8 March 2017

Budget 2017: Philip Hammond says he has a plan. What is it, please?

The difference between George Osborne and Philip Hammond seems to be that the latter doesn't even pretend to have a deficit timetable.

By Stephen Bush

We have a plan, and we’ll stick to it. That was the intended message of Philip Hammond’s first budget, although it has, so far, been drowned out by the row over the planned increase to national insurance contributions. Was he right? Well, it’s hard to say.

Why? George Osborne had deficit targets that, on paper, plotted out a path between the present day and his promise of a balanced budget by 2015, and when that didn’t work out, by 2020. He set himself benchmarks so year-on-year, we could see if he was on course to hit his target. (Spoiler alert: he was not.)

The problem with George Osborne’s deficit target is that each year he committed to undeliverable reductions in departmental spending that were abandoned due to internal pressure year-on-year, most devastatingly to his career prospects when he tried and failed to reduce tax credits.

Philip Hammond’s targets are different, in that he doesn’t really have them. As far as specific areas are concerned, they go like this: 2016-7: ? 2017-8: ?? 2019-9: ??? 2019-20: ???? 2020-21: ??!?!. The promised budget surplus has a new arrival date of “sometime never”. The Office of Budget Responsibility predicts that the current trajectory means the budget will be balanced by 2025, though, as I’ve written repeatedly, there are many reasons to doubt that we will hit that. (Both the revenue-raising models in this budget are already under sustained attack, highlighting the difficulties the government is experiencing even in keeping on the current path.)

But it’s not clear what the May era approach to balancing the books is. It can’t mean cuts to the health service, because those have been ruled out. It can’t mean cuts to social care because the government has U-Turned on those. It seems unlikely that any Conservative will attempt to seriously reduce Britain’s pensions spending any decade soon. So what departments are in the firing line? There is no indication I can see in today’s budget.

This makes it harder for us to say with confidence that the government is falling behind on its plan to reach a surplus. But this much is clear: none of the announcements today put the United Kingdom on anything like a trajectory towards a budget surplus by 2021. Either there are very large cuts coming down the pipe next year or, more likely, the Conservatives will fight the 2020 promising that this time, they really will get the deficit down in five years.