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Grayling: 2017 Budget Overview

23rd November 2017


Enemies to the left of him, enemies to the right, the Chancellor faced a tough second Budget when he stood up at the despatch box yesterday. After a terrible election campaign and a torrid few months since, the hope amongst many backbenchers was that this would be a Budget to re-galvanise a fractious Conservative party and provide a more optimistic narrative that the public can swing behind. The big question was how far the Chancellor would move to find more money for hospitals, tackle intergenerational unfairness and ensure the UK is ready for Brexit and beyond.

 

Would ‘box office Phil’ (a Westminster nickname filled with irony) deliver something daring? If he did, would that effectively be an endorsement of Labour’s economic policy from Ed Miliband onwards?

 

The context was tricky. Growth forecasts have been revised down, meaning less tax revenue down the line. Normally after an election a Chancellor can afford to take the unpopular decisions needed to raise money. But today’s politics and parliamentary arithmetic mean more savings from welfare were off the table, as were tax rises that would hit ‘ordinary working families’ – areas where the biggest money can usually be found.

 

In the event, the approach set out by Philip Hammond seems politically astute in the short term. Set to cost around £19bn over the next five years, with most of the spending occurring in 2019-20 (the year of Brexit), the Chancellor addressed the most pressing points of criticism:  £3bn to prepare for all Brexit scenarios, including no deal, to comfort his pro-Brexit critics; major investment (and threats) to increase housebuilding; abolishing stamp duty for most first time buyers; a freeze on fuel and diesel duty as well as on booze; £1.5bn to head off concerns across all parties on Universal Credit; and significantly more money for the NHS (although less than demanded by Simon Stevens).

 

Combined with further measures to boost infrastructure and digital capabilities, improve the environment, as well walking away from reducing the VAT threshold that would have hit small businesses, the Chancellor has given Conservative backbenchers enough to support and not much to criticise. He may be relying on improved productivity to come to his rescue down the line, which could mean more pain delayed, but unless the detail in the Red Book comes back to bite him in the days to come he will consider the event a success. 


Grayling Team

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