Budgets are notoriously tricky political constructions that often unravel in the months that follow them.
But rarely do they fall apart as rapidly as Philip Hammond’s. Exactly one week after he had delivered it, Theresa May gutted it. She announced that the centrepiece - increases in national insurance contributions for the self-employed - were to be ditched. How damaging is this both for him and the government in general? What does it say about the prospects for Mrs May’s handling of Brexit? And should there be an election to get the government out of its problems?
Last week the Chancellor astonished his backbenchers by announcing that NICs for many of the self-employed would rise over the next couple of years from 9% to 11%, making their contributions more in line with what the employed pay. He needed the money to pay for the crisis in social care and to help small businesses faced with big hikes in their rates bills. But, he faced an immediate outburst of protest from those backbenchers.
First, they said, the move hit the very people the Tories were supposed to be supporting: small businesses. Secondly, hadn’t their party ruled out doing any such thing in its manifesto of less than two years ago?
Mr Hammond and Mrs May tried to defend themselves by claiming that the manifesto commitment had only been intended to cover NICs for those who work for employers (the great bulk of workers), though it was quickly pointed out that the manifesto did not explicitly state that. Then Mrs May said nothing would happen until the autumn, giving everyone some time to think about it.
But none of this proved enough. It was clear that the Tory backbenchers were having none of it. So, early on Wednesday morning Mrs May ordered Mr Hammond to back down. Later they sat together on the front bench to announce it. The Chancellor said that after listening to colleagues’ complaints, the government had changed its mind: the original proposal was not in tune with the ‘spirit’ of the manifesto commitment and there were would be no changes to NICs in this parliament.
What was striking about his statement, however, was his palpable belief that the policy had been the right one, and that sooner or later something like it was going to have to be implemented. In other words, he was not what he thought was right but what political circumstances had forced him to do.
The following day’s headlines were predictably full of talk of ‘humiliation’ and it is hard to make a case against that charge. Governments are not supposed to behave like this. Sir Oliver Letwin, a loyal former minister now on the backbenches, tried to put a brave face on it by arguing that, with a weak opposition, it is actually democratically a good thing for a government to have to listen to its own backbenchers, but even he could hardly be happy at the turn of events.
In the first place it suggests rudimentary political incompetence. David Cameron was spotted by a lip reader saying that there was hardly anything more stupid than breaking a manifesto commitment.
The fiasco also revealed malfunction between No 10 and No 11, both of which seemed to brief against the other over the weekend between the Budget and the U-turn. Even after the change of tack, the Prime Minister’s staff was letting it be known that she did not endorse her Chancellor’s admission that the policy had been against the spirit of the manifesto. Governments tend to fall apart when the Prime Minister and the Chancellor fail to agree. So the episode casts doubts on Mr Hammond’s future at the Treasury.
But perhaps most of all the capitulation is an indicator of the government’s weakness in Parliament. It has a working majority of only seventeen and although the official Labour opposition is universally regarded as inadequate, the government is still vulnerable to being defeated - not at the hands of Labour but by their own nominal supporters.
In normal times it may not matter too much when the government has to make a sudden change of tack on a measure in a Budget, however politically embarrassing it may be. But these are not normal times. The government is about to embark on two years of highly complex and politically controversial negotiations with our European partners over Brexit and will face choices about which many of its backbenchers have highly charged views. How, it is asked, can we (and, more importantly, those negotiating with us in Europe) expect the government to carry out those negotiations effectively if they are prone to being forced to change their minds by rebel Tories in the House of Commons?
To many the solution to this problem is obvious: the Prime Minister should call a general election. The idea behind this is simple. With Labour in such disarray and so far behind the Conservatives in the polls, an election would almost certainly return Mrs May to power with a much increased majority. Such an outcome would free her on many counts.
First, she would go to the country on a wholly new manifesto that would not tie her hands in the way the one she inherited from David Cameron does. She could release herself from commitments on NICs and much else.
Secondly, it would give her a bigger majority to see off her own rebels in the inevitable future disagreements about the terms of Brexit. An election this spring would also fit the timetable of Brexit negotiations. That’s because, although the Prime Minister is expected to trigger Article 50 initiating those negotiations at the end of this month, little substantive negotiating is likely to take place until after the French elections in the early summer and the German elections in the autumn.
And thirdly, a new mandate would help her with Scotland. This week Nicola Sturgeon, the SNP’s First Minister of Scotland, announced that her government wants a new referendum on Scottish independence, a policy likely to be endorsed by the Scottish Parliament next week. It seems unlikely that Mrs May would even try to throw out the idea completely but will instead want to hold out for a date after Brexit has happened. An election would allow the Prime Minister to put such a policy into her party’s manifesto and enable her to see off Ms Sturgeon’s tweeted sneer that Mrs May has no right to hold up the SNP’s plans, because she has ‘not been elected by anyone’.
If the Prime Minister were to go down this road this week’s embarrassment over the Budget U-turn would soon be a footnote in history. But will she do it? She has said in the recent past that she intends to plough on till 2020. The difficulty in doing so, such as she has experienced this week, may persuade her to change her mind.
What do you make of the Chancellor’s U-turn? Do you think it was humiliating, sensible or both? Do you think he can or should stay in his job? Has the fiasco damaged the Prime Minister in your view? And what do you make of the idea that she could call an election?
Let us know your views.
