Budget 2018: 'Spend, spend, spend' - but where is the cash coming from?
PUBLISHED: 19:17 29 October 2018
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This Budget was set to be the most difficult any chancellor has had to deliver in living memory.
Hemmed in by the prime minister to increase spending certain politically-sensitive areas, much of the Philip Hammond’s cash was thought to be gone before he even stood up. We knew about the new National Health Service money, for example.
And yet he still needed to strike a positive tone and bolster Theresa May’s conference speech promise that austerity is coming to an end.
On top of this he needed to keep squabbling MPs on the backbenchers happy.
The thinking was Mr Hammond lacked two vital ingredients needed for the type of Budget that keeps everyone onside: oodles of money and a decent parliamentary majority.
And with any Brexit deal with the European Union still on a razor edge, the whole thing might well require a Hollywood-style reboot. Despite assurances that all of the pledges from the dispatch box were viable whatever happens with Brexit, if the UK leaves without a deal there is every possibility an emergency statement will be needed.
Businesses here in the East of England, from the smallest one-man band to the largest multinational, look to the Treasury for certainty. But even on Budget day Mr Hammond struggled to deliver that because of the remaining doubts of quitting Europe and its impact.
But there were new announcements – and plenty to chew over here in East Anglia.
To the shock of many – and people remain rightly dubious about where the money is coming from – there were handouts. But they are all pinned on the hope that the rosy Office of Budget Responsibilty projections are achieved. Spreadsheet Phil has his fingers firmly crossed.
The most eye-catching, that impacts the most people, is income tax. From April 2019 – a year earlier that promised in their manifesto and even after many believed they would have to scrap the pledge altogether – the personal tax allowance will go up to £12,500 and the higher rate of tax will increase to £50,000. This is some giveaway and will cost the Treasury £2.8 billion in the next financial year.
The national living wage, currently £7.83 an hour, will climb to £8.21. That is an increase above the year-on-year rise in the cost of living.
And a freeze on fuel duty stays in place while the price of a pint, cider and spirts will stay the same.
But wait? Aren’t we broke? Where is all the money coming from?
Simply put, the country’s borrowing is far better than expected. The chancellor could have saved that cash but instead he has decided, with all the gusto of Viv Nicholson, to “spend, spend. spend”.
This unexpected fiscal windfall has been well spread around though. The majority of the spending has gone on the NHS – but there is lots of smaller handouts as well.
This – completely by design – is a feel-good Budget. There will be one-off handouts for every school in England – £10,000 for primaries and £50,000 for secondaries.
And an extra £1bn for defence up until the end of 2019 and money for a military veterans’ charity – both of these moves will delight his Tory backbenchers.
And there were even some policies that could easily have come from the opposition front bench – the banning of Private Finance Initiatives and a tax raid on mammoth internet giants like Google and Facebook, although this is only projected to raise £400 million.
His critics will say, and they have a point, that the extra money for the NHS will only allow it to standstill not improve. They will ask why only small handouts for schools rather than more serious spending. And, of course, here in the East there was no detail on whether some of our big infrastructure needs will get attention – where was the A14 or the extra money to duel the A47 fully?
This is a Budget that – NHS aside – spreads the spending thin. Mr Hammond has dug deep and tried to keep everyone happy. But why?
It feels like a pre-election Budget with the government buying votes.
The chancellor and the prime minister know austerity has not been easy for Britain. Add to this two years of uncertainty after the Brexit referendum – whether you voted Leave or Remain – and our country has lost almost a decade to doom and gloom.
Mr Hammond wanted to make everyone feel good – he had better hope the sums add up.