It is not economic policy that distinguishes Philip Hammond from his predecessor so much as style and context. George Osborne enjoyed budget day as an opportunity to play political games, laying traps for the opposition and dominating headlines. Mr Hammond sees avoidance of news as a success. And he sees no need to factor an enfeebled Labour party into his calculations. The fiscal dilemmas facing the current chancellor feel familiar, partly because Mr Osborne botched them the first time around. Plan A was the elimination of a structural deficit by the end of the last parliament. Plan B was a balanced budget by 2020. Plan C had no fixed deadline at all.
The scale of the Tories’ economic policy failure tends to be overshadowed by the new challenge of Brexit. Theresa May acts as if David Cameron’s government was nothing to do with her. Conservative MPs and their supporters in the Eurosceptic press are complicit in this fiction. It is a pretence that treats a £68bn deficit and public debt creeping towards 90% of GDP as accidents of fate – contingent misfortunes to be borne stoically, as opposed to consequences of mismanagement by a party in government for seven years. Prolonging austerity gives Mr Hammond a grim task. The political arguments that were used cynically but effectively by his predecessor have lost salience. It is no longer plausible to refer back to a mess supposedly left by Gordon Brown. Likewise, the assertion that public money is being wasted – that there is fat to cut – rings hollow as people can see for themselves the difficulties facing public services.
The mood changed soon after the 2015 election, when Mr Osborne was forced to abandon reductions to tax credits. It was rebellious Tory MPs, anticipating the impact on their constituents, who forced that climbdown. The Treasury can no longer presume a parliamentary majority for benefit cuts. MPs will also increasingly demand help for their local NHS facilities. Tory council leaders will become more vocal in criticising the impossible local government finance settlement that has been imposed on them – especially as regards depleted budgets for social care. A storm is brewing around diminished school spending. Revisions to the funding formula will create pockets of fury in areas that lose part of their allocation. The police are becoming more vociferous in warning that public safety is in peril if their budgets shrink further. Last week, Simon Bailey, head of the police investigation into historic child abuse and the National Police Chiefs’ Council lead for child protection, said forces did not have the capacity to deal with cases and that “low level” offenders should receive rehabilitative counselling. But where are the resources to come from? It seems unlikely public opinion would welcome help for recovering paedophiles, even if it is cast as a more efficient deployment of resources, freeing police to pursue more dangerous offenders. Britain’s degraded prisons are full.
These dilemmas arise in every sector in every part of the country and they will get more critical. Even measures designed to be revenue-neutral, such as the revaluation of commercial properties for revised business rates, are causing the chancellor grief. He is expected to find relief for those who will experience the change as a tax hike. But why should they be spared and others not? Even if revenue forecasts prove rosier than anticipated, Mr Hammond will have scant opportunity for largesse. What is the qualifying factor for fiscal mercy under Theresa May’s government? The prime minister says it is those who are “just about managing”, but that has so far been a rhetorical investment.
Mr Hammond’s instinct is to play down the drama of a budget, to avoid tricks and gimmicks, to be as unlike Mr Osborne as possible – except to the extent that he is sustaining austerity. But the chancellor cannot pretend that his fiscal choices are an exercise in boring accountancy. That would be a deception. He is inflicting pain in some places, alleviating it in others, picking winners and losers – and the latter outnumber the former. He cannot expect his decisions to be legitimate without some account of the ethos that gave rise to them. He must take moral responsibility for the path he picks and be explicit about it. British patience with austerity has been stress-tested hard in recent years. If Mr Hammond is to test it still further, he needs better arguments and a more plausible pathway to a prosperous destination than the harmful games played by Mr Osborne.