After months of Tory nerves, Philip Hammond has just finished presenting his Autumn Budget in the Chamber. Among the main giveaways, the Chancellor announced more funding for the NHS as well as pitching to the young with his housing proposals and 18-30 railcard. He also announced measures to ease out the rollout of Universal Credit – including a one week reduction to the wait time.
However, although the Chancellor was at pains to sound optimistic and shake off his Eeyore image, this was made difficult thanks to some grim statistics from the OBR. The OBR has revised down its forecast for annual growth quite significantly – lower than envisaged after the Brexit vote. It’s the weakest official long term forecast for UK economic growth since at least 1983.
Here are five key take-aways:
The Chancellor’s Budget rabbit could turn out a damp squib
Under pressure to do something radical to solve the housing crisis, Hammond did muster £44bn of capital funding, loans and grants to solve the growing problem over the next five years – promising 300,000 new homes a year by mid-2020. However, the rabbit in his hat was an announcement that stamp duty will be abolished for all first time buyers on homes worth less than £300,000 – or £300,000 of homes worth £500,000. It’s not clear that this is such good news. Abolishing stamp duty for first-time buyers is unlikely to actually bring down prices. As the OBR puts it: ‘The main gainers from the policy are people who already own property’.
Ruth Davidson is one of the Budget’s big winners
Sajid Javid may not have got as drastic a housebuilding programme as he had hoped for, but north of the border Ruth Davidson certainly has reason to smile. The Scottish Conservatives were handed a series of good news policies they can sell to constituents back home. These included Police Scotland and the Scottish Fire and Rescue Service having their tax bills refunded in the future – as their counterparts get elsewhere in the UK. There was also an announcement that will please the whisky industry – freezing duty on beer, wine and spirits.
Deficit won’t be cleared until 2031
The Conservatives look set to continue the longstanding tradition of putting off balancing the books – thanks to a combination of the OBR forecasts and Hammond’s decision to borrow rather than attempt many revenue-raising measures (which coincidentally could have been a hard sell to the public and his MPs). Growth and productivity may be down but the deficit is up. The OBR have revised up its forecast for the budget deficit saying the Chancellor has raised the deficit further with higher public spending and a net tax giveaway. This means the deficit will be almost twice as big as previously forecast in 2021-22 – and won’t be cleared until 2031 at this rate.
Brexit war chest boosted by £3bn
Despite doubts about Hammond’s Remain credentials, the Chancellor did announce that he was putting aside money to ensure the country was match ready for Britain’s exit from the EU. He promised to set aside £3 billion over the next two years for Brexit contingency planning: ‘The negotiations on our future relationship with the European Union are in a critical phase. We have already invested almost £700 million in Brexit preparations and today I am setting aside over the next two years another £3 billion.’ The real test, however, will be how this money is used. There are many in the party who want to see it spent for planning for an event of ‘no deal’.
Defence was the elephant in the room
There has been a row brewing over the past few weeks about whether defence would – or should – get any money from the Treasury. A number of Tory grandees and MPs pleaded for more for the military – pointing to the threat from North Korea. In the end, there was nothing for defence.