Sky Views: Ending austerity is PM's big Brexit con

Sky Views: Ending austerity is PM's big Brexit con

   October 11, 2018  
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Sky Views: Ending austerity is PM's big Brexit con

When Philip Hammond agreed with the prime minister in June to find an extra £20bn a year for the NHS, he did so on one condition: other cabinet colleagues would have to accept that there would be no money left to spend on anything else.

The coffers were already empty and 'spreadsheet Phil' was now going to have to either increase taxes or borrowing to fund his boss's NHS "Brexit dividend" pledge.

Sources in the Treasury were clear at the time that all other departments would have to be put in a spending straitjacket if the Treasury were to have any hope of delivering on the NHS pledge, while also sticking Mr Hammond's self-imposed target of eliminating the UK deficit by the middle of the next decade.

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They also quietly agreed that the notion of this being a "Brexit dividend' was purely political spin: there was a consensus that any upside from the UK not having to pay a net £9bn-a-year into Brussels coffers would be offset against the loss of a weaker economy and softer tax revenues after exit.

And yet, three months later, Mr Hammond - in lockstep with No 10 - has turned his own narrative on its head.

Embracing a pledge

The chancellor told party activists in Birmingham last week that the prime minister was going to deliver a "deal dividend" that would give him a windfall to spend on keeping taxes low and investing in public services. He promised a "Brexit dividend" that went far beyond just the NHS. A day later his boss went further still, declaring that a decade of austerity was over.

At first glance it's all rather confusing. The chancellor, recently spitting over the prime minister's decision to tie his hands over NHS spending, is now wholeheartedly embracing a pledge that will punch a tens of billions of pounds hole in the public finances.

But closer reading points to a political play that makes perfect sense: No 10 and No 11 are binding the prospect of a Brexit pay-out to the passage of Mrs May's Chequers deal through the House of Commons.

"There will be a deal bounce," a Whitehall source told me as they explained why Mr Hammond was intensely relaxed about Mrs May's promise to end austerity. "If we get a good deal we will be able to spend more on public services."

This is all part of No 10's grand plan to put Brexiteer rebels - and Labour MPs too - under maximum pressure to back the prime minister if/when she returns to parliament with some sort of Brexit deal. Her big sell to recalcitrant backbenchers will run something like this: "Vote me down and bring on economic Armageddon".

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