Although Philip Hammond’s spending splurge Budget has received broadly positive front pages and a cautious thumbs up from the public, the Chancellor has been given a reality check by the Institute for Fiscal Studies (IFS). After crunching the numbers, IFS director Paul Johnson has concluded that Hammond had ‘gambled’ on the public finances. Johnson said that the Chancellor ought to be ‘thanking his lucky stars’ for his £12billion windfall from a revised public borrowing forecast. With no plan set out for how to fund this level of spending in the future, Johnson concluded that ‘inevitable tax increases’ would have to follow in order ‘to pay for our ageing population’.
On the Tory benches, it’s widely accepted that this was a Budget that put off the difficult decisions. But no-one seems that bothered about it. Whether it’s the threat of Jeremy Corbyn or the big Brexit decisions that beckon next month, usual fiscal hawks are uncharacteristically relaxed about the government’s decision to delay deficit reduction and splash out. In many ways, Monday’s event was seen as a holding budget – a way of keeping the show on the road until a proper plan emerges.
In the short term, the Conservatives have even managed to put Labour in a tight spot. John McDonnell is in hot water after he declared that Labour would support Philip Hammond’s promise to increase the tax threshold a year early. Given that the Resolution Foundation claims that the tax cuts will benefit the better off, it doesn’t seem like the most obvious move for anti-austerity Labour. Labour politicians including Andy Burnham, the Greater Manchester mayor, have been quick to go public with their discomfort. So, what is so-called socialist John McDonnell up to? In the snap election, Labour boosted their support among the middle classes. It follows that the shadow chancellor may be a bit twitchy about depriving these supporters of a tax cut.