Hammond v McDonnell on Budget ‘end of austerity’ claim


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Media captionBudget headlines in two minutes

Labour have dismissed the government’s Budget claim to be ending austerity.

Shadow chancellor John McDonnell said welfare cuts were continuing and public services could face a further squeeze.

But Chancellor Philip Hammond, who announced tax cuts as well as more money for the NHS and universal credit, said more spending was on its way.

He rejected criticism from teachers about giving schools money for “little extras” – insisting it was in addition to the normal funding process.

Meanwhile the Resolution Foundation said poorer families would be about £30 a year better off from the tax cuts, with the top 10% earners £410 better off.

The not-for-profit research and policy organisation said that better than expected public finances had given Mr Hammond an extra £74bn to play with – and he had used up three-quarters of that with the extra spending on the NHS, welfare and the income tax changes.

The personal allowance will rise to £12,500 and the higher rate threshold to £50,000 in April 2019, worth £130 a year for a typical base rate taxpayer.

Mr Hammond said the £1.7bn investment in universal credit would protect claimants moving onto the new system and save millions of families £630 a year. But some MPs said it was not enough to undo cuts already made to the system in previous years.

What else was announced?

  • £400m to allow schools to “buy the little extras they need”
  • A digital services tax aimed at tech giants
  • Help for first-time buyers of shared ownership properties
  • Another freeze in fuel duty
  • A £30bn package for England’s roads, including repairs to motorways and potholes
  • £900m in business rates relief for small businesses and £650m to rejuvenate high streets
  • Tighter tax rules affecting private sector contractors
  • A tax on plastic packaging which does not contain enough recycled materials – but no disposable plastic cup tax
  • An extra £1bn for the Ministry of Defence to boost cyber capabilities and anti-submarine warfare capacity
  • A further £650m of grant funding for English local authorities to spend on social care

There was a freeze on beer, cider and spirits duty, saving 2p on a pint of beer, 1p on a pint of cider, and 30p on a bottle of Scotch or gin.

Wine duty will not be frozen and a bottle will go up by 8p from 1 February next year, and a packet of 20 cigarettes has gone up by 33p.

Healthier forecasts

Mr Hammond said borrowing this year would be £11.6bn lower than predicted in March, at £25.5bn.

This helped pay for the multi-billion pound boost for the NHS, as well as more money for defence, schools, welfare and above-inflation rises in the income tax personal allowance.

The Office for Budget Responsibility said the spending promises represented the biggest Budget giveaway since the independent fiscal watchdog was set up in 2010.

It was the last Budget before the UK’s scheduled exit from the EU, and came with the final relationship between the two sides yet to be agreed.

There was an extra £500m to prepare for what happens if the UK leaves the EU without a deal – a scenario Mr Hammond has said would require a whole new Budget.

The chancellor also promised a “double deal dividend” if the UK and the EU reached agreement over Brexit.

Analysis box by Laura Kuenssberg, politics editor

First off, it is, on the face of it, a big change in direction – a Tory chancellor talking about turning on the spending taps again, rather than how to scrimp and save.

You’ll see headlines about the ‘biggest giveaway’ in a generation. That’s accurate in terms of the overall numbers, and the sense that government departments on average from next year will see spending go up not down.

And it’s different certainly to see a Conservative resident of No 11 putting that ahead of finishing off the attempts to clear the deficit. This chancellor is in fact seemingly content to let the deficit float up. That would have, until relatively recently, been considered heresy round his way.

Politically, it’s a big change of priority and has allowed the government to change its rhetoric substantially.

But if you look carefully, a huge amount of that money will be gobbled up quickly by the health service. After that, by some calculations, there simply won’t be much to go around – and some departments might even still face cuts.

Read Laura’s blog

The reaction

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Media captionJeremy Corbyn: “This is a broken promise Budget”

Mr McDonnell dismissed Mr Hammond’s claim that austerity – which refers to the public spending cuts that have been in place since 2010 – was “coming to an end”.

He said: “It is now clear austerity is not over, the cuts to social security will continue and Philip Hammond gave no assurances that departments won’t face further cuts.”

There was nothing in the speech to “repair the damage to schools, the police and local councils” he said, adding that the universal credit cash was less than a third of the welfare cuts still scheduled.

  • Corbyn – Budget is full of broken promises

Labour leader Jeremy Corbyn said the Budget had been full of “broken promises”.

The SNP’s Westminster leader Ian Blackford said the UK was “wholly unprepared” for Brexit, and Lib Dem leader Sir Vince Cable said the Budget was “a standstill non-event”.

Torsten Bell, director of the Resolution Foundation think tank, said the Budget had “significantly eased – but not ended – austerity for public services”.

He added: “Tough times are far from over. The chancellor has set out plans to spend almost all of a very significant fiscal windfall on extra spending for the NHS, bringing to a close the era of falling overall public service spending.”