Anthony Hilton: Years of short-term thinking mean that this Budget is doomed to fail

Philip Hammond let it be known his Budget would have to be revised dramatically if we crash out of the EU without a deal. We would need another Budget by Spring which would somehow need to keep the wheels of industry, and much else, turning: not so much an Emergency Budget as a “Salvage what we can” Budget.

But really?

I have no doubt Brexit will cause difficulties for the economy which both the Bank and the Chancellor will have to shore up. In fact it is already doing so. But so what? Budgets are all about the short term, when what this country actually needs is a long-term strategy. And there was no sign of that anywhere.

Austerity has not lifted because Theresa May said so in her Party Conference speech — which incidentally Hammond was furious about. Equally, austerity will not return if he does not get his deal.

The truth is that austerity is only just beginning in the country whether we leave or remain in the EU. Brexit or otherwise will not make much of a difference, or rather nothing like as much as if we managed somehow to restore productivity growth — basically to get the economy working more efficiently — so that people produce more with the same inputs. Without that, there will be no extra money for the NHS, mental health or the huge looming problem of long-term care because the economy won’t be rich enough to deliver the taxes.

Productivity means education — which is going downhill fast — not so much in secondary schools but in universities and further education.

It means investment, which is also going downhill fast, partly because of Brexit, but more generally because of the short-term focus of managers and their bonuses who therefore don’t invest in the future.

It requires an industrial strategy as invoked by Mariana Mazzucato in her book The Value of Everything, where government can fund and co-create resources for industries of the future, rather than leaving it to the market.

And it requires cutting back financial services so we focus on wealth creation which grows the economy, rather than wealth transfer which adds nothing.

Once that is sorted, we may have the tax revenues we need. If it’s not sorted, we are in dire trouble. We are fond of saying we have American levels of tax with Scandinavian levels of health and public services, but if that was ever true it is not so now. We have kept up the facade of not raising taxes but are running out of options. We have squandered North Sea Oil, privatised the utilities, destroyed the pension system, sold the council houses without building new ones, and imposed penal student loans. There is virtually nothing left.

And we did this while not investing in the economy and not investing in productivity, but instead going for cheap labour. That is why people have to work two or three jobs to make ends meet. That is why France and Germany have between 20% and 30% better productivity. We are the fifth-largest economy in the world, by some measures, but we are pretty well at the bottom of the productivity league of rich OECD nations. Government and MPs do not face up to this; they still think the tax baubles on the Budget Christmas tree mean something, just like a two-year old who can be bought off with tinsel.

The Institute for Fiscal Studies and the Resolution Foundation have done the sums looking out beyond 2030, and it is scary. More to the point, so has the Office for Budget Responsibility which, in the past few days, has been enjoying a warm glow of self-satisfaction because there was £13 billion more than expected in tax revenue, giving the Chancellor a bit of breathing space.