So where are the nasties? Philip Hammond’s Budget speech can be summed up as follows: £2.8 billion for the NHS, £44 billion of capital funding and loan guarantees for housing, £400 million for a new charging infrastructure for electric cars, £2.3 billion investment in research and development, £1.5 billion worth of changes to Universal Credit, an extra £2 billion for Scotland – all to be paid for, apparently, with higher taxes on super-strength cider, fags, a few of the smokiest diesel cars and the end of indexation for allowances on corporate capital gains tax.
A modern Budget would not be a Budget, of course, if it didn’t partially unravel thanks to measures hidden in the small print – and they may well emerge over the next few days. But it does seem that, unless there are vastly more Britons swigging cheap cider than I am aware of, these measures will be paid for by delaying, yet again, the day when the government manages finally to balance its books.
Government debt has not gone away because Philip Hammond has fallen for the argument that the British public has ‘grown tired’ of austerity. Never mind his prediction that debt as a proportion of GDP will peak this year, so long as we have any deficit at all that debt is growing. And we received a reminder this week of just how debilitating that debt burden could become if interest rates were to rise – the government had to borrow an extra £500 million this October compared with last year thanks to the rise in cost of paying the interest on inflation-linked bonds. Paying the interest on government debt is already costing nearly £50 billion a year – more than the government spends on defence or transport. And that is with interest rates at 0.5 per cent.
If the government is not prepared to close the gap between its income and expenditure through cutting spending, then why not do it by jacking up a few taxes? It is absurd, for example, that fuel duties have remained frozen for seven years while the cost of oil has fallen. Hammond boasted that this freeze had cost the Exchequer a total of £46 billion over the years. Yet thanks to the falling cost of the underlying product, the government could have enjoyed extra revenue as well as motorists enjoying a cut in the cost of filling their tanks.
Hammond seems to be working on the assumption that it has become politically impossible to impose any significant tax rise on the general population. He will pick off small groups of taxpayers – such as cider-drinkers – but there must be no tax rises capable of generating a negative headline. A Budget must, however, include generous spending pledges. That way, sadly, lies only fiscal ruin.