Budget 2018: The End of Austerity?

By Campaign Agent Sam Jacobsen

Hammond loosens the purse strings to alleviate austerity, but may face resistance on two fronts

“Austerity is coming to an end, but discipline will remain.” Philip Hammond repeated this slogan twice at the end of his budget speech today. His aim was to hammer home that there is still a big difference between Jeremy Corbyn’s ‘tax-and-spend’ Labour, and the governing Conservative Party. 

There was certainly lots of new spending announced, not least the £20 billion of extra funding for the NHS, which has been public knowledge for some time. There were many more payouts announced, including an extra £400 million for schools and £650 million going towards social care. 

There was also some extra taxation, most notably a new ‘digital tax’ designed to target tech giants like Google and Facebook. However, there were also several tax reductions: some for businesses and some for individuals, including raising the threshold for paying the top rate of tax to £50,000 a year. 

Theresa May’s government will present this budget as a way to alleviate some of the harsh effects of austerity, while still maintaining a robust, market-based economy. They will point to low rates of unemployment and a reduction in the national deficit as proof that their fiscal prudence has paid off. May long ago warned of the dangers of being considered the ‘nasty party’. Extra spending could be a good way to show that austerity was done out of necessity, not because of an uncaring Conservative ideology. 

However, there is a risk that this strategy will leave Hammond in no-man’s-land. For years, the Conservative Party has made balancing the budget its flagship policy, especially in the days when David Cameron was Prime Minister. With the Office for Budget Responsibility announcing that the deficit will now rise to £23.2 billion by 2023-24, many Tories may sense a betrayal of their core values. Meanwhile, Labour will attack the measures for not going far enough. Jeremy Corbyn stood up straight away after Hammond’s speech to argue that ‘Austerity is not over!’ 

Critics of the government may argue that if the public want extra spending at the expense of deficit reduction, they will vote Labour. Therefore offering a ‘tax-and-spend lite’ version of Labour’s policies is unlikely to win them many new friends, and risks alienating the ‘deficit hawks’ who have supported them for the last eight years. Hammond will counter that he has avoided the punitive tax rises that would characterise a Corbyn government.

There may even be friction between the Chancellor and the Prime Minister over the effect that Brexit will have on today’s promises. Hammond has warned that a no-deal Brexit would mean serious amendments to the budget would be necessary, but these claims have been effectively denied by Theresa May. Who is telling the truth? With Brexit scheduled for March 2019, we may find out soon.

All criticism aside, May and Hammond have lasted far longer in their posts than most would have predicted after last year’s general election. There is certainly a chance that they will remain at the helm long enough to oversee the promises made by this budget, and perhaps even future ones. 

Sources and Further Reading 

Image: Raul Mee @WikimediaCommons

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