Philip Hammond’s 'big' budget

Today’s budget is a "big" one. Or so I understand.

What does that mean?

Well, it cannot be big in terms of proposing anything radically controversial, because the Tories’ lack of a majority in parliament means all divisive radicalism is on hold, sine die (so forget about reducing tax breaks for pension saving because that would split the Tories - but funnily enough, beating up multi-national digital leviathans for tax is wholly uncontroversial and there will be moves in that direction).

I assume the "bigness" will be in the detail of May’s pledged end to austerity.

There has been considerable misunderstanding of Hammond’s caution when talking about this on Sunday. He’s fully signed up.

So I expect the budget to put flesh on the promise that the long years of famine for public services are drawing to a close, with the setting of spending targets for the coming five years.

To be clear, this will not be the set-in-stone expenditure "envelope" for the spending review that will establish departmental budgets from 2020 (and will probably be announced next summer, to give the departments time to plan).

They will be projections based on the assumption of the official forecaster, the Office for Budget Responsibility, that the UK leaves the EU on the basis of a negotiated deal that only slightly worsens our terms of trade with the EU.

These spending projections will be significantly more generous than expected, after eight straight years of shrinking public spending,after a near decade of acute austerity.

In large part that will be because the OBR has concluded tax revenues are likely to flow to the Exchequer at £10bn to £15bn a year higher for years to come than it thought only as recently as the spring.

But there is a sting in the tail for those of Hammond’s Brexiter Tory colleagues who prefer a no-deal Brexit to what they see as May’s vassal-state Brexit (her proposed concession the EU would continue to set rules for many UK businesses, as the trade-off for securing better access to the EU’s giant market).

The Chancellor had the option of setting the envelope today and initiating the inter-ministerial punch-up for improved funding for all those public services screaming the cuts have been too painful.

Yet he chose not to, because he recognises that a no-deal Brexit is a serious risk.

As you cannot have failed to miss, his and the Treasury’s view is that in the long-term the UK’s growth would be lower, and so tax revenues would be lower, if this country crashes out of the EU without a deal.

Hammond will announce the definitive total or envelope containing the funds available for spending as and when our Brexit terms are known.

In other words, his none-too-subtle message is that we cannot be confident the public-service famine will be followed if not by feast at least by square meals till the danger of no-deal Brexit has been eliminated.

So in what may well be his last budget - on the reasonable assumption this is May’s last budget too, and any new leader will want a new Chancellor - Hammond is not going out of his to seek a rapprochement with the true Brexiter wing of his party.

It will be pretty blatant blackmail to Tory MPs who say they would prefer no deal to a putatively sovereignty reducing deal: if they vote against whatever deal May negotiates, they can tell their constituents why there are fewer bobbies on the beat.

PS I would also expect Hammond to announce a more immediate and significant top-up of funding for the full roll-out of universal credit, to reduce the incidence of greater hardship for those on lower incomes.

And the Chancellor will confirm and even possibly accelerate Tory manifesto plans to increase the zero tax threshold to £12,500 and the top-rate threshold to £50,000.