Trick or Treat? Hammond’s Ambitious Budget ‘Gamble’
The Chancellor, in what may be his last, crafted his budget announcement into a grand unveiling on Monday as he announced that an “era of austerity is finally coming to an end”. But, to what extent?
Philip Hammond looked especially happy when stepping out of 11 Downing Street. He then seemed incredibly at ease when expelling the quips and a smile of an incredibly confident man at the dispatch box. This was because he was unveiling, what the government has portrayed as, a bold new direction as the British economy was now ‘back on its’ feet’ after recovering from the 2008 financial crisis. This is far from the truth, of course, but the government clearly has faith in Britain’s current economic condition. Enough faith to splash the cash in an attempt to appease voters, who have been suffering the crippling effects of reduced government spending under Tory rule. Despite a definite slump in growth since the 2016 referendum and a clear inferiority to the likes of German and French gains, Britain’s economy is still growing at a steady pace. Therefore, Hammond has decided to take a massive ‘gamble’, according to the IFS, and try to generate confidence in the British economy in an often sceptical political environment. This may backfire in the face of a decreased growth forecast for the next financial year (2018: 1.4%, 2019: 1.3%), and an unpredictable post-Brexit financial environment.
The extent of this gamble became clear as Hammond gleefully announced many sharp increases in spending. These included…
- An extra £1bn for the armed forces, specifically to develop anti-submarine warfare as tensions with Russia show no sign of decreasing
- £500m to build 650,000 new homes
- Business rate bills down by 33% for next two years and £650m deployed in an attempt to resuscitate the nation’s wilting high streets
- Citizens of the US, Canada, Australia and New Zealand can now use e-passport gates at UK airports as the UK flirts with businesses outside of the EU
- Fuel duty frozen to tackle pot holes and an increase of 30bn to improve England’s roads
- 1bn boost a year for universal credit
- Extra 2% digital tax for Amazon and Google
- Duty frozen on beer and spirits. Wine and tobacco rising with inflation, however
- NHS Budget to increase by 20.5bn a year by 2023
At face value, this all sounds fantastic and does indeed suggest that a tale of a refreshing new era of spending after years of cut-backs, which the government has been relentlessly peddling, has come to pass. However, when one considers the small print and potential future implications, this supposedly optimistic and rousing budget actually consists of many signature aspects of austerity. Spending on the police, schools and prisons, for example, will only increase in accordance to inflation. Hammond has attempted to distract the public from this fact with an extra £400m invested in ‘extra items’ for schools and £160m added to the anti-terror sector of the nation’s police forces.
These measures will prove to make little to no difference for two struggling yet utterly imperative parts of British society. British schools will continue to fall behind those of China and America as Teachers continue to endure incredibly stressful lives for abysmal wages. The profession will continue to lose employees as it appears increasingly unappetising to ambitious young people wanting to make a difference. Money needs to be focused on learning facilities and new technology which will improve results and make sure the country is in good hands after those of this generation have been and gone.
Moreover, investment in anti-terror units is wise, but not supplying the rest with adequate resources and wages is an oversight. Law and order may have been a priority for Tory governments of the past, although, under austerity governments, it seems that this has not been the case. Along with struggling schools, crippled Police forces around the country have been a constant and ferocious source of discontent due to intransigent high-level cuts. Austerity, it seems, is still alive and well.
Laura Kuenssberg has suggested that a possible explanation for this lack of funding in major sectors could be Hammond’s emphasis on NHS spending. This country’s defining institution has touched everyone’s lives and the winter crises of 2016 and 2017 have sparked a fresh debate surrounding how much funding the NHS receives and by what means it retains it. The controversy surrounding the lie on the big red bus has been a catalyst for this dispute. This game of political football has diverted attention away from other public services which are also in need of increased funding. Social services, the police and schools are prime examples.
Another source of potential funding could have been the £500m put aside in preparation for a No-Deal scenario. If there had been a remain vote in 2016, a greater emphasis on increased funding for more public services would be evident. Instead, we have entered into the periphery of an economic fog. Nobody knows which twist or turn Britain’s negotiations with the EU will experience next and, consequently, the nation’s economy has the potential to become extremely turbulent very quickly. Furthermore, the nature of the final deal, if any is reached at all, is yet to be decided. This will be vital as it will shape the prosperity of the UK for decades to come, maybe even centuries.
Labour have claimed that this budget is simply a way of deceiving the public; making the government seem like investors and spenders again in preparation for a General Election, during which Corbyn would now prove a worthy adversary for May. Austerity may even have to be reintroduced post-Brexit, as S&P predict a lengthy recession if no deal is reached. Even if an agreement is made, there will be inevitable slow, disruptive growth as the UK economy adapts to its’ new status outside of the single market and customs union. Prospects are looking even more gloomy as the UK’s application into the WTO was rebuffed last week, illustrating the very overt difficulties which the International Trade Secretary, Liam Fox, has chosen to ignore when it comes to finalising altered global trade deals. It seems that the treasury believes the British public to be magpies, as they try to gloss over these unappealing prospects by minting a shiny new 50p coin to commemorate leaving the EU. It may end up commemorating British economic dignity in the near future as the results of Hammond’s risk taking become clear.