Brexit overshadows this Budget. The story this morning has all been about Number 10 saying that the Budget won’t change in the event of no deal, in apparent contradiction of what Philip Hammond said yesterday. In truth, no deal would—obviously—have consequences for the public finances but the government’s initial reaction would be to try and stimulate the economy. Whatever anyone says now, no government would respond to no deal by taking demand out of the economy. So, yes there would be an emergency Budget. But it would be expansionary, not contractionary.
It is not just Brexit though that has left Hammond with limited room for manoeuvre. Theresa May’s pledge of £20 billion a year extra for the NHS by 2023 and her declaration that austerity is over has tied the Chancellor’s hands. But the Office for Budget Responsibility’s forecasts, which will be revised up in this Budget, mean that the squeeze on Hammond will be less acute than it otherwise would have been.
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