It’s Budget Day! Five things to look out for…
Should Philip Hammond deliver a “revolutionary” new budget for Britain? Today he unveils his plans for the next year’s economy. As the pressure mounts, here are five areas he might address…
1/ Public sector spending. The head of the NHS has asked for £4 billion of extra funding in this year’s budget. Two weeks ago, 5,000 headteachers demanded more cash for schools. Unions want the government to “end the pay misery” of five million public servants. But how to pay for it all? As the deficit has still not been solved, so far Chancellor Philip Hammond has resisted calls for more money.
2/ Young people. This week, a poll found that just 15% of under-30s now support the ruling Conservative Party. Hammond is hoping to woo them back with a “millennial” railcard and adjustments to student loan repayments. But a third off train tickets may not be enough to satisfy a generation at risk of earning less than their parents. Which brings us to…
3/ Housing. Another name for those strapped-for-cash, Tory-hating millennials? “Generation Rent”. The UK’s housing crisis has left almost a quarter of a million people homeless, while London’s house prices have risen over 500% in 20 years. Hammond says house building is the Budget’s “number one priority”, and promised 300,000 new homes. But many are asking him to do more — such as abandoning the green belt or ditching stamp duty.
4/ Productivity. This is the value that an average worker can produce in an hour. For a long time, the UK’s economy grew thanks to rising productivity. But for the last decade, it has been flat. Hammond has announced plans to invest in areas like driverless cars and artificial intelligence in the hopes of improving the numbers.
5/ Brexit. The big one; the issue lurking behind everything else. Britain’s future outside the EU remains unclear. Most economists say it will hurt the country’s finances, but Brexiteers say it will give them the boost they need. Hammond needs to plan for the growing divorce bill and any economic unrest, but also says he will “seize the opportunities” of Brexit.
Phil ’em up
Time for a shake-up, say Hammond’s detractors. On one side, left-wing Labour supporters want him to abandon austerity and ease the pressure on schools, hospitals and other public services. They say this could be paid for by borrowing more money or raising taxes. On the other, right-wing Brexiteers want him to do something “revolutionary” to boost confidence in Britain outside the EU. The message from both? Go big or go home.
That is not how economics works, argue Hammond’s supporters. The books must be balanced, and spending money on projects you cannot afford will only cause more problems later. There are no quick fixes or simple solutions when it comes to a country’s economy — only small changes and difficult compromises. With the UK’s future so uncertain, Hammond is right to be careful.
- What would you most like to see in today’s Budget?
- How important is it for a country to run a surplus (ie, to earn more than it spends)?
- Government spending is currently around £800 billion per year in total. It has to pay for many public services such as healthcare, education, welfare, defence, housing, policing, transport, arts, sport, and repaying debt. If you were deciding on the Budget, what would your spending priorities be?
- Choose one of the five issues summarised in this article. Then, using your own research, write a news article about it in the style of The Day. Remember to include two opposing opinions at the end.
Some People Say...
“In human life, economics precedes politics or culture.”Park Geun-hye, former president of South Korea
What do you think?
Q & A
- What do we know?
- Philip Hammond has already announced a few headline-grabbing policies, such as the railcard and the 300,000 homes. He has also said that those asking for dramatic increases in spending will be disappointed. But this Budget is being seen as a big test of his abilities, especially after a couple of political blunders (such as falsely stating that the UK has “no unemployed people” on Sunday).
- What do we not know?
- Exactly what the Budget will contain, or whether Hammond can pull off a magic trick that satisfies enough people to save his job. The problem is that he does not have much money to work with; the Office for Budget Responsibility, an independent body, has released rather gloomy statistics and predictions about Britain’s economy.
- The difference between how much a government spends, and how much it raises in revenues.
- A YouGov poll of 5,000 people for The Times.
- Earning less
- According to a study last year by the Resolution Foundation.
- Green belt
- Around 1.6 trillion hectares of land where urban development is banned. The policy was introduced in the 1930s. The green belt land is mostly found around London and other large cities.
- Stamp duty
- A tax on legal documents when buying a house.
- This was partly down to the financial crisis in 2008. Today, however, the Office for Budget Responsibility (OBR) will scale down its predictions for Britain’s future productivity growth, making matters even worse.
- Driverless cars
- Hammond said that he is aiming for “fully” driverless cars in Britain by 2021.
- Divorce bill
- The amount that the UK will pay to the EU as a result of the changes due to Brexit. It is based on the UK’s previous commitments to EU projects, and other costs such as contributions to the pensions of EU workers. This week Prime Minister Theresa May said the total amount could be increased.