We need a Budget of vision and hope

Before finishing his draft of next Wednesday’s Budget, Philip Hammond should stop and think about precisely what he is there to do. A chancellor is not just a civil servant, an accountant or an administrator. He is not there to enact the will of the Treasury establishment. Mr Hammond’s job, as a Conservative chancellor, is to put Conservative philosophy into action.

He has two tasks of historic significance. He has to rejuvenate the country to power it through Brexit. Our future doesn’t lie in a perpetual transition that leaves us tethered to the EU: it requires free trade, deregulation and an economy that can compete globally.

Mr Hammond must also rejuvenate the economic side of Conservatism in order to beat Jeremy Corbyn. He must find new, free-market solutions to tackle the problems of the day and a new language with which to sell them to the public. He must resist succumbing to Corbynism-lite, or to the sort of useless managerialism that is the Treasury’s hallmark. Popular hopes for change were raised by the Brexit vote: a Budget that only tinkers would completely miss the point.

A creative chancellor can bring real, lasting change that wins elections. Geoffrey Howe in the early Eighties broke the back of inflation. Nigel Lawson’s tax cuts and deregulation helped create an ownership society. And the Coalition’s effort to balance the books was only half accomplished, but it still restored business confidence.

Now, however, some bolder, braver reform is needed. Austerity is no longer the top priority, and neither are some of the issues of the Eighties and Nineties. Contemporary problems include a home-ownership crisis, stagnant real wages, low productivity and insufficient personal savings. In seeking to address these, Mr Hammond should meditate upon three fundamental principles of modern Conservatism.

First, lower taxes and limited regulations generate higher growth. When taxes are too high, as today, they reduce the incentives to work, save and invest. As to red tape, it prevents entrepreneurs from devising solutions to our problems: our broken planning regime is the key reason why we suffer from a housing crisis. Cutting taxes spurs activity and, in some cases at least, directly benefits the public purse – just as the Coalition’s cut to the highest band income tax raked in more for the Treasury. Mr Hammond should apply some supplyside medicine to our punitive and over-complex tax system and embrace a policy of real deregulation.

Secondly, lower spending as a share of GDP, especially on day-to-day expenditure, is good for economic growth. It transfers resources from low-productivity activities to entrepreneurs. George Osborne shifted hundreds of thousands of jobs from the public sector to the private, but there is more work to be done. We should aspire to Australian or Swiss levels of public spending and think about how to reform the public sector to allow this to happen, while improving the quality of health, education and the rest.

Thirdly, independent countries, as Britain would be after Brexit, have the biggest incentives to embrace the kind of efficient, free-market policies that have lifted around one billion people across the world out of extreme poverty. Self-governance works. It encourages the right policies in order to attract capital and talent.

In short, the Tories need to relearn how to sell popular capitalism, in a language fit for the millennial generation. Mr Hammond has to prove that Conservatives aren’t just about managing the status quo but about changing it for the better.

The vote for Brexit was a vote to shake things up, and this Budget, far from being a sideshow, is essential both to strengthening Britain’s position vis-à-vis the EU and ensuring that our country can exploit the coming opportunities. Mr Hammond should use his platform on Wednesday to show voters that the Conservatives belong to a dynamic tradition that is full of idealism rooted in experience and common sense. The Tories, if they are to remain relevant, need a message of economic hope that captures the imagination of every age group.

The voters won’t forgive Mr Hammond if he allows himself to remain the prisoner of the Treasury’s stultifying, declinist orthodoxy.