THERE were lots of populist measures in Philip Hammond’s lengthy Budget statement yesterday. There were measures to aid the beleaguered high street, an increase in the National Living Wage, an extra £1 billion for defence over the next two years, and support for the fishing industry.
The basic-rate taxpayer will pay £1,205 less tax in
2019-20 than in 2010-11. There will be no rise in duty on fuel or beer. PFI is to be ended. Scotland is to get £950 million more through to 2020-21. All of this, plus an assertion that austerity is – finally – coming to an end.
The devil, as ever, is in the detail. The Office for Budget Responsibility swiftly made it clear that the Government’s fiscal windfall has already been claimed by Mrs May’s promise of extra NHS funding.
Mr Hammond’s tax and spending giveaway “leaves the medium-term outlook for government funding little changed since March”, the OBR added. Public finances have been left no stronger than before. The SNP said the Scottish resource block grant will be £1.9bn lower in real terms in 2019/20, compared to 2010/11.
The Chancellor’s income tax measures leave Scotland’s Finance Minister Derek Mackay with a dilemma. Mr Hammond announced a rise in the threshold of the higher rate of income tax, of 40p, to earnings above £50,000.
In Scotland, the higher rate is 41p, and kicks in at £43,431 – meaning the divide between tax rates north and south of the Border could increase if Mr Mackay does not take similar action in his draft budget. He must weigh up how much Scots are willing to pay in extra tax to support public services.
He has already announced the extra funding the Scottish Government will receive due to the rise in health spending in England will go to the NHS here but he must also decide whether to ensure the Chancellor’s rates relief is passed on to support Scottish businesses.
The roll-out of Universal Credit has left many families in genuine distress and with crippling debt. The Chancellor did at least acknowledge that UC has major problems as he announced measures to help those involved, but anyone hoping that the roll-out would be paused were left disappointed. And the continuing freeze on working-age and child benefits could push even more people into poverty than is already the case.
Several of the Chancellor’s pronouncements had a tinge of Labour red to them. Populist as the measures were generally, they could do nothing to camouflage the disastrous split in the Cabinet over Brexit or indeed the perilously uncertain outcome of the Brexit negotiations. His languid demeanour at the despatch box could not make us forget his warning that in the event of no deal being reached, he will have to return with an emergency budget.
Let us not celebrate yesterday’s Budget too soon.
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