Philip Hammond has set out the new government’s economic strategy – and it’s widely being seen as not too far from that proposed by Ed Balls at the 2015 election, of borrowing to invest. (The man himself has taken to Twitter to say that it is “good that Philip Hammond is shifting towards a more balanced defict reduction plan”.)
So is Hammond just Ed Balls with a trimmer figure?
Well, not really. Although the rhetorical gap between the new Chancellor and his immediate predecessor is large, it’s worth taking a moment to recall the reality of austerity under George Osborne. Fiscal targets were announced to great fanfare – and abandoned under cover of darkness. Spending restraint did happen – but it was largely concentrated upon Labour voters (or, at least, areas with large enough numbers of Labour voters to be considered electorally unimportant).
But stimulus happened; admittedly, a decent chunk through the Bank of England’s programme of quantitative easing, but not exclusively. Roads were expanded and repaired – the Cameron-Osborne government, far from being “the greenest government ever”, turned out to be the most pro-motorist for thirteen years. Transport projects went on at a pace. “Help to Buy”, one of Osborne’s pet projects and a vital bung to the only working-age demographic to do better under the coalition than Labour – dual-earner childless couples – was explicitly designed to stimulate growth in the housing market.
And that’s before you get to the tax cuts, intended as an explicit instrument of fiscal stimulus. Admittedly, the threshold raise was an ineffective way to stimulate the public finances, as the winners were mostly comfortably off, and the most effective tax cuts go to the poor, who are more likely to spend the money and boost growth. But those tax cuts were mostly financed by borrowing.
The really big shift is rhetorical – unlike his predecessor, Hammond is not going to pledge fiscal rigour. But my guess is that the combination of greater borrowing, austerity for Labour voters, tax cuts for the Conservative electoral coalition, and fiscal stimulus for the transport and housing sectors will remain significantly closer to what Osborne delivered than anything promised by Ed Balls.
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