Do you remember the days when the big debate in British politics was not interminable talk of backstops, parliamentary process and obscure trade deals? The days when it was about something far more simple: tax and spending.
When Philip Hammond stands up at the dispatch box on Wednesday to deliver the spring statement, the agenda will remain all about Brexit. The traditional levers of government policy used to influence our everyday lives – income tax, NHS spending, school budgets and so on – will take a backseat.
The chancellor is likely to argue that money has been set aside for a no-deal Brexit, but should it be avoided, he can use these funds to end austerity. The thinly veiled threat – coming on the day of the crucial vote on whether to leave without a deal – will be this: do not drive over the cliff, because doing so will ensure years more of austerity.
Hammond’s message is important. Which Brexit path the country takes will have a fundamental bearing on the exchequer. But it’s also worth remembering that warnings of economic oblivion and bankruptcy have been favoured weapons in the Tory arsenal for years. And it’s starting to wear thin.
Can Hammond’s party ever be trusted to bring austerity to an end? Many will regard that as some sort of macabre joke, were the stakes not so high.
Public services are in deep distress, with the latest evidence, were any more needed, from the police and schools. The benefit freeze remains in place for the fourth year running, driving up inequality in an already split society. Millions of families have suffered from benefit cuts, including the hard-working variety the party says it stands for.
Despite their posturing as the party of fiscal credibility the deficit remains firmly in place under the Tories. When George Osborne was chancellor, he promised that the books would be balanced by 2015. Yet Britain is little better for the years of pain inflicted – if anything, matters are worse as the economy lacks resilience after years of cuts.
Public borrowing has fallen from a post-financial crisis peak of £153.1bn in 2009-10 but it is still forecast to be £25.5bn this year. For the most part the Conservatives have recycled savings from austerity into tax breaks for the better off.
Analysis from the New Economics Foundation this week shows that raising the tax-free personal allowance to £12,500 and higher-rate income tax threshold to £50,000 will cost as much as £30bn. The financial benefit of the increases have benefited higher-income households most and further stoked inequality.
At the last budget in the autumn, Hammond agreed to boost NHS spending by £20bn a year by the early part of the next decade to satisfy a promise made by Theresa May. But even faced with this additional cost, he chose to give away more handouts to the rich, meaning the policy has so far been funded by higher borrowing.
When asked about higher borrowing, Hammond has said that it can be smarter to cut the country’s debt pile through growing the economy – essentially conceding that Ed Balls was right all along and that austerity was a political choice.
The deficit is still expected to remain as high as £19.8bn in 2022-23 according to the Office for Budget Responsibility, the government’s own tax and spending watchdog.
Hammond pledges to stick to the Tories’ target to balance the books by the mid-2020s.But as the Institute for Fiscal Studies has said, such an aim is “for the birds”.
But something will need to give in the years ahead. Deficit fetishism carries a serious health risk, is economically illiterate and most importantly lacks the much needed flexibility to adapt to changing economic times.
One of the country’s oldest and most respected economics thinktanks, the National Institute of Economic and Social Research, argued in a paper last week: “Independent of the path EU Exit will take, planned spending increases will not be enough to accommodate sustainably the needs of an ageing population and to maintain the quality of public services.
“Weak productivity growth, an ageing population, the need for improved public services and the risk of an adverse Brexit outcome will mean that public expenditure will have to rise above current plans.”
Hammond has said he will conduct a spending review in the summer and will likely argue he has met the aim of ending austerity. But is he the right person to trust to kickstart spending? If past performance is any guide to the future, the answer ought to be clear: it is not the Conservatives.