The Philip Hammond of a few years ago would have seen a few billion pounds courtesy of an unexpected windfall and promptly locked it away, like the chairman of the bank in Mary Poppins.
But something has changed. Yesterday, Hammond was more Tigger than Eeyore.
He announced a whopping £30bn of extra public spending by 2024, with the lion’s share going to the NHS. The Office for Budget Responsibility could only watch in horror as the chancellor got drunk on the windfall and, in the watchdog’s words, delivered “the largest discretionary fiscal loosening at any fiscal event since the creation of the OBR.”
This was Hammond’s choice. And Theresa May’s. They could have concluded the job started by David Cameron and George Osborne. They could have moved to eliminate the deficit and return the books to surplus by 2023-24 – but things have changed. The public’s patience with austerity has worn thin and Labour is coming in hard from the left. With lower-than-expected borrowing forecast and higher-than-expected tax receipts, the government has decided to call time on the spending squeeze.
This is not without risk, as the OBR and others make clear. But Hammond made an important observation yesterday, one that hasn’t been heard enough in the economic debate of recent years: austerity isn’t just a matter of public expenditure on government operations, it’s also a matter of personal and family finances. To this end, bringing forward the raising of the personal allowance and the lifting of the higher-rate tax threshold to April next year is a solid, old-fashioned and entirely welcome tax cut for over 30m people.
Businesses have also faced their own austerity, and the quintupling of the investment allowance is another welcome move – one described by the British Chambers of Commerce as a “turbo boosting shot in the arm” for firms.
Brexit was the elephant in the room throughout Hammond’s speech, but its absence was telling: life, including political life, is about more than the UK’s departure from the EU.
Hammond and May have accepted Labour’s challenge that austerity must come to an end, but they’re determined to do it on their terms. For Labour, it means a £1 trillion cocktail of borrowing and spending. For this government, it’s about easing the tax burden, incentivising investment and banking on economic growth – generated not by Whitehall doping the economy, but by businesses improving their productivity and people keeping more of the money they earn.
Veteran Hammond-watchers (yes, they exist) may have expected a more sober, steady-as-she-goes Budget, faced as we are with political uncertainty. But yesterday he took the opportunity to shake things up a bit – and for the better. Yes, there was the usual and regrettable mix of tinkering and micro-managing – on stamp duty, on business rates, the apprenticeship levy, and other areas already suffering from an absurd level of complexity. No chancellor can resist such behaviour. On the whole, however, this was a budget that changed the fiscal direction of travel, but kept the government on an unmistakably Conservative track. With its emphasis on tax cuts and business-driven growth, it was a Budget to be welcomed.