How it took BBC to remind him of the Tory manifesto!
As he stood joking and laughing at the Despatch Box last Wednesday, Philip Hammond – a man not noted for his humility – clearly thought his first Budget was going swimmingly.
But scarcely had he sat down before a fierce backlash began. The usual postBudget briefing of journalists by Mr Hammond’s advisors was long and bloody.
Time and again, reporters demanded to know how he could square a 2p hike in National Insurance contributions for the self-employed with a promise, repeated four times in the Tory manifesto, that NI contributions would not rise.
Indeed it was the BBC’s Political Editor Laura Kuenssberg who informed the Treasury about the 2015 pledge.
Inside the Commons and on TV, normally loyal Tories were publicly calling for a rethink and by the following day there were 20 public rebels, more than enough to erase Mrs May’s slim majority.
What Mr Hammond had hoped would be an unremarkable, steady-as-she-goes Budget will now be remembered as the most spectacularly disastrous in recent memory. George Osborne’s ‘omnishambles’ Budget of 2012 took days to unravel. Mr Hammond’s was in pieces within minutes. so how did it happen?
Its origins lie in Mr Hammond’s admirable determination to present a balanced
‘Hammond lacks political antennae’
Budget: not spending any more than he raised in taxes. seemingly unable to find any more cuts, his only option was to hike taxes to find billions for social care and new grammars and free schools.
The ‘magic’ solution was offered by Treasury officials, who for years have been worried about the rise in selfemployment hitting tax revenues. At last year’s Autumn statement, the damage was put at £5billion a year.
some of those taking advantage of the system were rich professionals, accountants and lawyers. The Chancellor’s first error was to think his tax raid would be seen as targeting these groups. Instead, it was swiftly framed as a straightforward assault on self-sufficient, risk-taking entrepreneurs – many of whom are core Tory voters.
He was hammering White Van Man. something similar happened in 2012 with the so-called ‘pasty tax’.
But Mr Hammond’s bigger blunder, and the one that was ultimately his undoing, was underestimating the force of feeling among his own MPs and the wider public about the breach of the manifesto promise. His defence was risible. Mr Hammond and his aides said the commitment was only to Class 1 contributions paid by employees and not those in Class 4. At a time he was announcing a ban on ‘baffling’ small print for consumers he was relying on some of his own.
sunday’s newspapers contained ugly accounts of tit-for-tat briefings over who was to blame for the fiasco. Then on Monday Theresa May met a small but powerful group of Tory MPs, the executive of the 1922 committee. MPs warned that if the policy was not reversed, the party’s promises in 2020 would not be believed. The mood was ‘supportive’ but the message was clear: it must change.
Discussions between the Treasury and No 10 continued on Tuesday. Yesterday morning Mrs May and the Chancellor met at 8am and agreed the U-turn.
Just half an hour before Mrs May rose at midday for PMQs – when she would have faced tough questions on NI from her own side and Labour – the policy reversal was announced in a letter to the Treasury select Committee. No 10 cannot escape all responsibility for the car crash and would have been well aware of its contents well in advance. By attending Mr Hammond’s statement – described by one aide as ‘putting her arm around’ her Chancellor – Mrs May tacitly acknowledged that.
But among Tory MPs she was getting the credit for the swift reversal, which kills off the need for a long, painful and in all likelihood failed attempt to get NI legislation through this Autumn. One senior Tory told the Mail: ‘Be in no doubt. she has sorted it’.
Instead, the blame was laid squarely at Mr Hammond’s door, with MPs complaining about his judgment. ‘He isn’t the most sensitive soul,’ one said. Another berated his lack of ‘political antennae’. The damage isn’t terminal, but Mr Hammond dearly needs his next effort at a Budget to pass without a hitch. He also needs to find a couple of billion quid from somewhere.