Philip Hammond vowed to make Britain a “country fit for the future.” Today, in his make-or-break Budget he sought to explain his visions for the way forward for economic growth as well as protect his own fate.
Eurosceptic Conservative MPs have been looking for evidence that Hammond is more upbeat on the UK’s future outside the EU, whilst Labour has been attacking the Government’s record on the lack of wage increases, spending on the public sector, and ineffective action on tax evasion.
The Chancellor admitted at the weekend that his ambitions could not stretch beyond presenting a ‘balanced’ Budget. Downing Street was so concerned about the lacklustre details briefed to journalists overnight that it stepped in to insist more pro-consumer announcements were released.
The Chancellor has had to develop his plans in difficult circumstances. The Office of Budget Responsibility has again lowered its growth forecasts. But debt as a share of GDP is now set to start falling this year and forecast to fall to 79.1% of GDP by 2021/22. Hammond lauded that this was the “first sustained decline in debt in 17 years.”
Hammond was not afraid to tease his own colleagues in his speech, referencing May’s coughing at the Party Conference, and Michael Gove by using “long and economicky words.” But these are tricks to work the Chamber in the House of Commons.
The real test starts now. Will his plea to younger voters through railcards and stamp duty changes for first-time buyers have an impact? Will the housing initiatives he announced have a significant impact on one of the fundamental challenges of our time in terms matching housing supply and demand? Will the flurry of wide-ranging policies on maths to artificial intelligence and transport links add up to a complete picture?
One of the most significant pillars of Hammond’s appeal to consumers was his announcement that first-time buyers will no longer have to pay any stamp duty on properties worth up to £300,000. However, the OBR has already said “the consequence of introducing the relief will be to increase house prices.” The independent body said the reduction in tax costs will feed through into house prices “relatively quickly” as “the relief frees up first-time buyers’ savings to put towards higher deposits.”
Hammond’s aim was to strike the right balance to ensure his own survival. The OBR’s downgraded forecasts demonstrates the scale of the challenges the UK faces. Hammond decided to take no big risks, to resist the urge for any large upfront tax rises or major spending cuts, but do enough to buy off his critics. On the output we saw today he may have succeeded, for now.