In the Budget, the Chancellor gave money to Brexit, the NHS and housing. Bronwen Maddox looks at how the announcements stack up, saying he cannot afford to be this generous for long.
This Budget methodically acknowledged the challenges facing the UK; it doled out modest amounts to the biggest ones and made gestures towards many others. Above all, though, it was a Budget shaped by the politics of minority government. As Philip Hammond spoke - for an hour and two minutes - you could sense the obstacles he was dodging in trying to touch every base while giving Conservative backbenchers no ammunition against him or their Government.
The biggest sums went to the NHS, followed by Brexit and then housing.
Given the fiscal constraints Hammond placed on himself and the challenge of Brexit, it was a competent job. Yet it failed to live up to his rhetoric on big issues - notably the digital revolution and housing. What is more, in 2020-21, the year his fiscal rules kick in, the giveaway drops dramatically from £10 billion to around £3 billion. This Chancellor cannot afford to be generous for long.
Brexit
The extra £3 billion for Brexit comes on top of £700 million already announced (£250m last month plus the money in last year’s Autumn Statement).
The cash, to be distributed in a mini spending round before the new financial year, will cover new staff and systems, including customs and immigration, needed for day one outside the EU. But the allocation stops in 2019/20 and funds will be needed after in March 2019 to run new systems and regulators.
Infrastructure
The showiest statement was his endorsement of the National Infrastructure Commission’s (NIC) vision for the Cambridge-Milton Keynes-Oxford corridor. The NIC was established to make recommendations for projects based on solid evidence and it is promising that this appears to be working. The Budget’s announcement of a one year extension to the National Productivity Investment Fund, worth £7 billion, is also welcome.
But there was no mention of what will replace funding from the European Investment Bank after Brexit. The Budget also neglected to say when the Government will publish a new private finance ‘pipeline’. Announced in the 2016 Autumn Statement, this was meant to provide investors with details of future private finance requirements. We understand that an improved version of the existing pipeline will be published next month, but it’s questionable whether this will be enough.
Housing
Stepping onto one of the hottest battlegrounds, the Chancellor proposed to build 300,000 new houses a year, a 40% jump on current rates, partly through building five new garden towns. But this target will be hard to reach given Green Belt protections. A new Institute for Government infrastructure report next week will look at how to win public support for such contentious projects.
Public services
The £2.8 billion boost for the NHS over three years is not nothing - but is well short of the £4 billion boost its chief executive Simon Stevens wanted for the current year, and it will run out in 2020. Hammond said he would countenance pay rises for some NHS staff but not all.
Of the new capital spending, £2.6 billion goes to the Sustainability and Transformation Partnerships - badly needed to turn them into real vehicles for change. However, to meet the recommended £10 billion investment outlined in the independent Naylor Review, the Government still needs to find more than £5 billion through property disposal and private investment.
Schools got a small funding boost for maths and computer science teachers, a sensible response to shortages. But other services under clear strain, such as prisons, did not get a mention. Last week’s announcement that the social care green paper has been pushed back to summer 2018 raises questions about the Government’s ability to grasp this issue.
Nations, regions, cities
Metro mayors are winners from this Budget. The six combined authorities with metro mayors will receive half of a £1.7 billion fund to support intra-city transport, with the rest up for competition between other cities. There is also £300 million to ensure HS2 can accommodate future “Northern Powerhouse” and Midlands Connect services and £337 million to replace the Tyne and Wear Metro’s 40-year-old rolling stock. Greater Manchester gets £243 million from the Transforming Cities Fund to develop a local industrial strategy.
The Government is “‘minded to”’ pursue a devolution deal with North of Tyne as well as exploring further devolution to Liverpool City Region and the Tees Valley, and has agreed a further devolution deal in principle with the West Midlands Mayor on housing, skills and transport.
The Chancellor’s decisions on new spending in England have knock-on consequences under the Barnett Formula, hence the rise in the Scottish Government budget of £2 billion through to 2020-21, the Welsh Government budget of £1.2 billion and £660 million more to the Northern Ireland Executive.
Digital revolution
The most significant pledges were on education. Although the talk was big, the sums were small - £20 million will go to Further Education colleges for the new technical-level qualification, while the Chancellor promised “maths for everyone”. There were showy but small contributions to a new advisory body, the Centre for Data Ethics and Innovation. And the Chancellor announced a new Geospatial Commission, plus £385m to develop 5G mobile networks and full-fibre broadband.
Tax planning
Virtually all the revenue raising measures come through tax avoidance measures, exactly as George Osborne and Gordon Brown did when under pressure. In Hammond’s Budget, these measures will eventually raise about £1.5 billion a year - though such figures are highly speculative. Anti-avoidance often yields less tax than officials hope when announcing them.