Chan­cel­lor spends wind­fall to mark ‘end of aus­ter­ity’

The Guardian Weekly - - Global Report -

Philip Ham­mond de­clared on Mon­day that “aus­ter­ity is com­ing to an end” as he sought to re­as­sure vot­ers, and shore up the morale of the frac­tious Tory MPs Theresa May needs to back her Brexit deal, by pep­per­ing his bud­get speech with spend­ing pledges and a sur­prise in­come tax cut.

As ne­go­ti­a­tions with the EU27 en­ter their fi­nal weeks, the chan­cel­lor cast off his cau­tious rep­u­ta­tion and opted to spend al­most all of a £68bn ($86.8bn) wind­fall handed to him over the next five years by the Of­fice for Bud­get Re­spon­si­bil­ity (OBR).

In an un­ex­pect­edly gen­er­ous pack­age, which will pump an ad­di­tional £15bn into the econ­omy next year, Ham­mond met col­leagues’ de­mands to cush­ion the im­pact of uni­ver­sal credit, with a £1,000-a-year in­crease in the work al­lowance claimants can earn.

He an­nounced a slew of other short-term give­aways, on ev­ery­thing from de­fence spend­ing to pot­holes, and re­frained from tax mea­sures – such as a raid on pen­sions – that risked fall­ing foul of the gov­ern­ment’s lack of a se­cure ma­jor­ity.

One of only a hand­ful of rev­enue-rais­ing mea­sures in­volved a £400m-a-year levy on larger tech com­pa­nies, such as Google, Face­book and eBay.

Ham­mond also con­firmed that he will bring for­ward to 2019 the Con­ser­va­tives’ man­i­festo pledge to in­crease the in­come tax per­sonal al­lowance to £12,500, and the higher-rate thresh­old to £50,000, hand­ing an in­come tax cut of up to £860 a year to higher earn­ers.

The OBR said the chan­cel­lor could have used the un­ex­pected bonus of much lower than ex­pected bor­row­ing to meet his goal of put­ting Bri­tain’s finances back in the black by the mid­dle of the 2020s. In­stead, the in­de­pen­dent watch­dog noted that Ham­mond had spent the “fis­cal wind­fall rather than sav­ing it”.

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