Philip Hammond was beaten up pretty badly at last night’s meeting of Tory MPs.
Colleagues rounded on him for hiking a tax on the self-employed (for which one can read, entrepreneurs) and for another raid on dividend payment tax relief. How exactly are Tory MPs meant to sell this to their voters? And how does it stand alongside claims to be the party of aspiration and enterprise?
No wonder business groups were furious, with one denouncing “a £1bn tax hike on those who set themselves up in business”, concluding that many of their members “will now see a significant rise in their tax liabilities.” Much of the outrage stems from the fact the 2015 Tory manifesto ruled out any hikes to National Insurance.
Read more: Philip Hammond picks a pocket or two
This is the kind of brazen tax raid that can only be carried out by a party riding 20 points ahead in the polls and facing an opposition that doesn’t know which day of the week it is. Hammond had promised a boring budget; instead he’s set himself on collision course with Tory voters and MPs alike. We can expect this row to run and run.
On the plus side...
Hammond’s fiscal prudence is extremely welcome. Our new chancellor is aware of the challenges facing the state in coming years, such as an ever-tightening squeeze on health and social care prompted by rising costs and an ageing population. He believes that the government must re-shape itself to adapt to these changes rather than banking on a magic money tree appearing from nowhere.
Read more: Was the Budget bad news for entrepreneurs?
Only with fiscal discipline today can we cope with the demands of the future. “Britain has a debt of nearly £1.7 trillion, almost £62,000 for every household in the country,” he railed yesterday. “We will not saddle our children with ever-increasing debts.”
The Labour benches, sniffing further austerity, jeered – to which Hammond rightly cited shadow chancellor John McDonnell’s astonishingly deluded plan to borrow an extra half a trillion pounds on top of the UK’s existing debt pile and deficit.
Any hopes of inflating the deficit away were knocked by the OBR’s forecasts, meanwhile, which show prices rising at a far lower rate than many other economists expect.
This, the fiscal watchdog thinks, means faster real wage growth – and thus a boon for Hammond’s chance of remaining popular with Britain’s workers. Or at least those on a payroll, rather than the self-employed.