Hammond’s rosy picture of the British economy is utterly divorced from reality

With or without Brexit, this government is bereft of new ideas for the British economy.

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“Overshadowed” is the most suitable adjective to describe chancellor Philip Hammond’s spring statement. In the midst of Brexit chaos anything Hammond said could be obsolete within hours. Luckily for him, the statement was devoid of policy, foresight and hope. As with Hammond’s previous budgets, his latest will be forgotten in hours. This can’t be blamed entirely on Brexit.

Austerity has enfeebled Britain’s public realm. School cuts, the benefits freeze and two-child cap, food banks, homelessness and crumbling and costly public transport are symptomatic of its effects. Yet Hammond had few concrete remedies in his statement, instead peppering it with cringeworthy puns and palliative half-truths.

Instead of signalling the end of austerity, Hammond spoke of “another step on Britain’s road out of austerity”. His £100m package to confront knife crime was welcome, but the money is a drop in the ocean when compared to the cuts that the Conservatives have inflicted on youth clubs, pupil referral units and the police.

And while the chancellor published a new set of proposals on climate change, his budget will give little succour to young people planning to attend the climate strike on 15 March. As advocates of a Green New Deal have noted, confronting climate change will require state intervention on a scale akin to national warfare. The Conservative’s pledge to gradually decarbonise gas supplies paled in comparison to the bold climate strategy that is needed.  

His statement omitted more than it included, masking disturbing truths with duplicitous rhetoric. Hammond termed the British economy “remarkably robust”, citing record employment levels without mentioning that wage growth between 2010 and 2020 will be is the lowest it’s been since the Napoleonic Wars. He praised the “longest unbroken quarterly growth run of any G7 economy”, yet the UK has endured its slowest economic recovery on record. Hammond applauded the Conservative’s “balanced approach” to fiscal policy, ignoring the UK’s record levels of household debt.

Perhaps most worrying was his insistence that low wages can be chalked up to low productivity. Studies consistently find that it is falling union membership and the waning power of collective bargaining that causes stagnant wages and income inequality.

Both the UK and the US have experienced periods where productivity has grown without median wage growth. And at the other end of the scale, the pay of FTSE CEOs has increased by 11 percent. This is not a result of increased productivity, but of CEOs’ power to set their own wages. When the person entrusted with the economy doesn’t understand the nature of the problem, it gives one cause to worry.

Hammond’s rosy picture of the British economy will seem utterly divorced from many people’s realities. Our recent report, Labour Market Realities: Insecurity, Stress & Brexit, highlighted a third of workers are struggling to keep up with the basic cost of living. Few workers were expecting a pay rise in 2019 (a view shared by official forecasts at the Bank of England) while overwork and workplace stress are rife.

No doubt many commentators will let the chancellor off the hook, framing the spring statement an economic health update rather than an opportunity for bold new announcements. But bold strategy is needed. Since becoming chancellor in 2016, Hammond has been directionless. With or without Brexit, this government is bereft of new ideas for the British economy.

The statement could have been an opportunity to compensate for Brexit’s bumpy road: ending austerity, providing new funding for public and green infrastructure and demonstrating a faith in the UK’s future. While Hammond’s statement will be overshadowed and soon forgotten, the problems afflicting Britain’s economy will endure, Brexit or no Brexit. 

Faiza Shaheen is director of the Centre for Labour & Social Studies think tank. She tweets @faizashaheen