This Budget can’t change the political weather

EVERY Budget is called “make or break”. Few are, but today isn’t one of them. Some Budgets set out an economic approach that defines the political era — think of Geoffrey Howe’s 1981 tax rises and Nigel Lawson’s 1988 tax cuts; Gordon Brown turning on the spending taps in 2002 and the Coalition’s emergency action to turn them off in 2010. But they are the exceptions. On most occasions, the drama of Budget day, with the central conceit of one individual standing in Downing Street with a national masterplan in their red box, doesn’t match the reality.

Yes, with each Budget a Chancellor can nudge the country in a particular direction, making it a little more competitive, fairer and greener — or the reverse. But overall, a single Budget speech rarely changes the economic course of the country or the political fortunes of a government. Instead, it usually tells us what we already know: is the economy on the right track? And is the governing party winning the argument with the public or losing it? Philip Hammond’s second Budget confirms that, sadly, the economy is on the wrong track and the Tories are losing the argument, and there’s nothing the Chancellor could do about that today.

There are two reasons why. First, the major economic decisions that will define the era have already been taken by this government — and against the advice of Mr Hammond. The May Government has decided not just to leave the European Union (as the referendum dictated) but leave the single market and customs union too (which it did not). Although Parliament has yet to confirm this decision, and may not, it is already damaging private investment and the world’s view of the UK’s prospects. That’s why Britain has gone in the space of a year from one of the fastest-growing of the major advanced economies to one of the weakest. The devaluation of the pound is a reflection of that and it is squeezing real incomes. But because Brexit means less money available, not more, the Chancellor correctly judges that he doesn’t have the fiscal resources to do much about it by, for example, cutting taxes significantly or increasing welfare. So Mr Hammond’s main task today was to present what the Office for Budget Responsibility guesses the longterm impact will be of the economic decisions already made. He will do so through gritted teeth as he understands better than most what a foolish path Britain has chosen.

Second, this Budget could never be the political gamechanger that Conservative MPs yearn for. That’s because the rules of the game were set when the Prime Minister called an election and lost her majority. That disastrous campaign robbed her of her authority and bestowed it on the unlikely figure of Jeremy Corbyn, however unpalatable his Marxist solutions might be. As a result, the votes aren’t there in Parliament for big acts of social and economic reform. Witness the nascent Tory rebellion over any house-building in the greenbelt, without which talk of a radical housing plan falls flat. In any case, there is no narrative the Tories can construct — whether it is tackling the “burning injustices” or building “a Britain fit for the future” — that can compete with the all-encompassing psychodrama of the decision to tear up 45 years of Britain’s economic and security arrangements with the rest of Europe.

In the circumstances, Mr Hammond did well to resist the hysterical calls from Tory MPs, including his neighbour in Downing Street, for a lot more public spending as a panacea to their problems. It is baffling that many of the Right now think the best riposte to Mr Corbyn’s Magic Money Tree is to plant a magical forest of their own. Instead of this fantasy economics, the best the Chancellor could provide are small but welcome steps to improve things such as R&D, homelessness, regional infrastructure and maths teaching. But the Westminster caravan will move on. The economic and political course of the Government is set and there’s nothing Philip Hammond can do today to shift it.