May you live in interesting times. On Friday Phillip Hammond must have been ruing his decision to cite Norman Lamont in his budget. This morning he must be particularly thankful that we live in a time of Brexit.
The anger and hostility that ended last week over the Chancellor’s ‘manifesto-breaking-budget’ gave way to discussion of Article 50 and a potential new Scottish referendum, with Labour also being criticised for their budget plans over the weekend. The debacle over National Insurance Contributions is unlikely to end in Theresa May giving “Spreadsheet Phil” the boot, but the Chancellor’s error might bind the Government closer to the promises of David Cameron, something Mrs May has been trying to avoid.
The issue with budgets – as George Osborne will tell you – is that it’s always the days and weeks after that cause more damage, as financial packages and incentives begin to unravel once they come under media scrutiny. Number 10’s insistence on not feeding the media often leaves the beast unsatisfied and moves the news cycle outside of their control. Yet again however Brexit has come to the aid of the Government’s media team, with much of the press coverage this weekend on the upcoming infighting within Labour over the next Scottish independence referendum to deflect inter-cabinet battles.
A lack of effective media engagement did however derail the Treasury’s intended story of the Budget, whatever that had been; but that no longer seems to matter, as Theresa May and the UK will have bigger things to worry about.
Back on Wednesday a major take away in the hour after the Budget had been the solitary mention of Brexit. The Chancellor has room to manoeuvre following the altogether positive outlook of the OBR’s updated economic forecast. Growth this year is forecast to be 0.6% higher than expected in November and inflation is expected to decrease by 0.4% over the next two years. Two likely factors probably dissuaded the Chancellor from discussing the project of extricating the UK from the EU. First of which is Theresa May’s desire to have her legacy be anything other than Brexit. The second is the impending cost of the UK’s divorce settlement. Hammond has previously announced his plans for a £60 billion Brexit contingency fund, a figure likely to rely heavily on increased borrowing, particularly if Michel Barnier can follow through on his demands for a £50 billion bill.
The next ten weeks for Hammond may not end in the same way they did for Lamont all those years ago, but they are likely to dampen his enthusiasm for advocating a softer Brexit. On Downing Street the traditional tensions emerging between Number 10 and Number 11 could also see Hammond frozen out, as the Prime Minister relies more heavily on her inner circle. Murmurs amongst the backbenches are not what the Government needs as the Article 50 Bill returns to the Commons, though a diminished Chancellor may provide a much needed shot in the arm for David Davis as he embarks on negotiating the UK’s exit from the EU.
A budget that set out as a U-turn on business rates looks set to lead to a U-turn on National Insurance. Though with the change from statements to budgets, at least the Chancellor will get a do-over in the Autumn. Well maybe… we’ll have to see how the next ten weeks turn out.