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24 October 2017

Philip Hammond won’t borrow big in the Budget

The Chancellor believes the deficit and debt are too high for a splurge on housing. 

By George Eaton

There has been much excitement at Sajid Javid’s apparent conversion to Keynesianism. Appearing on The Andrew Marr Show on Sunday, the Communities Secretary hymned the virtues of borrowing to invest. 

“Taking advantage of record low interest rates can be the right thing if done sensibly,” he said (though Brexit is pushing borrowing costs up). Sources subsequently said that Javid wanted £50bn to fund a new housing programme in next month’s Budget. (Labour, whose fiscal rules allow for borrowing for investment, have called for £250bn for infrastructure over the next decade). 

But at Treasury questions earlier today, the Chancellor, Philip Hammond, pointedly distanced himself from this proposal, stating that it was not government policy. Hammond, a passionate fiscal conservative, is not preparing for a Keynesian splurge.

Allies point out that the Treasury responded to the most recent borrowing figures by emphasising that “government borrowing is still far too high at over £150m a day” and that “our national debt is still too high at £1.8trn [87.2 per cent of GDP], or £65,000 per household.” Though Hammond is expected to postpone the government’s budget surplus target from 2025 to 2027, this represents a softening, rather than an abandonment, of austerity. 

In the view of Hammond’s allies, his refusal to set aside large amounts for a “no-deal” Brexit is consistent with his “prudent” approach. But as the Chancellor has learned, not all Conservatives, to put it mildly, share that view. 

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