To meet the UK’s challenges, Philip Hammond’s Budget needs to be ‘big’ not ‘boring’

Editorial
Asked by Robert Peston whether his Budget would be ‘big or boring’, Hammond replied ‘balanced’: Reuters

The days when the run-up to a Budget was marked by the secrecy of “purdah” are long gone. In recent times, Chancellors have realised that they can generate several days of headlines by drip-feeding stories to the media that would be eclipsed on Budget Day.

Philip Hammond’s pledges on driverless and electric cars, artificial intelligence, and research and development fit this category – and so does the Government’s new slogan of building “an economy fit for the future”.

However, the Chancellor unwittingly prompted some unwanted headlines when he told the BBC’s Andrew Marr Show on Sunday that “there are no unemployed people”. He was trying to be upbeat about the next technological revolution by arguing that previous ones had not necessarily pushed up overall unemployment. But his slip of the tongue will play into the hands of Conservative critics who claim that he lacks a sure political touch. Hammond had to correct himself when he appeared later on ITV, conceding that there are 1.4 million unemployed.

Asked by Robert Peston whether his Budget would be “big or boring”, Hammond replied “balanced”. He will probably turn on the taps a little, by using part of his £26bn rainy day fund previously set aside for Brexit without tearing up his fiscal rules, which include clearing the annual deficit by the mid-2020s. So there will be some money to tackle the housing crisis, and probably a cut in stamp duty for first-time buyers. Hammond told The Sunday Times he wants to see 300,000 new homes built every year (up from 217,000 in the 2016-17 financial year), and trailed some sensible measures such as tackling land banking by housebuilders and hoarding by speculators. Other ideas, such as cleaning up industrial sites or putting in infrastructure such as new roads, sound very familiar. Similarly, targets for the number of new homes have been trumpeted by previous governments but not delivered. Unfortunately, Hammond has lost his argument with Theresa May over his desire to allow some building in the Green Belt, which would have demonstrated the urgency needed to meet the scale of the problem. Suggestions that his housing boost would be worth £5bn are disappointing; Sajid Javid, the Communities Secretary, has lobbied for £50bn.

The Chancellor will at last formally lift the cap on public sector pay, but looks unlikely to pump the £4bn into the health budget sought by Simon Stevens, chief executive of NHS England. We will need to study the small print on public services on Wednesday; there is a risk Hammond will give with one hand and take with another by forcing them to fund pay rises through cuts elsewhere.

Hammond promised a Budget with “a clear vision” of how the UK will prosper in post-Brexit Britain – a response to the hardline Brexiteers who secretly hope he will fail so they can renew their demands for him to be sacked. The truth is that, whatever he does, they would never be satisfied because he rightly argues for the UK to remain close to the European Union after Brexit. If he fails to spell out a vision of the long-term UK-EU relationship, that is hardly his fault: Theresa May has been too weak to impose her own blueprint or even allow the Cabinet to discuss the issue.

Hammond’s natural caution will be reinforced by his desire not to unsettle the markets at a time of uncertainty over Brexit. Nor can he afford a disaster like his U-turn just days after his March Budget over national insurance for the self-employed. In his interviews on Sunday, the Chancellor hoped that this week’s package would prove “a turning point”. But to meet the huge challenge of the times, it needs to be much closer to “big” than to “boring.”

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