Chancellor plans budget spending pledges to reassure MPs

Philip Hammond is planning to pepper his budget with a series of spending announcements to reassure Tory backbenchers who are anxious about the impact of universal credit and delivering on the prime minister’s pledge to end austerity.

The chancellor is understood to share fears that Theresa May’s promise at the Tory party conference to step up public spending had been interpreted too literally, putting pressure on the Treasury to announce giveaways later this month.

Senior Treasury officials said the spending announcements would be “dressed up as a significant intervention” although they could in reality be “a smokescreen” designed to appease Tory MPs already worried about the impact of Brexit.

They also said Hammond plans to help soften the national rollout of universal credit, which ministers have already admitted could cost low-income families £2,000 a year.

The plan for the budget is a significant departure from the low-key affair previously expected at Westminster, in which any major spending announcements would be delayed until after March next year when the economic impact of Brexit becomes clear.

Hammond is already grappling with how to fund the £20bn a year cash injection into the NHS to pay for thousands more doctors and nurses, which was announced by the prime minister this summer, and he has already opened the door to tax rises.

Labour voiced concern at the anticipated spending announcements, questioning whether they would amount to more than “jam tomorrow”, with any promises to invest more in public services focused on the end of the economic cycle.

The shadow chancellor, John McDonnell, said: “I think there’s panic in the Treasury and Hammond is having to look at the spreadsheets all over again and start tearing them up, but they’ve only got a limited number of days to do that.

“They’re looking to see whether they can find something to stack up on their own backbenches so all of a sudden this budget, in a way they never wanted, is becoming more significant then they thought.”

Other Whitehall sources insisted it was business as usual at the Treasury but admitted that although the 29 October budget would not be a major one, it could end up being presented as one in order to assuage worried Tory backbenchers.

One said: “If you’re asking, when we stand up there, are we trying to sell what we’ve got as hard as we can, then I strongly suspect we will. But is there some great lever that is going to be pulled? No, because the rhetoric can only get you so far.”

They added that Brexit overshadowed the whole budget process, with the chancellor unlikely to make big decisions on universal credit and other spending areas when the UK’s relationship with its biggest trading partner, the EU, was so uncertain.

The chancellor is expected to make an announcement on universal credit in his budget that would inject millions more to soften the national rollout of the benefit, rather than the £2bn that critics have claimed is needed. He is understood to be primarily focusing on how to fund the £20bn NHS spending pledge.

It comes after the Institute for Fiscal Studies said that May’s pledge to end eight years of cuts at Tory conference was “unlikely” to be compatible with the chancellor’s aim of balancing the nation’s books unless some tough decisions were made.

In its traditional pre-budget analysis, the thinktank said Hammond would need to find at least £19bn a year by 2022-23 to meet spending commitments for health, defence and aid, and reverse planned cuts in other areas, the “minimum definition” of ending austerity.