- Philip Hammond’s budget fails to tackle the three big causes of the Conservative government’s decline in support.
- Young people and public sector workers have turned away from the Tories after years of austerity.
- Chancellor unveils modest measures on housing but fails to deal with structural problems in the economy.
- Austerity set to continue with public sector workers denied a pay rise.
LONDON -The Chancellor Philip Hammond today set out what he described as his “vision for post-Brexit Britain” which he promised will “build an economy fit for the future.”
However as Hammond himself acknowledged his budget was “about much more than Brexit”. In fact in many ways, it was actually about making the Conservative party fit for the future. With the party struggling both in the polls and at the ballot box, and the real possibility of the government’s fragile majority collapsing, Hammond needed something radical to begin the process of turning the Tories’ fortunes around.
The evidence from today’s budget is that he fell short. Here’s why:
Hammond needed a budget for the ballot box
When Theresa May failed to win a majority in the general election, wiser heads within the Conservative party pointed the blame in three directions. The first was towards their long-term and growing failure to appeal to young people. The second was towards their failure to appeal to public sector workers. The third was their belief that the public had grown tired of austerity.
The big challenge for Hammond today was to tackle all of those structural obstacles to the Conservatives remaining in power both beyond the Brexit process and at the next general election. Here’s why he failed:
There was little to win over young people
A YouGov/Times poll out this week found that just 15% of voters under the age of 30 plan to vote Conservative, down from 32% in 2015. There are several reasons for this long-term decline, some of which are cultural and some of which are political. Brexit in particular, which was overwhelmingly opposed by younger voters, has done a great deal to drive a wedge between the Tories and the young. However, there are broader and longer-term economic reasons why younger people have grown disillusioned with the Conservatives. Stagnant wage growth, the rise of the ‘gig economy,’ sky-high rents and spiralling house prices have all combined to deprive the Tories of their previous supply of younger affluent and comfortable voters, who would have previously been converted into life-long Conservative voters.
— Matt Chorley (@MattChorley) November 21, 2017
Housing, in particular, is a major problem for the Conservatives. In recent years the housing crisis has seen the majority of young people now locked out of the housing market and stuck on spiralling rents for the foreseeable future. Today’s budget does little to address this. Hammond announced that the government will raise the target for new homes to 300,000. Yet even if he were to achieve this, and the government has consistently failed to meet its housing targets over recent years, it will take years until this has a noticeable impact on house prices and even longer until it makes the housing market affordable for the majority of young people. He also announced the eradication of stamp duty for most first-time buyers. However, the independent Office for Budget Responsibility forecast that this will help just 3,500 people onto the housing ladder with the policy simply leading to even more unaffordable house prices in the longer term. They also suggest that the policy will mostly benefit exsiting homeowners.
Meanwhile none of the rumoured plans to allow building on the green belt made their way into his final budget.
There were other token measures to appeal to young people, such as a new proposed discount railcard for under 30s and an increase in the youth rate for the minimum wage. However, these will barely touch the edges of the systemic decline in support for the party among this age group.
Hammond failed to appeal to public sector workers
Analysis by the GMB in the wake of the general election found that public sector workers now outsize the majorities of in 85 Conservative-held seats. Among those prominent figures at risk from losing their seats and handing Labour a majority are Boris Johnson, Theresa Villiers, Amber Rudd, Zac Goldsmith and Nicky Morgan. The Corbyn-supporting group Momentum has been working hard to target these seats, with union campaigners dressed as “Maybots” descending on Westminster this morning.
Some senior figures in the Conservative party are now aware of the threat this poses the party, with Johnson, in particular, pushing Hammond to do more to appeal to public sector workers. However, successfully doing so is a big ask. Public sector pay has been frozen below inflation for years, leading to a real-terms decline in living standards for millions of teachers, nurses, police officers and firefighters. As a result, Hammond has been under pressure to lift the cap. But despite a partial lifting of it in some areas earlier this year, the chancellor has resisted a broader raise for the simple reason that he doesn’t believe he can afford it. For millions of already struggling public sector workers, austerity is set to continue.
He refused to shift away from Austerity
Today the Office for Budget Responsibility sharply downgraded both Britain’s productivity and growth forecasts as well as its business investment forecasts, meaning the UK’s finances look set to worsen over the coming years. This is even before you factor in the possibility of a Brexit-inspired downturn or a wider global recession, which some forecasters now believe is overdue.
So while Hammond accused his opponents of “talking the country down” in reality his own government are working on the assumption that the British economy is heading in the wrong direction and has restricted its plans accordingly.
Becasue of this there were no really radical pledges on either public sector pay or housing within the budget and Hammond again confirmed his intention to continue with austerity.
But by continuing down the same course as his predecessor George Osborne, Hammond has severely limited the prospects of the Conservatives overcoming the long-term structural reasons for the ongoing decline in support for the party among younger and public sector voters. And with Jeremy Corbyn’s Labour continuing to offer a clear departure from this agenda, the prospects of this budget triggering a big change in fortunes for the Conservative government now look slim.
Hammond’s real “Brexit vision” remains a gloomy one
Anyone who believes the claims of Theresa May and her Cabinet over the past year expect that Britain is currently on course for a glorious economic future in which we are finally freed from the grim fiscal shackles of the EU. Today Hammond boasted of his “optimism” for Brexit and said his budget would provide “a vision for post-Brexit Britain to grasp the opportunities that leaving the European Union provides.”
With this in mind, you might have expected the Chancellor to have today unveiled a radical budget in the anticipation of the vast Brexit bounties that we are to expect.
The fact that Hammond instead unveiled the hugely cautious, constrained and austere budget that he did, suggests that Theresa May and her government do not really believe that Brexit is quite the great economic opportunity they have claimed for the past year.
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