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| The Observer view on Philip Hammond’s budget | The Observer view on Philip Hammond’s budget |
| (2 months later) | |
| Sun 19 Nov 2017 00.03 GMT | |
| Last modified on Sat 2 Dec 2017 02.29 GMT | |
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| At every opportunity, Theresa May has emphasised how much she wants her premiership to represent a break from the pre-Brexit past. From her first public words as prime minister on the steps of Downing Street, to her speech on housing last Thursday, she has consistently articulated that she will govern in the interests of ordinary working people. We are to believe that she does not just want to deliver Brexit, she wants to address the economic and cultural factors that helped bring it about. | At every opportunity, Theresa May has emphasised how much she wants her premiership to represent a break from the pre-Brexit past. From her first public words as prime minister on the steps of Downing Street, to her speech on housing last Thursday, she has consistently articulated that she will govern in the interests of ordinary working people. We are to believe that she does not just want to deliver Brexit, she wants to address the economic and cultural factors that helped bring it about. |
| But May has turned down every opportunity to make things better. The deindustrialisation and loss of employment and identity that helped foment the conditions for Brexit are decades old. | But May has turned down every opportunity to make things better. The deindustrialisation and loss of employment and identity that helped foment the conditions for Brexit are decades old. |
| Their effects have been worsened since the financial crisis by the economic policies of David Cameron’s government. And since May has become prime minister, we have had an autumn statement and a spring budget that have barely deviated from George Osborne’s spending plans. | Their effects have been worsened since the financial crisis by the economic policies of David Cameron’s government. And since May has become prime minister, we have had an autumn statement and a spring budget that have barely deviated from George Osborne’s spending plans. |
| May did not change course back when she was in a position of relative strength and authority before June’s general election; it seems even less likely now. So 16 months after he left No 11, Osborne’s stamp will in all likelihood remain heavily imprinted on Wednesday’s budget. | May did not change course back when she was in a position of relative strength and authority before June’s general election; it seems even less likely now. So 16 months after he left No 11, Osborne’s stamp will in all likelihood remain heavily imprinted on Wednesday’s budget. |
| It is to the nation’s detriment. Osborne’s signature approach was one of badging flashy initiatives – a higher minimum wage; more cash than ever for the NHS; help to buy for those struggling to get on the housing ladder – as symbols of a Conservative government committed to ensuring that those with the broadest shoulders would bear the biggest burden of austerity. | It is to the nation’s detriment. Osborne’s signature approach was one of badging flashy initiatives – a higher minimum wage; more cash than ever for the NHS; help to buy for those struggling to get on the housing ladder – as symbols of a Conservative government committed to ensuring that those with the broadest shoulders would bear the biggest burden of austerity. |
| But underneath the disingenuous PR lay a much sharper reality. An NHS facing its tightest-ever financial settlement, with a big chunk of its cash increase coming from cuts to health training budgets. A housing scheme that helped a handful of the most affluent renters over the line into home ownership, while inflating prices and taking it further out of reach for everyone else. And, most perniciously, modest increases in the minimum wage, whose benefits for low-income families with children were far outweighed by the cuts to tax credits and benefits that Osborne set in train. | But underneath the disingenuous PR lay a much sharper reality. An NHS facing its tightest-ever financial settlement, with a big chunk of its cash increase coming from cuts to health training budgets. A housing scheme that helped a handful of the most affluent renters over the line into home ownership, while inflating prices and taking it further out of reach for everyone else. And, most perniciously, modest increases in the minimum wage, whose benefits for low-income families with children were far outweighed by the cuts to tax credits and benefits that Osborne set in train. |
| Hammond has made no mark of his own: he has simply continued down the path sketched out by Osborne. He might argue that he has no headroom to soften the blow. But even on the chancellor’s own terms, that’s a deceit. There is a robust case for borrowing to invest in housing, infrastructure and public services when the economy is so sluggish and interest rates so low. But even within Hammond’s own fiscal rules, choices exist. He has chosen to follow Osborne in opting for cutting support for poor families with children and the disabled, using it to pay for further income tax cuts that benefit the more affluent. | Hammond has made no mark of his own: he has simply continued down the path sketched out by Osborne. He might argue that he has no headroom to soften the blow. But even on the chancellor’s own terms, that’s a deceit. There is a robust case for borrowing to invest in housing, infrastructure and public services when the economy is so sluggish and interest rates so low. But even within Hammond’s own fiscal rules, choices exist. He has chosen to follow Osborne in opting for cutting support for poor families with children and the disabled, using it to pay for further income tax cuts that benefit the more affluent. |
| The results are staggeringly unjust. Low-income families and disabled people stand to lose eye-watering sums: the poorest fifth of working-age families with children will be more than £3,000 a year worse off on average by 2020 as a result of tax and benefit changes. In sharp contrast, some of the most affluent families with children will find themselves £500 a year better off. | The results are staggeringly unjust. Low-income families and disabled people stand to lose eye-watering sums: the poorest fifth of working-age families with children will be more than £3,000 a year worse off on average by 2020 as a result of tax and benefit changes. In sharp contrast, some of the most affluent families with children will find themselves £500 a year better off. |
| These are parents often trapped in low-paid work, struggling to make ends meet, who simply cannot afford to lose thousands of pounds a year. The consequences are already in evidence: families who can’t afford to eat pushed to seeking out food banks; people getting into spiralling debt; individuals who can no longer afford their rent finding themselves living on the streets. This is a government that pretends to have the interests of the struggling at heart. | These are parents often trapped in low-paid work, struggling to make ends meet, who simply cannot afford to lose thousands of pounds a year. The consequences are already in evidence: families who can’t afford to eat pushed to seeking out food banks; people getting into spiralling debt; individuals who can no longer afford their rent finding themselves living on the streets. This is a government that pretends to have the interests of the struggling at heart. |
| Yet on its watch, child poverty is forecast to reach its highest level since modern records began: almost one in four children will be growing up in poverty by 2022. This, in one of the world’s richest countries. | Yet on its watch, child poverty is forecast to reach its highest level since modern records began: almost one in four children will be growing up in poverty by 2022. This, in one of the world’s richest countries. |
| Hammond’s top priority must be to cushion the blow on low-income families. Conservative chancellors will have delivered £80bn of tax cuts by 2020, including £22bn of income tax cuts and £13bn of corporation tax cuts. | Hammond’s top priority must be to cushion the blow on low-income families. Conservative chancellors will have delivered £80bn of tax cuts by 2020, including £22bn of income tax cuts and £13bn of corporation tax cuts. |
| He must go beyond cutting the six-week wait for new claimants of universal credit, which by itself would be far too incremental: he must halt further tax cuts and use the proceeds to restore the generosity of benefits to their old levels. | He must go beyond cutting the six-week wait for new claimants of universal credit, which by itself would be far too incremental: he must halt further tax cuts and use the proceeds to restore the generosity of benefits to their old levels. |
| Cuts to public services are also wearing away at the fabric of the state in a way that hits the poorest families hardest. The NHS is so stretched that operations are getting arbitrarily rationed using criteria such as obesity and smoking, disproportionately affecting the less affluent. Further education budgets have been slashed, while higher education, still too much the preserve of the middle classes, has enjoyed healthy funding increases. The poorest areas have been most hit by police cuts and cuts to local council budgets. | Cuts to public services are also wearing away at the fabric of the state in a way that hits the poorest families hardest. The NHS is so stretched that operations are getting arbitrarily rationed using criteria such as obesity and smoking, disproportionately affecting the less affluent. Further education budgets have been slashed, while higher education, still too much the preserve of the middle classes, has enjoyed healthy funding increases. The poorest areas have been most hit by police cuts and cuts to local council budgets. |
| There are two knock-on effects of the government making the poorest even poorer. First, it makes the regional inequality that contributed to the Brexit vote even worse. There is more to come: the government is insisting that councils become more reliant than ever on local tax revenues. | There are two knock-on effects of the government making the poorest even poorer. First, it makes the regional inequality that contributed to the Brexit vote even worse. There is more to come: the government is insisting that councils become more reliant than ever on local tax revenues. |
| But it is more affluent areas with the biggest tax bases who will be able to spend more on their infrastructure and public services, attracting further business investment. This will catalyse even bigger gaps in prosperity between different parts of the country. | But it is more affluent areas with the biggest tax bases who will be able to spend more on their infrastructure and public services, attracting further business investment. This will catalyse even bigger gaps in prosperity between different parts of the country. |
| Second, the gap between the generations is getting bigger. From the young people locked out of home ownership, to new parents stuck in low-paid jobs, to the current generation of children that will be scarred by child poverty: the young are suffering the most. | Second, the gap between the generations is getting bigger. From the young people locked out of home ownership, to new parents stuck in low-paid jobs, to the current generation of children that will be scarred by child poverty: the young are suffering the most. |
| Hammond must once and for all address the housing affordability crisis on Wednesday, scrapping the expensive price-inflating subsidies for first-time buyers, instead investing radically larger sums in house building, and improving the security of tenure for those who are renting. | Hammond must once and for all address the housing affordability crisis on Wednesday, scrapping the expensive price-inflating subsidies for first-time buyers, instead investing radically larger sums in house building, and improving the security of tenure for those who are renting. |
| The economy is also suffering from long-term structural problems that will make it even more vulnerable to the sharp economic shock of Brexit when it happens. | The economy is also suffering from long-term structural problems that will make it even more vulnerable to the sharp economic shock of Brexit when it happens. |
| Productivity and investment remain far too low, resulting in sluggish growth that remains heavily reliant on consumer debt and rising house prices. There is a large number of low-paid, low-skill jobs in the service sector offering poor progression prospects, which necessitate significant government spending on in-work benefits. | Productivity and investment remain far too low, resulting in sluggish growth that remains heavily reliant on consumer debt and rising house prices. There is a large number of low-paid, low-skill jobs in the service sector offering poor progression prospects, which necessitate significant government spending on in-work benefits. |
| Conservative chancellors have done far too little to address these issues since the financial crisis. Ten years on, they have got worse. | Conservative chancellors have done far too little to address these issues since the financial crisis. Ten years on, they have got worse. |
| The country is in desperate need of a budget that parts ways with the spirit of Hammond’s predecessor. If the chancellor insists on stubbornly sticking to the course already plotted, Britain will become a meaner, more unequal society in which to live in the next decade. There is too much at stake. Hammond must once and for all banish the ghost of George Osborne that still haunts the Treasury. | The country is in desperate need of a budget that parts ways with the spirit of Hammond’s predecessor. If the chancellor insists on stubbornly sticking to the course already plotted, Britain will become a meaner, more unequal society in which to live in the next decade. There is too much at stake. Hammond must once and for all banish the ghost of George Osborne that still haunts the Treasury. |
| Budget 2017 (November) | |
| Opinion | |
| Philip Hammond | |
| George Osborne | |
| Theresa May | |
| Tax and spending | |
| Universal credit | |
| editorials | |
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