Hamish McRae: Philip Hammond needs to make a mark on housing

There was the first Gordon Brown budget with his golden rule to limit government borrowing, which sounded great at the time but did not turn out too well in the end. There was the creation of the Office for Budget Responsibility by George Osborne (now editor of this paper), which has proved a durable innovation, giving an independent perspective on decisions made in the budget.

And I suppose if you go back further there was the emergency budget of Denis Healey at the time of the IMF bailout of Britain in 1976, which marked the turning point on the return to fiscal discipline after the dreadful early Seventies.

But most budgets just fade into oblivion, their grand initiatives and apparently clever tax tweaks quite forgotten. So the real test is not whether they cause a stir at the time — though given its weakness this government rather needs a political success — but whether they do an adequate job within the constraints imposed on them.

So what would constitute an adequate job now?

At a macroeconomic level, it is pretty clear that Philip Hammond needs to keep heading towards a balanced budget. He does not have to get there at any particular date and the markets will cut him some slack should, say, the Brexit bill prove larger than at present anticipated.

But at some stage, probably within the life of this parliament, there will be another global downturn, and we don’t want to go into that with a structural deficit of 5% of GDP (and a total deficit of 10% of GDP) as we had in 2010. You cannot plan for a massive recession such as the last one, and I don’t think that will happen for all sorts of reasons. But you can and should plan for a couple of years of dismal growth.

So far this financial year the numbers seem to be turning out rather better than they appeared in the spring: it looks like a deficit of rather less than £50 billion instead of rather more. But growth performance looks a little worse than expected, and the deficit still works out at around 2.5% of GDP. In this position the only prudent thing to do is to keep trying to grind the deficit down. It is not masochism; it is common sense.

As for the microeconomic elements to the Budget, I don’t think it is helpful to urge this or that measure on the Chancellor.

Every pressure group in the land has its shopping list of Budget submissions, because that is what pressure groups are paid to do.

Sometimes their warnings are sensible. Take the idea of dropping the VAT threshold so that businesses with turnover below the present floor of £85,000 a year have to register. It has been suggested that if it were £50,000 this would raise a couple of billion more in tax.

Well, maybe. But as the small business lobby has noted, it might just encourage more businesses to stay small. You might end up losing revenue, as the Government has done by doing away with tax discs for cars licences. It saved £10 million on the discs and lost something like £100 million of revenue. On the other hand, listen to a pressure group and you may end up creating a tax loophole that is abused and you then have to close years later.

A bit more attention to spending money wisely and a bit less on trying to tweak the tax system would be more than welcome.

There is however one aspect of public financial policy where the pressure groups do deserve a hearing, and that is housing.

We know the Government is setting a target of the country building 300,000 homes a year. We know too that housing policy in the past has been a disaster.

And we know that all sectors, from the private developers to the Housing Association movement, need to contribute to the solution. What we do not know is whether the present Government will do any better than its predecessors. But if Hammond wants to be remembered this is where he should make his mark.

We need more homes in this country, but they need to be in the right place and they must be decent ones.