It’s the morning after the Budget before and both Philip Hammond and Theresa May will be pleased that he’s steadied the Tory ship, at least for now. Yet while the Chancellor may have safeguarded his own job and earnings, the public may feel much more gloomy about theirs. The big story of yesterday was the severe growth downgrades for the UK, just as we are heading for Brexit (and in contrast to growth upgrades in the rest of the EU and global economy). The impact of that on Britons’ wages (see below) is now becoming clear.
As I said in my WaughZone Budget Special HERE, the Office for Budget Responsibility’s Robert Chote yesterday sounded like the Robert Chote of old, when he regularly gutted Budgets for the Institute for Fiscal Studies. The IFS has its traditional ‘Day After’ briefing at lunchtime, yet it may find it difficult to trump the way Chote ridiculed the stamp duty changes, pointed up Brexit negatives and highlighted that our earnings and GDP would be much lower than anyone forecast. The IFS’s Paul Johnson told the BBC that Hammond provided ‘almost no money for public housing’. He added that while the £25bn Budget spending eased austerity temporarily, the cuts programme had been extended by at least another year. We may get more on the latter later.
Overall, what was most odd about Hammond’s package yesterday was that it felt like a pre-election Budget rather than a post-election one. Bits of cash here and there for various interest groups, as well as buying off Brexit rebels and Universal Credit rebels alike. Yet that underlines the strange (majority-free) political waters in which we all now sail, as our exit from the EU looms on the horizon. For all his talk about looking at the long term, Hammond appears to be just trying to survive from Budget to Budget. For both him and the PM, getting to the new Year, and then getting to Brexit in 2019, seem to be the real timelines behind yesterday’s announcements. In the FT, former Treasury chief Nick Macpherson rightly says that Hammond’s first Budget of the new Parliament was “eminently forgettable”. But that may be its point, simply to avoid making more waves in this uncertain ocean. Asked by Today if he was a Brexit convert now, Hammond replied: “Look, I’m focused on getting this done”.
So what about the alternative? Also on the Today programme, John McDonnell tried to make his case that the real political choice ignored by Hammond was to borrow (and tax) more to invest in the economy. But after he failed to remember national debt interest figures on Daily Politics yesterday, Mishal Hussain pressed him and he replied he didn’t need the stats in his head because “that is why we have iPads and advisers etc”. He hit back at the BBC’s “trite form of journalism”.
On BBC Breakfast, Hammond was confronted with the case of 33-year-old nurse Lucy who is thinking of strike action because years of real terms pay cuts mean she can’t plan her finances or buy a home. Yesterday the Chancellor said ‘nurses deserve our deepest gratitude’, but this morning he was in full Hambot mode. “Let me tell you the facts: last year nurses on average received pay rises of thir..three point three per cent across the board.” It sounded like 33.3% at first (that really would have been gaffetastic), but even that 3.3% claim will hardly win round NHS staff who suspect his promised pay rise won’t be above inflation. Other public sector workers had nothing to cheer at all yesterday (and don’t forget more than half of them are not covered by pay review bodies).
And wages elsewhere are a real worry after the Budget forecasts. The Resolution Foundation (which wins the race with the IFS to get its analysis out first) this morning published an overnight verdict that the UK faces a record 17 years of pay stagnation. Wages won’t return to 2007 levels until 2025, they say, with the longest fall in living standards since records began. Hammond hit back today by pointing out that the national mimimum wage was going up by more than inflation next year. What he didn’t say was that Osborne’s much-trumpeted plan to get the ‘national living wage’ to £9 an hour by 2020 had been derailed by the weak economy.
Hammond was unrepentant on the Today prog, saying that the only way to get wages up was to improve productivity. “There is no other solution,” he said. That sounded like Thatcher’s TINA was back (“there is no alternative”), updated for our wage-squeezed times. Whether the public, or public sector workers, have sufficient patience for that line remains to be seen.
The Budget’s extra £2.8bn in day-to-day cash for the NHS was well below the £4bn demanded by chief exec Simon Stevens and think tanks like the King’s Fund. That puts Stevens in a tricky position (will he stay in post?) but Tory MPs in an even more tricky one. They will be worried by stark warnings from senior NHS officials and clinicians (like Sir Bruce Keogh) that waiting times will now lengthen and rationing become more likely. The Chancellor suggested he was lavishing cash on the health service as never before, but critics say the small prints showed it was another con.
Ageing citizens and rising drug and treatment costs mean the health service needs 4% rises not the 1% it has been getting since 2010, so something’s gotta give. A&E staff warn that even this winter’s extra £350m could be swallowed whole by agency spending. Some £3.5billion extra will go on capital investment, but note that the Red Book says more asset sales “will also be accompanied by private finance investment in the health estate where this provides good value for money.
Meanwhile, buried under the Budget avalanche yesterday were the latest figures on winter deaths. The number of mortalities jumped by 40 per cent last winter partly because the flu vaccine failed to protect the elderly, ONS stats showed. Some 34,300 more people died between December and March, mainly the elderly, one of the highest figures in recent years. That’s a very sobering thought this morning. As we head into winter, why isn’t there an Urgent Question or statement about that?
Watch as a woman’s handbag is nicked by moped-riding muggers in London, only for a heroic bystander to take them on. They got away but her bag was saved.
As a former Treasury man, Work and Pensions Secretary David Gauke clearly knows how to make a case to his old department. Backed by the PM’s desire to stem the political damage on Universal Credit, Gauke won some significant concessions to get £1.5bn to cut the waiting time to five weeks, increase advances and extra help on housing benefit. The latter is important as it means claimants can continue to receive it for a fortnight after making a UC claim.
Gauke has a Commons statement at 11.30am and will be pressed on more details. I was struck by the line buried in the documents that he will look again at the ‘taper’ rate (something IDS and UC Tory rebels have demanded) next year, and will extend a pause early in the new year. The row isn’t over as the new changes won’t kick in until January, raising the spectre of families facing poverty over Christmas. But if he can get avoid that (and tell DWP managers to stop tweeting photos of cakes telling everyone how wonderful the system is), Gauke may yet defuse this political timebomb.
With the Ashes underway Down Under, there’s a cricketing theme around. The Sun’s front page has a Budget headline ‘House-Zat!’ and a mock-up of Hammond in whites, tossing a ball. And yesterday in the Commons chamber, Tory whip Andrew Griffiths indulged in a bit of sledging of the Opposition as Jeremy Corbyn made his Budget response.
Many wondered why Corbyn looked so furious at one interruption of his speech, yet amid the hubbub the incident got lost. Now Labour MP Laura Smith claims Griffiths had heckled that the Labour leader “you should be in a care home!” A furious Ian Mearns shouted Smith should ‘get out’ of the chamber and Smith formally complained to the Deputy Speaker. See our story HERE.
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