Labour successfully made the case that tax-and-spend policies will revive the UK’s flatlining economy – and even some Tories now agree. Unfortunately the Treasury remains wedded to a failed ideology of spending cuts
When Philip Hammond stands up to deliver his first autumn budget next week, he will be acutely aware that it could also be his last. Recent chancellors bestrode the political scene and their colleagues were in no doubt that their fortunes rested on the whims of Treasury. This is not Mr Hammond’s fate. In the run up to this year’s events it is clear he is an isolated figure, upstaged in cabinet by rivals who want his job and challenged in the media by ministers unafraid to question him over spending restraint. The Treasury has briefed against the prime minister – whose instincts were momentarily against state-shrinking, me-first Thatcherism – over her grasp of economics. The chancellor remains in place because his boss seems weaker than he is and because the economy is facing a Brexit-sized threat. It is not because of Mr Hammond’s political acumen. He has taken no initiative over a major policy, nor does he appear to have a substantial agenda beyond blunting the worst impacts of Britain’s foolish charge out of the European Union. Mr Hammond is a “small c” Conservative politician: he is in favour of the status quo. That explains his lonely and reasonable attempt to stave off a hasty, chaotic Brexit. It also explains his lonely and unreasonable attempt to resist the retreat from a programme of damaging and unnecessary fiscal austerity.
The public is fed up with seven years of cheese-paring in the name of fiscal rectitude and promises of growth that never materialises. While it is not unusual for the run-up to a budget to see pressure for more public spending, there have been stark warnings from the head of the NHS, headteachers and counter-terrorism police about whether the arms of the state can survive further rounds of cuts. The human cost is becoming all too apparent: academics say that reductions in health and social care spending since 2010 can be linked to nearly 120,000 excess deaths. If allowed to continue with a programme of welfare cuts, by 2022 child poverty will rise to record levels. Austerity has not just been a social failure, it’s been an economic one too. The policies pursued since 2010 left the country deeper in debt, with productivity and wages flatlining. Weak demand almost certainly had a role in deterring firms from investing and innovating. As the Bank of England drily noted, the pace at which the economy can grow without generating inflation has fallen. Lower output will push up forecasts for public borrowing. Mr Hammond’s target to balance the books by the middle of the next decade, requiring even more spending cuts, should be junked along with a failed ideology.
