Jeremy Hunt’s budget speech was revealing not for what he said but for what he did not say. Missing from his peroration was that household income will fall by the largest amount over the next two years since records began. Or that house prices will fall by a tenth. The chancellor skated over these figures to paint a rosy picture of a nation that, since 2010, has been the envy of the developed world. With the economy shrinking this year, voters are entitled to ask what planet Mr Hunt is living on. If such a heavenly body existed, it would surely be called austerity.
Mr Hunt thinks that by cutting the state’s budget, debts and deficits, he will restore the economy’s competitiveness through reducing wages, prices and public spending. So unpopular is the policy that it dared not speak its name for the last five years. Yet the chancellor thinks the public are going to back the Tories because the books could be balanced in 2026. Voters are being asked to prioritise an abstract idea over their wage packets and weekly shops, when both are being squeezed. Good luck with that, as the pollsters might say.
The chancellor, however, won’t miss an opportunity to grab the headlines. Mr Hunt has been watching revenues from taxation, especially that paid by households, beat expectations. The interest paid on government debt was also below what the bean-counters had calculated. Energy subsidies were lower than predicted. Even within the government’s fiscal rules, that meant extra cash was available to be spent. The chancellor has decided to hand cash over to motorists, the armed forces and big business. By happy coincidence, these are the very constituencies that need to be placated to keep restive Tory backbenchers happy.
On a day of industrial action, Mr Hunt decided there was no money to be found to improve the pay offer to striking public sector workers. The sums he has made available to motorists this year are just shy of the £6bn that experts think would have been enough to make an inflation-matching pay offer possible this coming year. Instead, Mr Hunt chose drivers over nurses, doctors and teachers.
The chancellor is extending some help in the next financial year. However, the scale of the giveaways tells a story of whom the Conservatives prize most highly. Before the next election, the defence budget will get almost as much as all the cash Mr Hunt proposes to spend in total on his childcare offer, climate investment in domestic sources of energy, and subsidies to keep down household gas and electricity bills.
Plainly, the chancellor thinks some voters are worth more than others. Abolishing the lifetime allowance on pensions is a big subsidy for well-off Britons and their children. A tougher sanctions regime for benefit claimants would be damaging and counterproductive. In fact, sanctions on disabled people are likely to increase economic inactivity, the exact “problem” Mr Hunt wants to solve. The temporary “100% capital allowance” is similarly self-defeating: the Treasury pays £28bn over three years, while the investment generated is only £18bn.
Post-Brexit Britain, contrary to the impression its proponents gave, is turning out to be a less productive place, which requires higher levels of net migration. The New Economics Foundation calculates public services will take a £22bn hit. Mr Hunt quoted the International Monetary Fund in his defence, which had said UK is now “on the right track” after the disastrous Liz Truss premiership. What Mr Hunt did not say was that the IMF’s figures showed the shrinking of the British economy made it not only “the sick man of Europe”, but of the G7 and the biggest 30 economies in the world. If this is what happens when the plan is working, then heaven help the country if it fails.