The new chancellor is facing an £84bn black hole
The new chancellor is facing an £84bn black hole in the public finances thanks to Brexit, a new report from the Resolution Foundation suggests.
This is (yet another) death knell for Osborne-omics. As a result of declining growth and disappointing tax revenues, the £10bn surplus he had pencilled in for the end of the parliament is now expected to look more like a £13bn deficit.
Unsurprisingly, the Resolution Foundation welcomes Philip Hammond’s decision to ‘press the fiscal reset button and set a new economic course for the remainder of the parliament,’ rather than introducing substantial new tax increases or public spending cuts.
The good news for Philip Hammond, according to Resolution’s Matt Whittaker, is that despite increased borrowing costs, ‘by softening his fiscal target he has significant political and economic room for manoeuvre.’
“The leeway created by a new set of fiscal rules could afford the Chancellor the opportunity to make his mark on two key themes of the new government – boosting investment and helping ‘just managing families’ by reversing the social security cuts that are set to squeeze their incomes.”
Of course, it is welcome that the government is finally changing course on years worth of disastrously ill-conceived economic policy, though it shouldn’t really have taken a catastrophic blow to the economy for them to do so.
But what about the people who bore the brunt of that economic policy?
The people with disabilities hit by the bedroom tax, and by cuts to social care and personal independence payments; the low-paid workers denied in-work benefits; the NHS patients facing record waiting times and the doctors and nurses working overtime to try to plug the gap; the victims of domestic violence with nowhere to go because of cuts to refuge services.
For six years, these people have been told their suffering is in service of a greater purpose — a budget surplus by 2020. Now that that target has been summarily abandoned, those worst-affected by it deserve an apology from government, or at the very least an explanation.
And this isn’t just about Brexit, although that’s what Osborne would like us to believe. Resolution points out that ‘the government had already veered off course before the June referendum’, suggesting that many of the problems it identifies today would have arisen even in the event of a Remain vote.
But instead of recognising the failure of the previous governments — and despite her lofty rhetoric about the ‘just managing’ — Theresa May insists on defending the principles and practice of austerity.
As she pointed out in PMQs earlier this year:
“He [Jeremy Corbyn] talks about austerity — I call it living within our means.”
However, in light of all the recent economic and political upheaval, next month’s Autumn Statement will be an opportunity for Hammond to chart a new economic course for the remainder of the parliament.
Rather than promising a fiscal reset and then trotting out some form of pro-business austerity lite, he could offer tangible change to the millions already slammed by austerity, who are also going to bear the worst effects of Brexit.
The chancellor has already built up something of a reputation for challenging the PM’s ill-considered dogma — not to mention that of his predecessor. He should do so again next month.
Niamh Ní Mhaoileoin is editor of Left Foot Forward. Follow her on Twitter.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.