Who’d be Philip Hammond?
Brexit looms ever larger in the windscreen. Prime Ministers are always keen to make the big economic announcements personally. The Prime Minister committed to spend an extra £20.5bn on the NHS by 2024 – the single biggest decision for this Budget – in June.
You could argue that the electorate was the one that made the big decision for this Budget, two years earlier. Mr. Hammond yesterday faced the unenviable challenge of crafting fiscal policy with the year’s most significant fiscal event still largely a mystery. In the coming year, we’ll either leave the customs union – or we won’t. Either way, it might be temporary – or it might not. We might have agreed a deal with the EU – or we might be braving the leap without one. The shape of Brexit will be the single most important thing for the public purse, but the man who holds the purse strings can only guess at it.
An end to austerity?
Mr. Hammond was able to stand up and deliver some good news. Tax receipts have been better than expected in the last six months and employment reasonably strong, giving him a minor windfall to play with.
He will spend virtually all of it on the NHS, by far (indeed, by an order of magnitude) the biggest tax or spending commitments in this Budget. Fully 87% of all new spending commitments made through to 2024 were on the new five-year settlement for the NHS. In her party conference speech, the Prime Minister had promised an end to austerity. The Chancellor has his work cut out if he’s to do that and honour his manifesto commitment to balance the Budget by the mid-2020s.
The property sector was looking for action on retail and housing, to help address the ongoing structural turmoil affecting both.
- Retail: Business rates continue to influence retail chains as they trim their portfolios and try to weather tricky times on the high street. The fresh rates relief for small businesses announced today won’t help those larger chains, though independents will welcome it. It is hard to see it having a major impact. Nor will a highly selective UK digital services tax that won’t be introduced for 18 months do much to level the playing field for physical retailers.
- Housing: There’s another £500m for the Housing Infrastructure Fund, and relief from stamp duty for first-time buyers of shared ownership properties. The major spend on housing, though, is the removal of the borrowing cap for local authorities looking to build homes – and that’s one area where we’ll have to wait and see if local government can make the most of it.
So what’s the story of this Budget? A government trying to break out of the fiscal straitjacket of austerity. A party keen to be seen as the face of responsibility. A country facing the unknown. And a Chancellor who can only tinker at the margins.
Who’d be Philip Hammond?