Philip Hammond’s first Budget showed a Chancellor determined to be seen as steering the ship of state with a steady hand as Article 50 approaches. The need to dodge political and economic icebergs meant limited, carefully chosen giveaways, balanced with tax increases.
There was disappointment for anyone hoping that better-than-expected borrowing figures could fund reforms to stamp duty or substantial infrastructure investment. With the air of frowning bank managers of old, Mr Hammond intoned that he would not be funding things with new borrowing, thank you very much – especially not, he might have added, since the national purse today carries £100 billion more debt than it did when George Osborne brandished his last red box.
What has happened since then? Only by reading between the lines would you know the UK was leaving the EU. Mr Hammond’s only reference to it was in a slightly nervous joke; the full Budget makes only three oblique references to the fact. Instead, the Chancellor took the opportunity to paint a broader, political narrative in a way that hasn’t happened since the Prime Minister first took office. He painted this as an education Budget, that followed an infrastructure Autumn Statement, against a wider landscape of driving up flagging productivity. It was a salient reminder that productivity seems to be among the Prime Minister’s key concerns, which business audiences should welcome.
Splashing the cash (more of a ripple)
A government with a small majority needs to keep its backbenchers happy: one way to do that is £2bn for social care over the next two years. Another is £445m in business rates relief, particularly when some of it is targeted at that perennial favourite of politicians: the local pub. Even if for many small businesses this only delays a blow, it is a victory Tory MPs can take to their constituents.
These are not the only announcements that you’ll see Conservative MPs and candidates boast about in campaign leaflets in the coming months: there was also further devolution for London, a Midlands Engine strategy, and funding to address strategic road problems in the North and Midlands. Investment in ‘T-levels’ and other measures to support technical and vocational training will likely be popular. Funding new selective schools will be more controversial.
Sit down, EU’re rocking the boat
In this Budget braced for economic turbulence, the biggest risks may be political. It only takes a handful of rebels to turn the expansion of grammar schools into a real political struggle. Several government backbenchers have already indicated their discomfort with the policy. Increases to National Insurance contributions for the self-employed look an awful lot like a broken manifesto pledge, and one that will affect those with loud, influential voices. If there’s one thing Conservative MPs aren’t keen to defend, it’s a tax hike.
The consultation on the Housing White Paper is still open, so it would have been unfair to expect substantial announcements on housing, and particularly stamp duty. Despite that, the property community may well think that nothing is too little. For a steady-as-we-go Budget that will have disappointed many, plenty of potential pitfalls lurk ahead…