Will Phil give us a trick or treat Budget?

TORY MPs are this weekend wondering what identity Philip Hammond will adopt when delivering his Halloween week Budget on Monday. In keeping with the supernaturalthemed festivities, the Chancellor is currently regarded as something of a political shape-shifter among colleagues. No one quite knows whether to expect a trick or a treat when he stands at the Despatch Box for his annual financial set-piece speech.

Fellow Tories have watched Mr Hammond mutate from arch Eurosceptic to Cabinet cheerleader for close post-Brexit links with Brussels. Less than three years ago he denounced the UK's relationship with the EU as “unacceptable” and indicated readiness to vote to leave unless radical changes were made.

Since the 2016 referendum vote to quit he has led calls for keeping the ties to Brussels as near to the status quo as possible.

Now the Chancellor appears to be undergoing a similar transformation in his approach to the stewardship of the economy. Once he nicknamed himself “fiscal Phil” and revelled in a dry-as-dust reputation for a tight grip on the Treasury's purse strings. As next week's Budget looms, his officials have done little to douse expectations of a switch towards big spending as the Chancellor fleshes out Theresa May's promise of the “end of austerity”.

Recent days have seen confirmation of strengthened public finances and an underestimation of tax receipts believed to give the Chancellor at least another £13billion to play with. Earlier hints that income tax cuts for low and middle-income earners promised in last year's Tory general election manifesto might have to be abandoned to provide extra cash for the Prime Minister's promise of a £20billion injection into the NHS have been dropped. Treasury officials signalled last night that the Chancellor will ease business rates for some shops to help rejuvenate deprived town centres.

Most Tory MPs will welcome any move to cut the tax burden to help boost the economy as the country prepares to quit the EU next March. Yet some are becoming concerned that both Mr Hammond and the Prime Minister are becoming too quick to reach for big spending, bigstate solutions to social problems.

“We could do with a Conservative Budget but I don't think we're going to get one,” an MP critical of the Chancellor told me this week.

“The party leadership is being far too timid about fighting Jeremy Corbyn's lavish spending promises. If the Conservatives give up being the party of careful prudence and turn the next election into a choice between two big spenders, the voters will punish us for it.”

CONCERN is growing in the City and among some Tories about the possibility of the country facing a new recession. They suspect that the economic cycle means a downturn must come at some point, given that the last recession was 11 years ago and worry about the risks of increasing Government borrowing after years of cutting the annual Budget deficit. Mr Hammond is likely to be advised to “fix the roof when the sun is shining” as his predecessor George Osborne used to say.

Preparations for Brexit and contingency plans being drafted in case of a no-deal departure from the EU have led to the recruitment of thousands of civil servants, wiping out the reductions in the size of the state achieved during the years after the 2008 financial crisis. Further expansion of the state funded by increased borrowing is worrying some cost-conscious ministers.

Mr Hammond is understood to have decided to hold the first Budget on a Monday since 1962 to avoid embarrassing Halloween headlines. But a financial statement that goes too far towards splurging the cash could still be seen as a horror show by some of his colleagues.

When he stands up at the Despatch Box for his big moment, the Chancellor will be under pressure to show he can loosen the purse-strings a little without abandoning the Tory core principle that there is no such thing as government money, only taxpayers' money.