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The end of austerity is not nigh

Chancellor Philip Hammond's November Budget will be a dour affair. Credit: PA

Whenever I meet anyone at, or connected with HM Treasury, at the moment, they spontaneously emote that "there is no money - please tell everybody!"

I am passing that on, just in case you thought the end of austerity was nigh.

In the words to me of one senior cabinet minister, "austerity isn't a choice, it's a permanent necessity".

So for the avoidance of doubt, next week's Budget won't be a great fiesta of public-sector pay rises, housebuilding, health spending or universal-credit u-turns.

It will be a dour affair, I am told. And the perceived imperative of building many more houses will be achieved by some sleight of hand involving a softening of planning restrictions, rather than the deployment of vast amounts of additional taxpayers' money.

The calculation is that there is very little point in dispensing big bribes when the attention of the nation is on the chaos that are the Brexit talks, and when the election could be more than four years away (not that the Tories would be wise to bank on holding out till then).

Indeed that chaos also means that the fiscal costs of Brexit - the amount that tax revenues could fall as the economy slows - can't yet be bottomed out, because much will depend on whether we secure seamless cost-free access to the EU's markets, pricey access, or somewhere inbetween.

Risky it would therefore be to binge-borrow today, when a stimulus may be more useful tomorrow (or at the moment of true Brexit, 11pm on 29 March 2019).

But surely there is more money than the Chancellor expected at the time of his Budget in March?

In the last six months government borrowing, the deficit but NOT the debt, has recovered to pre-Crash levels and is running healthily below the last official forecast.

But for poor Hammond in his rickety coracle, the counter currents are stronger.

The outlook for economic growth and therefore for tax revenues is widely thought to have deteriorated, partly because productivity - or output per hour worked - is forecast to be much worse than hoped (though the latest figures, published today, were significantly better than expected).

Also, much of whatever additional money might be available has been pre-committed: Hammond, you'll recall, was forced by the white-van-man lobby to abandon a revenue-raising streamlining of National Insurance; the Bank of England's decision to raise interest rates and its plans to increase them more will push up the government's substantial borrowing costs; and Hammond was ordered to spend £1.5bn on works in Northern Ireland to purchase a government-saving entente with Northern Ireland's DUP, inter alia.

Of course there are plenty of economists who would say none of this is really a constraint: with UK growth so anaemic, and the deficit at sub 3% of GDP, this would be a sensible moment to loosen and borrow, arguably.

So the most interesting and important decision the Chancellor will make is whether to adhere to his plan to reduce the so-called "structural deficit" to 2% or less by 2020-21.

He is under huge pressure from Treasury officials to stay on that course. His instinct is to do that. And although Theresa May may wish there was more money in the kitty, she’ll know that another relocation of the fiscal goalposts would undermine any claim the party has to consistency in the management of the nation's finances.

As I mentioned (sorry), the end of austerity is not nigh.