Today’s UK Budget Statement by Chancellor of the Exchequer, Philip Hammond, must rank as one of the oddest Budget Statements ever. All Budgets are a mix of the political and the economic, and the balance between them depends on the circumstances in which the speech is being delivered and the personality of the Chancellor delivering it. Philip Hammond’s style has always tended more towards the company AGM than a great political occasion; but today, it was all politics. At the slightest risk of becoming technical, the Chancellor breezily referred us to the Budget Red Book and moved briskly on.  

The air of unreality was increased by the fact that most of his announcements had already been – well, announced. Indeed, this could be described as the first postmodern budget: the Chancellor merrily told us that Chancellors tend to produce rabbits out of hats and then proceeded to do just that (bringing forward the delivery of the manifesto pledges on tax thresholds); he noted that he had little left to announce (but still spoke for over an hour); he delivered some truly awful puns, and then acknowledged their awfulness.   When he solemnly intoned that “Fiscal Phil Says: Fiscal Rules OK”, it felt like one’s grip on reality was becoming weaker…

What was going on? Well, as many viewers of a play by Beckett might feel, not very much – at least on the surface. All the action was taking place elsewhere. The only point in having the Budget this week was not to have it in late November or early December, when it might have become inextricably entangled with the final struggle to reach a Brexit deal. The Chancellor did refer on two or three occasions to a future deal (although he only mentioned the word ‘Brexit’ once), and to a possible Brexit dividend, although he was very careful not to couch it in Johnsonian or Govian terms, but in his own. Any benefit which might accrue to the public finances or the wider economy from a deal being agreed would be limited to the release of pent-up demand and the Treasury availing itself of the “fiscal headroom” which it has created in case the negotiations end in failure.  In other words, Hammond was rejecting the hard Brexiteers’ line that Brexit ipso facto would give the UK fiscal position a boost and instead telling them that if they wanted up to £16 billion of room within the fiscal rules to be released, they’d better back the Prime Minister’s deal. 

But, if part of the speech was aimed at Hammond’s own backbenches, the clearest political messages were designed for voters.  It was “the hard work of the British people” (which Hammond mentioned at least 10 times) which had meant that he was now in a position to declare that “austerity is coming to an end” (Note: not “over” yet).  In fact, apart from some unusual in-year spending pledges (eg on social care), the main switch to an expansionary fiscal stance will be in the next spending review period, following the review which he announced for 2019. Since it was politically imperative to make it plain that the pain endured by “the hard-working British people” (there we go again) had been worthwhile, the Chancellor had to say that the Conservative government’s 2010 fiscal goals had been achieved. As they hadn’t (a balanced budget is receding into the future), he declared victory in another battle: that of reducing the UK’s debt (which, to be fair, is now falling as a percentage of GDP).  The political challenge for the Conservatives is that the counterfactual events which loomed large in 2010 (the Greek debt crisis and the fear that the UK might follow suit) have been completely forgotten by almost every voter, and even the claim that it was all Labour’s fault, which voters perhaps half-believed in 2015, now rings hollow.

The other shadow looming over this Budget was the Labour party. In spite of voters’ wariness of Jeremy Corbyn as a potential Prime Minister, all the signs are that many Labour policies are popular and that the political centre of gravity in the UK is shifting leftwards. So, in many ways, this was a smart budget if seen as a political manoeuvre: it stole Labour policies (eg abolishing PFI), sought to neutralise areas of vulnerability to Labour attacks (eg more money for Universal Credit) and picked up some populist Labour ideas such as the proposed Digital Services Tax. On the other hand, there was evidence of Hammond’s political ‘tin ear’ – in particular his extra money for schools was couched as helping them pay for ‘the little extras they need,’ when many state schools say they are facing significant holes in their budgets and threatening to close early on Fridays to save money. Also his jokes about the Shadow Chancellor ‘falling flat on his face’ and the seemingly endless toilet humour puns based on his announcement to end business rates on public loos fell rather flat in the Chamber and seem unlikely to resonate with voters. 

But perhaps, ultimately, the only way to make sense of this perplexing Budget is to see it as a good, old-fashioned pre-election giveaway Budget – just in case the government is forced to hold a General Election next year.  After all, the Conservatives are running a minority government; as soon as the Brexit deal (if there is one) is put before Parliament, the government will be in considerable danger of being defeated. Notwithstanding the Fixed-Term Parliaments Act, a vote of no confidence in the government would lead to an election unless Jeremy Corbyn could cobble together his own minority government (and he might prefer an election anyway). 

So, this explains the political rhetoric and the traditional pre-Election tax cut (raising the thresholds), the freeze on beer and spirits duty, some extra money for good causes – oh, and “the end (almost) of austerity.”  

Of course, Hammond — like the Prime Minister, who cut a rather subdued figure on the front bench as the Chancellor spoke — will be hoping that, unlike Godot, a Brexit deal does actually arrive, and that then an election can be avoided.

Bigland_Alexandra_sq
Alex Bigland

Alex Bigland is senior director and deputy managing director of APCO Worldwide's London office. She has more than fifteen years of experience in marketing, corporate communications, stakeholder engagement and UK public affairs. Read More