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You can find the current article at its original source at https://www.theguardian.com/society/2018/oct/23/philip-hammond-end-austerity-brexit
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| Philip Hammond can't announce an end to austerity. Brexit won't allow it | Philip Hammond can't announce an end to austerity. Brexit won't allow it |
| (25 days later) | |
| Philip Hammond’s budget next week is likely to be filled with initiatives and spending plans that, the NHS aside, add up to very little. Brexit, for so long an undetonated bomb, makes all predictions of economic growth and tax receipts more of a fiction than usual – and the chancellor knows it. The inescapable conclusion from a lack of clear visibility is that the Treasury can spend only what it must, he will say. In other respects, it must keep its powder dry. How could he not be cautious, when the most bloodcurdling predictions attached to Britain crashing out of the European Union could prove optimistic. | Philip Hammond’s budget next week is likely to be filled with initiatives and spending plans that, the NHS aside, add up to very little. Brexit, for so long an undetonated bomb, makes all predictions of economic growth and tax receipts more of a fiction than usual – and the chancellor knows it. The inescapable conclusion from a lack of clear visibility is that the Treasury can spend only what it must, he will say. In other respects, it must keep its powder dry. How could he not be cautious, when the most bloodcurdling predictions attached to Britain crashing out of the European Union could prove optimistic. |
| There may be a £16bn war chest, stored up since April from a combination of unexpectedly high tax receipts and low Whitehall spending, but spending pledges at this stage, with only months to go before the divorce deadline, would be reckless. | There may be a £16bn war chest, stored up since April from a combination of unexpectedly high tax receipts and low Whitehall spending, but spending pledges at this stage, with only months to go before the divorce deadline, would be reckless. |
| Philip Hammond urged to make moves to end austerity | |
| That said, there will be an array of public investment projects to allay the fears of Tory MPs shocked at the paucity of government initiatives since Brexit talks began. These could include boosting capital spending on schools and hospitals now that many schools are coping with rainwater in the classroom and the Tory shires are dotted with ageing hospitals. | That said, there will be an array of public investment projects to allay the fears of Tory MPs shocked at the paucity of government initiatives since Brexit talks began. These could include boosting capital spending on schools and hospitals now that many schools are coping with rainwater in the classroom and the Tory shires are dotted with ageing hospitals. |
| He can talk about them in the budget and promise to honour Theresa May’s pledge to end austerity; however, the cash will only follow a Brexit deal, and one that combines independence from EU rules and frictionless trade. In this scenario, which Hammond still believes is possible, despite the unresolved Irish border question, he could reverse the cuts pencilled in for the next five years for the police, probation service, prisons, social care and local government. | He can talk about them in the budget and promise to honour Theresa May’s pledge to end austerity; however, the cash will only follow a Brexit deal, and one that combines independence from EU rules and frictionless trade. In this scenario, which Hammond still believes is possible, despite the unresolved Irish border question, he could reverse the cuts pencilled in for the next five years for the police, probation service, prisons, social care and local government. |
| With a Chequers-style agreement, there is the chance of a triple Brexit bounce, he will say. First, from being able to spend the £16bn without concern for a looming Brexit-induced recession. Second, from a surge in business investment that has waited in the wings, hoping for a reasonable settlement. Third, from revised growth figures by the Office for Budget Responsibility, the Treasury’s independent forecaster, which will say that Brexit has proved a boon and means higher tax receipts going forward. | With a Chequers-style agreement, there is the chance of a triple Brexit bounce, he will say. First, from being able to spend the £16bn without concern for a looming Brexit-induced recession. Second, from a surge in business investment that has waited in the wings, hoping for a reasonable settlement. Third, from revised growth figures by the Office for Budget Responsibility, the Treasury’s independent forecaster, which will say that Brexit has proved a boon and means higher tax receipts going forward. |
| A further boost will come from tax avoidance clampdowns, such as the plan to tackle self-employed workers who are paid through companies and work solely for one employer. Hammond says the practice cost the exchequer £700m last year and will cost £1.2bn in 2022/23. | A further boost will come from tax avoidance clampdowns, such as the plan to tackle self-employed workers who are paid through companies and work solely for one employer. Hammond says the practice cost the exchequer £700m last year and will cost £1.2bn in 2022/23. |
| Much of any extra cash is already allocated to the NHS, which has been granted a 3.4% average budget increase until the 2022-2023 financial year. The chancellor must also honour May’s commitments to freeze fuel duty and allow councils to borrow to fund home-building. | Much of any extra cash is already allocated to the NHS, which has been granted a 3.4% average budget increase until the 2022-2023 financial year. The chancellor must also honour May’s commitments to freeze fuel duty and allow councils to borrow to fund home-building. |
| However, he can wait until the health minister, Matt Hancock, has said what he wants to spend the extra money on before allocating NHS funds. More immediately, we know that Hammond wants public sector pay to be more flexible, with leaked reports suggesting the Treasury plans to base wage increases on performance and location. | However, he can wait until the health minister, Matt Hancock, has said what he wants to spend the extra money on before allocating NHS funds. More immediately, we know that Hammond wants public sector pay to be more flexible, with leaked reports suggesting the Treasury plans to base wage increases on performance and location. |
| The chancellor is keen to keep the lid on extra money for public services, according to his own guidelines, at least until a spending review next year and any post-Brexit bounce materialises. On benefits, Hammond is a huge supporter of the welfare cap, the cuts embedded in universal credit and restrictions on benefit rises for those not in work. He may be a one-nation Tory, but that doesn’t stop him believing that the government needs to make work pay – and driving down benefit payments is part of that effort. There will be yet more cash to ease the transition for universal credit claimants, but the system itself will not change, at least not at the chancellor’s urging. | The chancellor is keen to keep the lid on extra money for public services, according to his own guidelines, at least until a spending review next year and any post-Brexit bounce materialises. On benefits, Hammond is a huge supporter of the welfare cap, the cuts embedded in universal credit and restrictions on benefit rises for those not in work. He may be a one-nation Tory, but that doesn’t stop him believing that the government needs to make work pay – and driving down benefit payments is part of that effort. There will be yet more cash to ease the transition for universal credit claimants, but the system itself will not change, at least not at the chancellor’s urging. |
| So for the coming year, public sector workers hoping for a relief from relentless austerity and a meaningful pay rise will be disappointed. Only pensioners can listen to the budget knowing they will be protected from the real-terms cuts inflicted by an inflation rate that last month was running at 2.4%. They were told last week by the pensions minister, Esther McVey, that last year’s rise of 3% will be followed by a 2.6% increase next April. Everybody else, despite the talk of extra funds, will be asked to sit tight until after 29 March. | So for the coming year, public sector workers hoping for a relief from relentless austerity and a meaningful pay rise will be disappointed. Only pensioners can listen to the budget knowing they will be protected from the real-terms cuts inflicted by an inflation rate that last month was running at 2.4%. They were told last week by the pensions minister, Esther McVey, that last year’s rise of 3% will be followed by a 2.6% increase next April. Everybody else, despite the talk of extra funds, will be asked to sit tight until after 29 March. |
| • Phillip Inman is an economics writer for the Guardian | • Phillip Inman is an economics writer for the Guardian |
| Public services policy | Public services policy |
| Budget 2018 | Budget 2018 |
| Philip Hammond | Philip Hammond |
| Public sector careers | Public sector careers |
| Public sector cuts | Public sector cuts |
| Public finance | Public finance |
| Austerity | Austerity |
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