ALEX BRUMMER: Phil’s £103billion gamble to woo middle England voters with spending and tax cuts
When the Prime Minister announced the end of austerity in her speech to the Tory Party conference in September, there was enormous scepticism as to how she was going to manage it.
Yesterday, her Chancellor Philip Hammond endeavoured to tell us – deciding, after eight years of the Government battening down the hatches, to put into effect one of the biggest economic U-turns of recent times.
He has swapped prudence and an ever-rising personal tax burden for higher spending and tax cuts that will benefit almost every person in the workforce.
Listening to the Chancellor’s list of giveaways in his Budget speech reminded me of the old American political adage that if you spend ‘a billion here and a billion there you are soon talking about real money.’ And believe me, this is real money.
Chancellor Philip Hammond endeavoured to tell us – deciding, after eight years of the Government battening down the hatches, to put into effect one of the biggest economic U-turns of recent times
The policy decisions taken in the Budget mean an extra £103billion will be showered on the economy between now and 2023.
It is a vast sum and much will be spent on the NHS as Mrs May pledged to commemorate its 70th birthday earlier this year.
But the real surprise for middle Britain is that instead of continuing to milk taxpayers, Hammond is somehow giving all of us a tax cut by bringing forward an increase in the tax allowances by a year.
This will tip £2.8billion into wage packets next year alone.
He has taken advantage of the fact that, despite all the gloomy economic forecasts at the time of the EU referendum two years ago, the economy did not collapse.
The policy decisions made by the chancellor mean an extra £103billion will be showered on the economy between now and 2023
The number of people working in this country has soared since then, a reflection of the confidence employers still feel despite the great uncertainty caused by Brexit.
Hammond projected that by 2023 some 4.2 million jobs will have been created.
There could, of course, be many a slip before then.
The independent Office for Budget Responsibility is calculating that Britain’s economy will continue to grow – albeit not spectacularly – in each year until 2023.
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It is choosing to ignore growing risks of a global slowdown as a result of Donald Trump’s trade wars, slower output in Asia and rising American interest rates.
Hammond is going to pay for all this firstly by spending the extra money in the Exchequer that’s resulted from careful spending in government departments and from soaring tax receipts.
Secondly, by abandoning previous Tory promises to balance the nation’s budget and continuing to run budget deficits.
Thirdly he is assuming the Government will forge a deal with Brussels and they will get it through Parliament, resulting in a Brexit dividend of huge investment.
Critics will argue that Hammond is sacrificing the Tory reputation for budgetary prudence by continuing to borrow for years to come.
But in deciding to open the spending taps, he seeks to shoot Labour’s foxes by wooing middle England.
Hammond is giving all of us a tax cut by bringing forward an increase in the tax allowances by a year. This will tip £2.8billion into wage packets next year alone. He also projected that by 2023 some 4.2 million jobs will have been created
The UK may still be running a budget deficit by the middle of the decade but those sums will be negligible compared with the probable deficits of a Jeremy Corbyn-led government, whose spending pledges could cost up to one trillion pounds.
That income tax is effectively being reduced for millions and small businesses are being protected against the scourge of business rates will bring sighs of relief from the nation’s strivers.
But the Chancellor has not forgotten those at the bottom of the income scale with a rise in the national living wage, an increase in the tax threshold, and heavy spending to make sure the system of Universal Credit is fairer and better implemented.
As controversial as Universal Credit has been, it is among the reasons hundreds of thousands have been encouraged off the benefits system and into the workforce.
Many political observers have regarded Philip Hammond as a dull dog with a love of spreadsheets and a poor political touch who has only hung on to his job because he is a Remainer and a counterbalance to the Brexiteers in the Cabinet. There is some truth in that.
But as he demonstrated in his lengthy speech, he has grasped the post-Brexit nettle. Restoring the NHS and public services with vast injections of money is part of that.
Equally as important is having a vision for the future – super-fast broadband, an improved transport system and backing for research and development at universities.
What is most remarkable is that most of the tax penalties that had been threatened have been dodged.
The Chancellor also promised the one tax which will be hugely popular by courageously taking aim at the digital giants.
But he is taking a bold gamble. Even the most sensible budgets can be blown off course by an unexpected turn of events.
Failure to get a Brexit deal – or a global recession – could turn his Budget dream to dust.
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