The Chancellor of the Exchequer, Philip Hammond
Philip Hammond attempted to shrug off the huge divisions in the Tory Party by cracking a few jokes as he delivered his second Budget since becoming Chancellor, but the biggest joke was the portrayal of himself as a great moderniser putting Britain ‘at the forefront’ of the world’s imminent ‘technological revolution’. He said the Conservatives would ‘run towards change’ and make Britain ‘fit for the future’. The grim reality is markedly different. Barnaby Philips reports.
- The Resolution Foundation said that wages would not return to 2008 levels until 2025, meaning two lost decades of wage growth for workers, the longest fall in living standards since records began in the 1950s.
- The state sector continues to be stripped to levels not seen since the 1930s under the plans of the previous Chancellor, George Osborne.
- The Office for Budget Responsibility (OBR) announced its biggest downgrade for economic growth since it was set up in 2010. Growth in 2017 was reduced from 2% to 1.5% and growth through to 2021 was knocked down by between 0.2 and 0.5 percentage points; it will only creep back up to 1.6% in 2022. Even these figures are optimistic as they ignore the uncertainty of Brexit and the increasing probability of recession – Britain has suffered one in every decade since the 1970s.
- GDP per person will be 3.5% smaller in 2021 than forecast in March 2016. The loss of growth will mean the economy is £65bn smaller in 2021 than previously thought.
Despite seven years of austerity that was supposed to eliminate the budget deficit, originally by 2015, the Tories have been forced yet again to increase borrowing. The OBR rejects Hammond’s assertion that the hole in the public finances will be gone by 2025, saying it would remain until at least 2031. The Institute for Fiscal Studies added that national debt – currently standing at £1.94 trillion, with an annual servicing cost of £48bn – may not return to pre-crisis levels until the 2060s.
The OBR’s growth figures were based on a weak export sector and forecasts of 1.1% productivity growth until 2022, compared to an annual average of 2.1% before the 2008 financial crash. City firm Fathom Consulting said that, with productivity growth averaging 0.3% over the past five years and an ageing population, the OBR’s outlook was again too optimistic. It is Britain’s persistent sluggishness in productivity – the longest period of low growth since the 19th century – rather than any radical Tory vision, which has forced Hammond to increase the National Productivity Fund by £8bn to £31bn, with £500m for projects such as Artificial Intelligence and driverless cars. The technological revolution Hammond latched onto – which Shadow Chancellor John McDonnell had urged him to embrace – may provide ‘high paid, high productivity jobs for tomorrow’ for a lucky few but, according to the Bank of England, threatens to displace up to 15 million jobs by 2030.
The Chancellor must borrow an extra £90.5bn over the next five years. This is despite an £8.4bn improvement in public finances for 2017-18, thanks to rising inflation pushing up the price of goods and boosting VAT receipts. However, the deficit widened in October, year-on-year, by £500m, the exact opposite of what was expected by City economists. The reclassification of Housing Associations as private bodies helped reduce borrowing by £24bn, enabling Hammond to stay on target with his fiscal rule that borrowing will be below 2% of GDP by 2021, albeit by a smaller margin.
In a move to placate his party’s Brexit fanatics, £3bn has been set aside for preparations to leave the EU, adding to the £700m already been spent on the process. This as the government edges closer to accepting a ‘divorce bill’ from the EU of at least £40bn. In contrast, the NHS received an extra £2.8bn, £1.2bn less than NHS England required. There was also no extra money for renewable technology until 2025.
No fix for housing
Hammond said that over the next five years the government will commit a total of at least £44bn of capital funding, loans and guarantees to support the housing market. But only about £15.3bn of this represents new support and funding. This is a drop in the ocean, with little prospect of lifting the housing supply to 300,000 new homes a year by the mid-2020s. Consecutive governments have missed much lower targets, including the current one of 217,000. Councils were given permission to charge 100% extra council tax on empty properties, little problem for rich property investors that dominate the top end of the housing market in London and other major cities.
The Chancellor pledged to ‘revive the home-owning dream’ and abolished Stamp Duty for first-time buyers on sales of up to £300,000, and on the first £300,000 of properties up to £500,000. The OBR immediately rained on Hammond’s parade, saying that the move would push house prices up by 0.3%, making ‘the main gainers people who already own property’. City firm Jefferies said that the average saving for first time buyers would only be £800, and wouldn’t make much difference outside of London.
Insulting the poor
Hammond poses changes to personal tax allowance, raised to £11,850, as a boon for the working poor, but more than 40% of workers do not earn enough to pay income tax. It will be higher rate payers who gain the most with an extra £340 a year. Lower earners get £70 and Universal Credit claimants an insulting 50p.
In the run-up to the Budget, the Chancellor embarrassed himself on live TV by claiming that ‘there are no unemployed people in Britain’, forcing him to make a point of admitting in his address to Parliament that ‘1.4 million people unemployed is 1.4 million too many’. He said the Tories had created three million jobs and would add another 600,000 by 2022. In reality high unemployment is accompanied by in-work poverty that has hit record numbers,* with millions of people driven into low-paid, insecure work. For them, ‘tomorrow’s jobs’ look like a step back to a much darker time.
* See: In-work poverty in Britain hits record high
Fight Racism! Fight Imperialism! 261 December 2017/January 2018
