Turning budgets into political showbiz is bad for the government and the economyby Paul Wallace / November 23, 2017 / Leave a comment
Philip Hammond did his best to present an upbeat message in his first Autumn Budget, announcing more money for the NHS, a tax break for first-time homebuyers and ambitious plans to build more houses. But the discordant growl of the government’s fiscal watchdog drowned out the chancellor of the exchequer’s falsetto trills. The decision by the Office for Budget Responsibility (OBR) to downgrade prospective productivity growth slashed future revenues and cut the ground from under his feet.
The gloomy forecasts downgraded the Budget, which was no bad thing. British chancellors have become too fond of overhyping their big days out. Under two of Hammond’s predecessors—Gordon Brown and George Osborne—the main spring budgets became political theatre, providing an opportunity for them to strut the stage and flex their ministerial muscle. Not content with that they both grabbed a second turn under the lights by presenting what were in effect mini-budgets in the autumn.
Like Alistair Darling who did heroic service at the Treasury between these two overmighty chancellors as he contended with a financial and fiscal crisis, Hammond is less showy—one reason why he will hold just one Budget a year every autumn from now on. (There will also be a “Spring Statement,” though this will be “no major fiscal event” according to the chancellor when he announced the reform a year ago.) Unfortunately, however, “Spreadsheet Phil” came under pressure from Tory MPs to become “Box Office Phil” in order to bolster May’s woefully weak government. Despite his limited room for manoeuvre he felt obliged to try and please the troops.
Whether practised by believers or non-believers, turning budgets into political showbiz is bad for the causes of good government and a better-working economy. All too often attention-seeking announcements trip up. Hammond managed to avoid a repetition of Osborne’s “omnishambles” Budget of 2012. But the shine swiftly came off his crowd-pleasing abolition of stamp duty paid by first-time buyers on properties worth up to £300,000 (and the first £300,000 of those up to £500,000) when the OBR pointed out that existing homeowners would actually be the ones to gain as the tax relief was capitalised in higher house prices. It estimated that the change would result in only around 3,500 extra purchases a year by first-time buyers.