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Budget 2017: Fit for the next few days?

Budget 2017: Fit for the next few days?

🕔22.Nov 2017

We have become used to observing Budgets which produce last minute rabbits and grab bold headlines on the day, only to disintegrate as economists pore over the fine detail in the HM Treasury’s ‘Red Book.’ The question, writes Kevin Johnson, is whether this Budget, entitled Fit for the Future, will still be in tact in the next few days.

So, Budget day reviews need to be viewed (indeed written) on the understanding that assessments could change dramatically as more information emerges.

Watching Philip Hammond crack despatch box jokes at regular frequency did make me slightly concerned for the Chancellor.

An over confident gag or jibe today could well come back to haunt him if the Budget unravels like others in recent times. His speechwriters will be pleased that he delivered some half reasonable lines, but nobody will be suggesting Fiscal Phil takes over one of Peter Kay’s new arena dates.

Two headlines will dominate Budget coverage – economic growth forecasts down and a £44bn housing package, including the removal of stamp duty up to £300,000 for first time buyers.

However, the headline stamp duty measure has already been criticised by the Office for Budget Responsibility which says it is likely to lead to an increase in house prices and may only result in 3,500 people buying a new home.

It’s also worth stepping back to appreciate this is a Conservative Chancellor who has announced a decrease in economic growth forecasts and it is a Government which is still years away from delivering a balanced or surplus budget which was, after all, the central purpose of the 2010 Tory-led coalition.

Philip Hammond would doubtless point to the long term productivity challenge as the cause of weaker growth as well as highlighting the forecast additional 600,000 people that will be in jobs by 2022 according to the OBR.

Some measures to ease the introduction of Universal Credit, freezes on most duties and £3bn on Brexit contingency planning were among the raft of Budget measures announced.

Investment in driverless cars, a maths education initiative and rail cards for 26-30 year olds also featured, as trailed in the last few days.

Some extra money was promised for the NHS as well as a nod and wink that a recommendation for an increase in nurse’s pay will be approved.

As some commentators and MPs have already pointed out, there was a bigger spending commitment on Brexit preparations than on day-to-day spending on the NHS. Can anyone remember what it said on the side of that bus last year?

There was nothing on social care or police funding. It was as if two of the principal causes of the failed election gamble earlier this year had become a distant memory.

There was only passing mention today of a second devolution deal for the West Midlands. More details are promised tomorrow.

We already knew that the region will receive £250m from the Transforming Cities Fund which Mayor Street and the WMCA have committed to spending on the Wednesbury to Brierley Hill Metro extension.

The Chancellor also announced that he would spend £28m on three Housing First pilots in the West Midlands, along with Manchester and Liverpool.

The Treasury’s ‘Red Book’ tells us that the Devo Deal will include £6m for a housing delivery task force and £5m on a construction industry training scheme. The document also states that Government has agreed a “second devolution deal in principle…to address local productivity barriers.”

There will also be a £12m fund for helping Combined Authorities which have an elected mayor at their head across the next two years to help with capacity building.

We will have more details on the deal early tomorrow, but Chamberlain Files understands that the Government will confirm its intention to transfer police governance to the Mayor with effect from the next election in May 2020.

Elsewhere in the Budget, £6m has been committed to Midlands Connect as well as a “pilot manufacturing zone” in the East Midlands.

Funds are also being set aside in the Northern Powerhouse and Midlands Connect areas for connecting rail services to HS2.

Mr Hammond said he was backing the Northern Powerhouse, Midlands Engine and elected Mayors. In his response to the Budget, Labour leader Jeremy Corbyn said the terms Northern Powerhouse and Midlands Engine were increasingly met with “derision.”

In a surprising move, there will be a North of the Tyne devolution deal, worth £600m featuring an elected Mayor.

Greater Manchester will work with Government on developing a local Industrial Strategy.

Liverpool and Tees Valley will now begin talks on second devolution deals for their Combined Authorities.

London will pilot 100% business rates retention with other pilots to be announced by the Communities Department shortly.

Business rates will move to adopting the CPI rather than RPI measure of inflationary increase. Councils will be able to charge a 100% council tax premium on empty properties.

Local authorities will be able to apply for discounted lending to support high performing infrastructure projects.

Budget day may be nearly over, but it will take a few more days before judgement can be passed on its measures and the detailed policy announcements that follow.

We will back with more on Devo Deal II early tomorrow.

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