanced are they from the role of effective Opposition.

There is, however, a more interesting question for the rest of us. It is whether Alice in Wonderland might actually be closer to reality than anything that might be delivered in the official Budget speech.

Chancellors have become adept in recent years at not telling it how it is. In session after session, year after year, they paint a picture of a Goldilocks economy facing the odd problem, of course, because our trading partners keep messing things up, but with nothing we need to be embarrassed about. Quite the opposite. There is always some measure to be plucked from La La Land to show conclusively that we are doing better than almost everyone else and remain the envy of the world.

The truth, unfortunately, is rather different. We are a nation of Micawbers, hoping something will turn up — or just about managing, in the Prime Minister’s phrase — and constantly borrowing to make ends meet. Personal debt is fast approaching the levels it hit just before the financial crash.

Exports have picked up a bit and dividends on investments from overseas are higher because the fall in the pound has made them cheaper. But the country is running its worst trade deficit in 70 years because we love foreign products and don’t have enough quality stuff to sell in return. So we borrow the difference, or sell another national asset — an airport, a utility, a tech company, a football club. Already, four out of every five manufacturing companies employing 500 people are foreign owned.

Financially, January was a good month for the Chancellor, with more tax than he expected. But it is the month when a lot of income tax is paid. Figures for the year are also on target — but only because his first move as Chancellor was to make the target much easier to hit. Overall, our budget shortfall is easily the worst in Europe — much worse than those basket cases of Greece or Italy — and it has resisted all efforts to improve it in spite of taxation being at its highest level for 30 years and relentless cuts.

We regularly spend more on health, pensions, education and roads than we raise in taxes to pay for it all. Again we bridge the gap by borrowing —helped occasionally by smart wheezes such as selling the student loan book.

Meanwhile, demographics make it worse, as the number of retired people increases much faster than the number joining the workforce. Our economy is not efficient enough to keep us in the style to which we would like to be accustomed.

This shows through in all sorts of ways. It is why the millennial generation is the first since Victorian times to earn less than its parents; why the proportion of people able to buy a home is declining for the first time since the Fifties; why the squeeze on wages in the past decade has been the most severe since the 1920s.

A higher proportion of adults work here than in almost any other country, and yet it is still the case that millions of people need at least two or more jobs to pay the bills. A huge proportion of working families and millions of self- employed rely on additional state benefits to get through the month.

It is Philip Hammond’s misfortune to be Chancellor when it all begins to unravel. Without a major surge in economic growth there is no more money for the National Health Service; there is no more money for schools; there is no money for long-term care for the elderly, for nursery places for the young, nor for the defence of the realm. Choose your own favourite; there is no money for it. Complain all you like, there still will not be any money for it unless he decides to borrow even more.

In a situation like this you would hope that a Chancellor would adopt the Google maxim or a version of the doctors’ Hippocratic Oath, to do no harm. But instead the Government is poised to unleash an increase in business rates. For many the increase will be so severe that it will put them out of business.

Even with a blank sheet of paper, a room full of the finest brains and an unlimited supply of cooling ice-packs it would be hard to invent a worse tax than business rates. It is based on how much in theory the business could be charged as rent but it takes absolutely no account of the profitability of the tenant, nor the ability to pay. You would expect the Government to want small businesses to plough back their available cash into further expansion, to employ more people and go for growth. Business rates encourage the opposite. The more they have to pay in business rates, the less cash companies have to grow, and the more likely they are to give up the fight.

The Chancellor will no doubt offer some sop such as phasing in the increase or making a few more small firms exempt. But that is just a smokescreen to get him through the day.

A bold Chancellor would recognise that business rates are the most obvious example of why the British tax system needs a complete rethink. It was designed for a world that existed 50 or more years ago. It has to change to reflect the revolution in the world of business and the way in which we as individuals live, work, spend and are employed.

Is Hammond the man to seize the moment? Well, that really would be a Budget surprise.