Here are the five things you need to know about this Budget.
First, it represents a major giveaway.
Most post-election Budgets involve tax rises; this one involved an eye-catching tax cut (stamp duty for first time buyers) as well as extra spending on the NHS and on a Brexit war chest.
Indeed, the total amount committed to 2019/20 – the year of Brexit, significantly – is just under £10bn – the biggest single-year giveaway since Alistair Darling cut VAT in the face of the financial crisis in 2008.
Second, the economic outlook is dismal.
This is the first time in modern record that the Chancellor of the day has published an official forecast in which the UK economy doesn’t grow by 2% or more in any single year of the five year horizon.
That’s all because the Office for Budget Responsibility has decided that the UK economy’s long-term productivity rate (our bang-for-buck) is simply lower than it has been for quite some time.
NOT ABOUT BREXIT
And before you ask, no, this is not the Brexit effect.
Image: A major giveaway is pencilled in for the Brexit year of 2019/20
In fact, the OBR said the forecast cut came down to other long-standing issues – primarily the fact that the UK has simply failed to rebound convincingly following the financial crisis.
Either way, the upshot is the same: less money being generated by the economy (GDP is simply a measure of total national income) means less money earned by all of us, less money paid in taxes and less money in the Exchequer.
Those weaker growth forecasts have pushed up the total amount of borrowing in future years.
The Chancellor could have responded to this by imposing more austerity, but instead, he has gone in the opposite direction, with a full-blooded splurge of extra spending.
To understand the impact of this, consider the fiscal year 2019/20.
Remember, not all that long ago, that was zero year – the year George Osborne intended to eliminate Britain’s deficit entirely, generating more taxes than spending for the first time in decades.
That aspiration died some time ago.
At the time of the last Budget the Government was pencilling in a £21.4bn deficit that year – in other words £21.4bn more in spending than generated in tax revenues.
The upshot of those productivity cuts – and the foregone tax revenue – is to push up the deficit that year even further – by an extra £4bn.
Then add on the more than £9bn in extra tax and spending measures today, everything from stamp duty to NHS spending and the Brexit warchest, and you get a deficit of £34.7bn.
That’s not an eye-watering figure, but it is a long way from where we thought we’d be a few years ago. And underlines how much everything – from weak productivity to Brexit, has impacted the public finances.
Image: Mr Hammond said there was no magic bullet to solve the housing crisis
Last but not least, this Budget won’t solve the housing crisis. But it was never going to.
In fact, at the dispatch box the Chancellor outlined an impressively reasonable assessment of the property market’s problems.
Not enough homes are being built, he said, but there was no magic bullet to get them built.
It would involve many long-term painful changes: to planning regulations, to the construction sector, to council and housing association policy.
But he is at least making a fist of it.
As for the stamp duty cut: there has been some carping today about how the stamp duty cut for first time buyers will only push up prices for existing owners.
Similar things are said every single time the Government introduces policies for the housing market – and while they may be economically true, they miss the political point.
Housing tax cuts are vote winners.
The Tories want to win over some younger voters and thirtysomethings. Whether this will make any difference against the Corbyn juggernaut remains to be seen. But it is probably a canny move.
It was far from the biggest item in the Budget but it may well dominate tomorrow’s front pages.
Source: SKY News