Charles Moore:
The NICs row shows that the Chancellor and the PM have yet to work out their approach to Brexit
When Philip Hammond stood up to deliver his Budget on Wednesday, he seemed confident in its dullness. “This is solid, sane, commonsense stuff,” he seemed to be saying, “Trust me.” It must have been a shock to him when people focused with intense interest – and frequently with anger – on what he proposed to do to the self-employed. The situation was not improved by Mrs May’s subsequent decision to weaken his position by talking of delay.
I’ll come back to all that, but it may also help to look at Mr Hammond’s speech in another way, and consider what was not in it. Two big things were scarcely there at all.
The first was Brexit. It featured only two and a half times in his speech (the half being a joke against Jean-Claude Juncker). The only substantive point the Chancellor made about it was the reasonable one that the economy needed to be in good shape for the uncertainties that the Brexit process might bring. But about its opportunities, he said nothing.
The second thing missing was a vision of how the actions of millions of people shape our national prosperity. Adopting the phraseology of Theresa May, Mr Hammond did say “The object of our economic policy is to support ordinary working families, and to build an economy that works for them.” This sounds little more than a cliché, but actually it contains an important mistake. The economy is not something the Government “builds” for everyone. It is what everyone builds, if the Government lets them.
Previous Conservative chancellors at their best – Geoffrey Howe in 1979 and 1981, Nigel Lawson in 1984 – have used the Budget speech, at a time of great challenge and transformation, to link their immediate actions to a future path towards greater freedom and opportunity. Not coincidentally, their speeches took seriously the idea of tax-cutting and tax reform. This Chancellor so far seems to prefer to act in the interests of his department, the Treasury, rather than that of the citizen.
Mr Hammond correctly identified that, because of “globalisation, shifts in demographics and the emergence of new technologies”, many more people are becoming self-employed or forming new companies. But instead of saying to such people, “Congratulations for understanding the way the world is going, and thank you for helping the rest of us through the aftermath of the credit crunch”, he turned this point right round.
It was against “fairness to individuals”, he said, that selfemployed people were paying lower National Insurance rates than the employed. His brilliant solution to this problem of unfairness he had just invented was to make those paying less pay more. It did not cross his mind to cut the NI rate paid by the employed.
One must acknowledge that Mr Hammond does face some severe problems. He has the preposterous hostage to fortune given by his party at the last election – the promise that they would not put up income tax, NI or VAT for the full five-year Parliament. As a Cabinet minister at the time, he was signed up to that manifesto, but I am sure he thinks of its pledge as a silly Cameron/Osborne game, and is inclined to forget that, since Mrs May has not called a general election, he is still bound by it.
He has a deeper problem, too, which is that his tax base is disappearing. Although the Chancellor pined, in his speech, for “a better way of taxing the digital part of the economy, the part that does not use bricks and mortar”, he hasn’t found one. So the new business rates are about to gouge out more of the mortar from between the bricks.
In the Treasury view, the selfemployed and newly incorporated businesses “cost the public finances” £11 billion a year between them. That is Mr Hammond’s own phrase. It is an oddly negative way to look at the people who will produce more and more of the nation’s wealth. When the clamour for new spending suddenly gets out of control – as it recently has to pay for more technical training and subsidise social care – the Government decides that these groups should be herded up and milked.
In the course of his speech, and even more in the reaction afterwards, it emerged how much Mr Hammond is the prisoner of this semi-official mindset in which putting up a tax is considered a mark of “fairness” and “economic logic”, whereas cutting, say, the £12 billion we scatter annually upon international development would be seen as “uncivilised”.
The Office for Budget Responsibility is run by Robert Chote, who used to run the Institute for Fiscal Studies (and whose wife runs Ofcom). The Institute for Fiscal Studies is run by a former civil servant and quangocrat called Paul Johnson; it is the main public advocate of the Chancellor’s attack on the self-employed. Matthew Taylor, the man charged with investigating “modern employment practices” is Tony Blair’s former head of political strategy.
All these people and organisations are constantly praised for being “independent”. Certainly they are not moles for other parties, but the word “independent”, in the world of Whitehall, is virtually a synonym for “centre-Left” and “pro-EU”. They are no friends to Conservative governments. Even less are they the natural allies of the “just managing” classes whom Mrs May had identified for sympathy (though not, so far, for many concrete advantages).
In a new book called The Road to Somewhere, the former editor of Prospect magazine, David Goodhart, makes play of Mrs May’s claim that “If you are a citizen of the world, you are a citizen of nowhere”. He divides modern Britain chiefly into the Anywheres and the Somewheres. The former are those who can move freely between different jobs, countries and international organisations, liberal in ideology. The Somewheres identify much more closely with a particular place, nation and culture, and are usually more traditional in their views.
In his great trilogy, The Lord of the Rings, JRR Tolkien describes Frodo’s stalwart companion, Sam Gamgee, returning to the Shire alone after their great quest. Sam sees “the yellow light” of home, “and fire within”. He comes in and sits down to supper with his baby daughter on his knee: “He drew a deep breath. ‘Well, I’m back,’ he said.” There the story ends, the story of a classic Somewhere. We learn in the appendix that Sam is seven times elected Mayor of the Shire and becomes “the most famous gardener in history”. He seems to be self-employed.
I now, belatedly, see The Lord of the Rings as a key Brexit text, though it was written before the European Community had even been invented. I have never noticed it lying around in the corridors of power, but it supplies an ingredient so far entirely missing in Mr Hammond’s view of the world, and not yet fully articulated in that of Mrs May. It is a grand, romantic statement about how the ordinary people of a small country can win.
It has been a great relief so far that the May/Hammond partnership has been neither a Blair/Brown feud, nor a Cameron/Osborne spin operation. It has looked businesslike. But in the great alterations which are coming, we shall need to be led by a partnership of politics and economics which can speak convincingly about how to make a newly independent nation work. If we don’t have a sense of how to be Somewhere, we will get Nowhere.