Britain faces triple whammy of gloom, says Hammond
BRITAIN faces a triple whammy of “more borrowing, more taxing and a bit less spending”, former chancellor Philip Hammond warned today on the eve of the Budget.
He also cast doubts on whether the public finances would allow Boris Johnson to spend billions of taxpayer’s money on “grand” infrastructure projects as part of his levelling-up agenda.
Amid a growing row over how Chancellor Rishi Sunak will restore Britain’s shattered public finances, Lord Hammond told Times Radio: “I’m afraid whatever politicians choose to say, the truth which will be borne out by the experience of the next few years is that we are going to do more borrowing, more taxing and a bit less spending.”
He compared the economic shock from Covid as “probably most akin
to fighting a war”, leaving the country in a “perilous” situation which he believes means that the Government will not be able to meet all its previous spending pledges.
“Alongside measured tax increases, there will have to be a more measured approach to what we can afford in terms of public spending,” he said.
“It may be that some of the capital projects that the Prime Minister has talked about, capital spending projects on infrastructure, instead of being funded by government, we need to look at ways of getting private investors... to invest in those.” It came as:
⬤ Business Secretary Kwasi Kwarteng all but confirmed that furlough will be extended. He played down the prospect of big tax increases to be announced tomorrow, telling BBC Breakfast: “We have got another three years to run in the parliament and the Chancellor will be looking to reduce the deficit. For now, I think the real emphasis is on trying to provide critical support.”
⬤ Ex-Tory leader William Hague backed increasing taxes, writing in The Daily Telegraph: “It pains me to say that we have reached the point where at least some business and personal taxes have to go up.”
⬤ However, Mr Sunak risks a backlash from Tory MPs if he moves quickly to raise corporation tax from 19p or swiftly hikes other levies, amid fears that such actions could make more firms go bust. ⬤ He was also warned that the public, who together have saved billions during the pandemic, may be reluctant to spend stashed away cash to boost the economy if taxes are looming.
Fabrice Montagné, chief UK economist at Barclays, said: “If you talk about tax hikes too soon, people will keep the excess savings they’ve been building up to pay their taxes.”
⬤ Mr Sunak was set to announce more than £400million of extra support for the badly hit culture sector to help museums, theatres and galleries re-open once restrictions start to ease.
⬤ Savers are to be offered the chance to help Britain meet its goal of net zero by 2050 with the launch of the world’s first sovereign green savings bond.
Lord Hammond said he strongly supported the levelling-up agenda, adding: “One of the ways to grow the economy... is to get economic growth more evenly spread across this country.
“But that does not necessarily mean investing in infrastructure projects. Many of the things that will drive higher economic growth are around the way we deliver things like education.”
Measures widely expected in the Budget but not officially confirmed include postponing an increase in fuel duty on vehicles and the stamp duty holiday.
CHANCELLORS have historically got to enjoy a proper drink while delivering the Budget. William Gladstone took sherry while Hugh Dalton sipped on a dreadful-sounding rum and milk. Such is Rishi Sunak’s dominant position in Westminster, he could probably get away with the modern Tory equivalent of the forbidden fruit — Champagne.
Despite all the errors of a rollercoaster first year — Sunak spent much of the past 12 months trying to curtail the furlough scheme and other support measures on a misplaced understanding that the country would have to learn to live with the virus — he remains hegemonic. A self-professed low-tax Brexiteer, he is the presumed heir to Boris Johnson. And in Anneliese Dodds, he faces a shadow chancellor who has made little impression on the public, though is an improvement on her predecessor John McDonnell. The criticism of Dodds’s relative anonymity is misplaced. Most opposition politicians — including shadow chancellors — are unrecognisable to the average voter. Indeed, even as Chancellor Philip Hammond was not exactly a household name. If, as we all hope, the vaccination roll-out accelerates and lockdown restrictions are lifted in the summer, the economy will bounce back. This is both a challenge and an opportunity for Dodds.
After a year in which Covid-19 has dominated and the public was looking for constructive opposition, the economy is once again rising in salience. To start winning in the years to come, Labour must begin offering the big ideas we saw Blair, Brown and the young Cameron offer when all were in opposition, and show their vision for what kind of post-Covid country and economy it wants to construct. Things have not started well, providing a confused front on whether it would support a rise in corporation tax, even if postdated for the future. Yet the resumption of normal politics will afford Dodds and Labour the chance to make their case to a country exhausted by Covid and curious about what Labour’s alternative Britain might look like.