Progress | Centre-left Labour politics

The budget: 10 things to watch out for

Alison McGovern gives us her breakdown of the 10 key things to watch out for in Philip Hammond’s budget announcement on Monday

Just three days to go. Whatever you might have planned for the weekend, Philip Hammond is likely going through spreadsheets and checking over his speech. It will be a nervous few days for him, but worse for us, as the country holds its breath to work out if there is any serious plan to stop rife poverty, and the necessary – yet shameful – growth in foodbanks. So, what should we be prepared for?

Here are 10 things to watch out for in the budget:

1. Universal credit

In the budget speech, we normally hear about economic prospects first. The chancellor reads out the forecasts from the Office for Budgetary Responsibility. So, the top issue for progressives in this budget – the lack of resources for the welfare state – won’t be covered at the beginning of the chancellors speech. But it is our number one concern because of the glaringly obvious impact it is having on millions of families.

All the details are here. Esther McVey has briefed that she has put pressure on the treasury to find more funds, but it will require more than the £2 billion figure that has been floated. In Labour’s manifesto in 2017, John McDonnell earmarked £4 billion for the welfare state, but even that won’t undo the damage done by years of real cuts to support for working families. Come Monday, we will know if the chancellor is prepared to listen to the Child Poverty Action Group and others who are campaigning to stop child poverty growing. This much is clear: with child poverty heading towards five million by the end of this parliament, the stakes are very, very high.

2. Brexit – the immediate bill

Another big issue for progressives is Brexit. In the 2017 budget we found out that Hammond had allocated £1.5 billion extra of public resources in 2018 and 2019 to cover the cost of Brexit. Will this be revised up? As my colleague, Stephen Doughty MP the home affairs select committee reminds me regularly, the police are chronically short of funding, but there are billions of pounds for Brexit defences. It all seems such a waste.

3. Brexit – the long-term price

The second Brexit question is what exactly it has done to our prospects. Here, a misunderstanding is often made about the impact of Brexit on our economy. People continually expect a crash, whereas what we are experiencing is something almost worse: long-term decline. Recessions are normally caused by a negative shock to the economy: something unexpected. Whereas, Brexit is now very much expected – as the finance people say: it’s in the price – so rather than recession, the economy is slowly but surely adjusting to what will now be a much harder path for Britain.

We know some of these costs already. I doubt we will find out much more from the budget. And we won’t find the one question on Brexit to which the answer could be a surprise: will the prime minister agree a deal with Europe that keeps frictionless trade and no hard border in Ireland? And what does she have the votes for in the House of Commons?

4. NHS

Speaking of votes in the House of Commons, the Tories have struggled since the mid-1990s to maintain public trust in them in looking after the health service. They veer from wanting to reform it out of existence, to starving it of funds. Here’s hoping that Hammond has learnt the lesson and makes good on the promise floated on the front page of the Financial Times this week to use some headroom in the budget created by unexpected tax receipts to give the health service a boost. However, no amount of money for hospitals will do much good unless he also reaches for the other Tory poisoned chalice, that is…

5. Social care

On Labour’s benches, Barbara Keeley is relentless in arguing that the NHS is hamstrung by a fractured, privatised, and insufficient system of social care. And she is correct. However, funding for care was one of the trapdoors that the prime minister fell through during the general election in 2017, so it hardly seems likely that she would allow her chancellor to walk over it again – which is a shame. Because like many of the country’s biggest challenges, they are being crowded out of debate by Brexit, and seem impossible to solve due to constant political churn. Just like…

6. Tax

With a radically changing economy, comes a rapidly degrading tax base. The ever-more-digital nature of both consumer spending and employment provides a challenge for the government, as new products and job roles slip through the tax net. Progressives should search for answers to this, too. But meanwhile Hammond has also floated the possibility that he might unilaterally impose taxes on the new digital giants, even if others fail to do so. An interesting, and potentially necessary idea.

No doubt, with one eye on the…

7. The deficit

It looks like it will be relatively good news for the government on the public finances. There are several accounting sources of good news for the Tories, which gives the chancellor something of a breather in dealing with the budget deficit.

No doubt this was what Theresa May had on her mind at Tory party conference when she proclaimed the end of austerity. The problem with that is the time lag. The Tories have spent the past eight years degrading the capacity of the state with their cuts. Unless they now provided not just one-year commitments to the likes of the NHS, local government, the armed forces and others, but three to five-year settlements, how will we know that the Tories have learnt their lesson?

Because we must never forget, when it comes to the deficit, austerity failed. It took twice as long as promised to bring the public finances back into near-balance, and the cuts created problems that in the long term, make our economic prospects worse not better. And there is one area in which the failure of austerity can clearly be seen. That is…

8. Debt

The debt to GDP ratio is seen as an important measure of a country’s economic stability, so you can understand why politicians of all parties worry about creating more debt, even if borrowing can be the rational thing to do. So, Hammond faces a dilemma here. Live up to his prime minister’s promise on ending austerity, or risk increasing debt in the future. The progressive thing to do would be to prioritise the sort of spending that would help increase economic capacity or productivity: infrastructure is always the obvious one, but increasingly economists think that dealing with family pressure through childcare and social care might also be very important. However, with Brexit looming, it is very hard to call what the criteria for investment should be. Do you back winners, such as growing industries? Or do you attempt to rebalance to deal with the root cause of the Brexit vote? These are big questions, which leads us to the looming…

9. Spending review

Rumours have been circling Westminster that the planned spending overhaul may be kicked into the long grass. It’s hard to know which the great folly is: leaving service providers like the police and local government in the dark about their financial futures or attempting to reshape public spending in the middle of the greatest shift in the economic structure of our country in several generations.

And finally…

10. Housing

More likely, rather than deal with the long-term over which he has little real control, Hammond will look to capture attention for some more popular immediate measure. It is worth thinking back to last year’s budget in which he spent billions on a stamp duty cut which was spun as a boon for wannabe house-buyers, but in fact, was a handout to home-owners who reap the benefits in the end.

The prime minister’s promises in her Tory conference speech that she would help councils to build homes were largely treated with derision, and organisations like Shelter that are on the frontline when it comes to rough sleeping and homelessness have been crying out for the government to do more. Or can Hammond do anything that would help millennials who have been kicked off the bottom of the housing ladder?

We wait until Monday to find out. What there is no doubt about, however, is the high-risk nature of the course the government are pursuing. Brexit – handled badly – not only risks an immediate recession, it is an economic rupture like the seismic events of the 1930s or the 1980s Get it wrong, and the social consequences will become much worse than they already are.

One way to change course would be to demonstrate that the government understands the anguish that current levels of poverty and inequality are causing in Britain. That is why, if on Monday you forget all the other nine points in this article, just remember the first. Families in Britain shouldn’t be left in poverty.

It’s a simple test. Let’s see if the chancellor of the exchequer is prepared to meet it.

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Alison McGovern is the chair of Progress. She tweets @Alison_McGovern

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Alison McGovern MP

is chair of Progress

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