Philip Hammond’s Mansion House speech this morning was sound in its rhetoric. “We must make anew the case for a market economy and for sound money,” he said, warning that “higher taxes and higher borrowing” must be rejected, taxes must be kept “as low as possible” or else they will “slow growth, undermine competitiveness, and cost jobs”. He repeated this language at Cabinet, telling colleagues of the “importance of making the case for a market economy and sound money”. This is all positive rhetoric. The policy truth is alas very different.
Hammond confirmed this morning that he still wants to push back closing the deficit until 2025, ten years later than the Tories promised. The Tories have added £500 billion to the national debt in 7 years, Hammond now plans to add a billion a week to the burden. That is not “sound money” by any definition of the term.
Taxes have risen under the Tories. The claim by the Tories to be a low tax party has not been true this century. They raised VAT almost immediately upon coming into office. They argue they have cut business taxes, yet they raised dividend taxes on small business owners and tried to raise National Insurance contributions. Hammond ditched the triple tax lock at the election. He has signalled further tax rises are likely. The tax burden under this Chancellor will rise to its highest level since 1969. That is not keeping taxes “as low as possible”.
Hammond is sounder on economics than Theresa May and her former aides. Talking up the “market economy” is clearly a slap down of the PM’s failed attempt at interventionism in the manifesto. Though his claim to be funding public services by anything other than more borrowing and more taxes is sadly all spin…