Author Mark Richards
On November 22nd Chancellor of the Exchequer Philip Hammond will present his first Autumn Budget. He supposedly wants to help younger people. How could he do this? Or will he simply opt for safety-first and window dressing?
In just over four weeks’ time, Philip Hammond, the Chancellor of the Exchequer and a man so dynamic and charismatic that he is nicknamed ‘Spreadsheet Phil’ by his colleagues, will present his Budget speech. And sorry if you thought the Budget was always in the spring: Hammond has moved it to autumn to give more time for the taxman to bring changes into effect before the next tax year.
The political background
Budgets are always presented against a background of politics: the Chancellor’s speech is always a mixture of politics, economics, showmanship and sleight-of-hand. When Philip Hammond stands up on November 22nd we can expect plenty of those first two ingredients. There will be significantly less of the third as – outwardly at least – Hammond presents his speech against a backdrop of failure.
Not long after Hammond delivered his final spring Budget speech Theresa May announced a general election. The Chancellor must have rubbed his hands in glee: a sure and certain Conservative majority of between 80 and 100, giving him five years to sort out the nation’s finances, steer the UK through Brexit and… Goodness me, Theresa might have had enough by then. Who better to pick up the reins of a strong and stable government…
As we now know, the General Election did not go according to plan. No doubt the inquest is still being held at Conservative Central Office. No senior Conservatives emerged from the campaign with credit and Philip Hammond further blotted his copybook with a totally lacklustre speech at the recent Conservative Conference – only click the link if you suffer from incurable insomnia. This – combined with his leaden-footed intervention in the Brexit debate – has led to calls for his sacking from former chancellor Nigel Lawson and pro-Brexit Tory backbenchers.
So on November 22nd Philip Hammond will get to his feet, take a sip of water and try to save his career. (Chancellors are allowed to drink alcohol during a Budget speech – perhaps Spreadsheet Phil could inject a little colour by following the example of William Gladstone, who drank sherry and a beaten egg. Even the equally uncharismatic Geoffrey Howe reached for a G&T.)
What might be in the chancellor’s speech?
But armed with his water, what will Philip Hammond say in four weeks’ time? And just as importantly, who will he try and target with his speech?
If the early reports are to be believed the answer to that last question is simple: young people. Why did the Conservatives do far less well than they expected in the General Election? In part, because young people voted in far greater numbers than they previously had, and they voted for Jeremy Corbyn and his message of hope.
That is hardly surprising – as one commentator put it, ‘The Conservatives cannot expect young people to vote for them as they are giving them nothing to conserve.’ But in trying to woo the young Hammond has a number of concerns to address: their inability to get on the housing ladder, the way rents are rising as a percentage of income, the number of young people with debt problems, the student loans fiasco and – in the longer term – the growing threat to jobs from robotics, artificial intelligence and low-wage economies in Europe and the Far East.
How is Philip Hammond going to do this?
If the leaks are to be believed one of his tactics will be a raid on older people to pay for tax breaks for the young. The buzzword will be ‘intergenerational fairness’ with Hammond apparently planning to offer tax breaks to workers in their 20s and 30s, paid for by cutting tax reliefs for older and better off workers.
Well, as Sir Humphrey might have said, ‘That’s a very courageous decision, Minister.’ Another contributory factor for the Conservatives poor showing at the Election was the ill-thought plans for a ‘Dementia Tax.’ Now along comes the Chancellor with plans for a ‘tax on age.’
But he has to do something – and tinkering around the edges by increasing the threshold for student loans repayments and pumping more money into the Help-to-Buy scheme will make no difference.
So what else could he do?
We wrote last week about the increasing amount of their income people were having to spend on rent: almost without exception this is a problem which affects young people and the solution is simple – build more houses. Whether the Chancellor has the courage to stand up to the vested interests and NIMBYs (Not in my Back Yard) who oppose relaxation of the planning laws is doubtful. In which case the housing crisis will steadily worsen…
There are also calls for the Chancellor to slash the subsidies on green energy which are artificially pushing up the cost of energy for most families. Again, do not hold your breath.
The Chancellor even went so far as to write to fellow MPs and ask for ideas on how to attract young voters. Messages on housing and education costs flooded back, and it does appear that we will see a raising of the threshold for starting to make repayments on a student loan. This could well increase from £21,000 to £25,000 per annum – but while it might save graduates money in the short term (someone earning £30,000 a year will save approximately £30 a month) it will also mean that their overall debt increases – and with interest being charged at 6.1% on some student loans, increase significantly.
Sadly, it looks like safety first
With the Office for Budget Responsibility having downgraded their forecast for UK productivity, it appears that Spreadsheet Phil will err on the side of caution and present a safety-first Budget. Hammond is apparently already holding private meetings with MPs, telling them that there will be no headline-grabbing announcements.
This may not be a wise career move for Philip Hammond. As I am writing this on Monday the newspaper headlines will not be pleasant reading in 11 Downing Street. Tory rebellion over ‘toxic’ Hammond is one of the kinder ones, amid rumours that he is not preparing for a ‘no deal’ Brexit and that, frankly, he is simply too cautious.
As we noted in the introduction, one of Philip Hammond’s first acts as Chancellor was to move the Budget from spring to autumn. I would not bet against Hammond being equally swiftly moved after November 22nd – and this being one of the very few autumn budgets any of us ever see…