Budget analysis: Much caution, few rabbits from Chancellor’s fiscal statement

By March 8, 2017Public Affairs

budget brief 2

 Well, we were expecting a cautious budget statement from the Chancellor this afternoon and that’s certainly what he delivered. Even Philip Hammond himself, in one of his frequent forays into the realms of humour, alluded to the ‘Spreadsheet Phil’ label awarded to him by Treasury insiders and adopted by the rest of us as easy shorthand for a politician who clearly goes to bed dreaming in decimal points and acronyms.

Those who were paying attention during the mid-stages of the speech, will know a lot more about Stage 2 and Stage 4 NIC classes than they’d bargained for and will be in no doubt that Mr Hammond thinks the tax system needs to evolve fast to cope with revenues lost to an increasing tendency for workers to become self-employed.

All of which will be controversial in some quarters. Many of the self-employed workers that will lose out to National Insurance and dividend payment changes are precisely the sort of people who might also tend to describe themselves as self-starting Tory voters. At the same time, commentators on the left are already pointing out that for every plutocrat that will lose out from these changes there are many more workers in the so-called ‘gig economy’ who are also self-employed but who might not be blamed for wondering what was in the Chancellor’s statement for them.

There will be sustained questions over who these changes serve: those Theresa May called JAMs (Just About Managing) and pledged to support when she entered Downing Street last July or the endless fiscal meat grinder of the national deficit that we now know definitely won’t be cleared this decade as planned back in the halcyon days of 2010.

The jury will be out on other newly announced measures too. There were a lot of reviews mentioned – like those on business rates and North Sea oil and gas – that should lead to big change, but not in the immediate future or in ways that will grab acres of positive newspaper commentary in tomorrow’s news.

Meanwhile, there was a significant amount of extra cash for health and social care south of the border but whether this is enough to shore up what has come to be seen as a system in crisis remains to be seen. The introduction of new T-Levels as a means of delivering parity of esteem between vocational and academic education pathways seem like a good idea, but businesses will want to ensure that this is more than just a re-branding exercise.

And what of the additional £350m that will come to Holyrood via the Barnett Formula? The Scottish Government will argue that this falls short of what was already taken from Scottish budgets in the course of previous cuts. Nonetheless there will be pressure to earmark that sum for projects that will spur economic growth and productivity, like infrastructure and skills programmes. Are we likely to see Nicola Sturgeon’s government set out similar priorities around reforms to technical skill support and investing in social care?

In truth the whole thing really came across as a type of holding statement pending updates in the Chancellor’s first autumn budget later this year. By then Philip Hammond will have a slightly clearer view of where EU talks are taking the government (a subject altogether roundly ignored today) and whether the OBR’s projections on borrowing, GDP and inflation will take a turn for the worse.

All being well on those fronts (and that is certainly no given), he may feel he has latitude to be a little more open handed with voter-pleasing rabbits from hats – a species of rodent that was notably conspicuous by its absence from the Commons chamber this afternoon.