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28 October 2018

Philip Hammond has prepared a Budget of disappointment

The Chancellor has made clear he will neither end austerity nor be optimistic about Brexit.

By Patrick Maguire

Philip Hammond has been touring the broadcast studios ahead of tomorrow’s Budget, and has offered little suggestion that he will do anything but disappoint.

Looming over the chancellor is Theresa May’s promise to end austerity – and if there is one message to be taken from his interviews with the BBC’s Andrew Marr and Sky’s Sophy Ridge this morning, it is that he won’t be fulfilling it in any meaningful sense.

Hammond has refused to frame his first autumn Budget in the terms the Prime Minister would prefer – or confirm her declaration that austerity is over – instead stressing that any big changes to public spending would be delayed until next year’s Spending Review. What’s clear from this is that whatever the Chancellor produces will fail to do what the Prime Minister said it would, leaving ample room for Labour to outflank them to their left.

As far as what might be generously described as good news goes, Hammond did hint that he would move to reverse the billions in cuts to Universal Credit made by George Osborne, an issue fomenting rebellion on the Tory backbenches.

“We continue to look at how this process is working and if we find cliff edges and difficulties, frictions in the move from the old benefits system to Universal Credit then of course we will always try to smooth those out and be pragmatic about it,” he told Ridge. But firefighting on that front will neither mark the end of austerity nor ease divisions among Conservative MPs. What constrains Hammond’s ability to make a political success of this Budget is Brexit, as he makes clear at any available opportunity.

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He was at pains to stress the conditionality of any pledges he will make tomorrow – and, indeed, the feasibility of May’s pledge to end austerity ever being met – on the UK securing a good deal from Brussels. “Once we get a good deal from the European Union and the smooth exit from the EU we will be able to show the British people that the fruits of their hard work are now at last in sight,” he told Marr. “What I will be doing is setting out a path of public spending that will take us from the spending review onwards, but the detailed allocation to different departments is something that is for next year.”

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Under a no-deal scenario, he effectively said, there will be no Brexit jam tomorrow, and an entirely new Budget approach will be needed. He also added that he had built up a “reserve of borrowing power” to enable the government to intervene in the event of an economic crisis sparked by a chaotic Brexit. Most strikingly – but not surprisingly – he repeatedly refused to deny to Marr that Brexit would definitely have a negative impact on the economy.

This will do little to allay the emnity of Tory Eurosceptics, who hold a special contempt for Hammond and the Treasury (both, they say, are fundamentally opposed to Brexit and determined to thwart it). The Chancellor has given them no cause to believe that he will deliver the optimistic budget that they and the DUP have been noisily demanding. “A bastion of Remoanerism,” is how Jacob Rees-Mogg described the Treasury after Hammond’s Sky interview. The actions of the European Research Group, who have promised to have a “lot of fun” with the budget, will be worth keeping an eye on. Ditto the DUP, who have threatened to vote it down.

The problem for all sides in the Tory civil war, however, is that the economic realities of Brexit and the increasing likelihood of a catastrophic no-deal means that there is no prospect of Hammond meeting anyone’s expectations. That holds true for Brexiteers seeking visions of sunlit uplands and a Prime Minister desperate to signal to voters that the good times are on their way back but unable to match Labour’s promises on the economy. If one thing is inevitable, it’s that Hammond will keep on disappointing.