We have grown used to the Chancellor pulling the proverbial rabbit out of the hat at the end of the Budget Statement – it is the crowd-pleasing headline grabber that distracts attention from the pain of tax rises announced shortly beforehand. In making this break, Philip Hammond asserted his authority on the position he holds and tried to persuade the public that he is serious about ensuring economic stability for the UK, not producing politically pleasing measures.
It was a relatively bland Budget, with many announcements having been trailed in the press. Hammond did gently chide the Prime Minister for stealing some of his thunder during PMQs, and ad-libbed a few jokes which went down better on some benches than others. With additional school funding and other such measures already announced, it fell to the untrailed changes to be picked over in more detail by analysts and economists. Most notable were the changes to NICs which bring the tax burden for the self-employed in line with employees who are paid similar amount. However, with self-employed people not having benefits such as sick and maternity / paternity pay these changes could be seen as a deterrent against self-employment, rather going against the Government’s pledge to help the British entrepreneurial spirit. And with the reduction of tax-free dividends for business owners from £5,000 to £2,000, one could think that Hammond was taking some advice from Members opposite
However, extra money has to come from somewhere and these were seen as politically and as well economically prudent. With the OBR forecasts in the medium term not actually changing, Number 11 looks like it is still trying to fix the roof whilst the sun is shining.
More astonishing was the fact that Jeremy Corbyn, whilst responding (a notoriously difficult speech to make) failed to mention the NIC changes – there is potentially great political capital to be made by the Labour Party and the Leader of the Opposition missed a great opportunity to hammer home the point. In their last manifesto, the Conservative Party pledged not to raise NI (although David Gauke did clarify afterwards saying it only included some NI classes), and yet it fell to backbenchers taking to twitter to berate the Government. But that really sums it up – who is there to pick over the fine print and hold the Government to account? Rebel backbenchers and the SNP spring to mind. Business rate changes are still going ahead – pain delayed rather than dissolved – and the funding of social care has not really been dealt with. The additional funding is over 3 years, and a long term sustainable solution seems to be as far away as ever. With the lack of effective Opposition, Hammond could get a relatively easy ride, compared to his predecessor.
Also surprising was the lack of mention of Brexit (although what would the Chancellor say?) and the small wins he missed out on, like supporting Carolyn Harris’ campaign to waive fees for funerals of children. Overall, once the economists have picked over the small print and given their opinions, the conclusion could be the rabbit was that there was no rabbit – no gimmicks and stunts – just good old fashioned economic stewardship.
Hammond’s political capital will rise if he comes out of this relatively unscathed, and that could give him greater confidence to be bolder in future years. Much of that depends on his own backbenchers who could flex their muscles of business rate changes and quarterly reporting, both of which are still going ahead as planned, as well impending problems over funding for schools and the health service. The Chancellor could need his rabbit after all.