Things are going to get harder, and harder and harder.
So said Paul Johnson, director of the Institute for Fiscal Studies in his immediate response to the latest budget. The IFS is a highly-regarded independent research institute devoted to informing public debate.
And, as most people already knew, Johnson is right.
Despite mounting pressure to end the years of austerity, it’s going to continue getting harder for the vast majority of individuals and households whose real incomes will be squeezed further.
Public services like the NHS, social services and education which all depend upon government spending have reached the limit of what they can cut.
As a result of Hammond’s refusal to maintain budgets in line with inflation and extra costs, it would now be “impossible for many schools to avoid making redundancies”, warned Paul Whiteman, leader of the National Association of Head Teachers.
Analysis by the IFS finds that existing plans mean welfare, the health service and prisons face further deep cuts, regardless of the budget, leaving departments such as justice and work and pensions facing a real-terms cut of as much as 40% over the decade to 2020.
There will be a further £12bn cut in welfare spending by 2020/21, the NHS will face its tightest funding period since the 1950s and prisons will see a real-terms cut of 22%.
And, as the Office for Budget Responsibility, which guides the chancellor, told us all, it’s going to get harder for Britain’s economy, with its growth rate declining to less than 1.5% for the foreseeable future.
That’s an unsustainably low rate for a capitalist economy which must see a continuous growth in the production of commodities to counter the declining rate of profit. Many economists say that 3% is the minimum.
Attempting to reconcile these irreconcilably opposite pressures leaves Philip Hammond in an impossible position. It’s why his budget speech promise that 600,000 more people will get jobs countered the astonishing nonsense in his pronouncement in a televised interview days before that “there is no unemployment in Britain”.
And it’s why his flagship “solution” to the housing crisis, including the removal of stamp duty on properties costing up to £300,000 for first time buyers, immediately blew up in his face when it became clear it would drive prices higher – to the benefit of existing owners.
Despite money for Kensington council to help with the fallout from the Grenfell House fire, you’ll struggle to find any support for really affordable, rented social housing. Never mind piling 100% council tax on empty properties to solve the problem. What’s really needed is to release the vast estates of privately-owned land into social ownership.
Just as previous chancellor George Osborne’s programme of cuts designed to turn Britain’s deficit into a surplus by now proved impossible to achieve, so Hammond’s much less ambitious programme is bound to fail.
Hammond wants to raise funds for his budget partly by selling off shares in RBS – reprivatising the bank nationalised in the wake of the crash, but the current share price means a huge loss for the “taxpayer” – us.
He’s also changed the accounting status of housing associations to take their debt off the government’s books. But nobody is fooled.
Declining profitability induces declining investment, which means productivity cannot improve. These are long-term problems for the capitalist economy worldwide. With the known unknown effects of Brexit negotiations looming large, the UK’s finance-addicted economy puts it in a worse position than most.
In other words, Hammond’s dilemma is a reflection of a system in crisis which cannot be remedied by an accounting sleight of hand.
Still, there’s a silver lining. Because restoring the profitability of the capitalist economy is Hammond’s major focus, he’s set on a course for confrontation with the majority.
That will surely boost support for camp Corbyn especially if he and the shadow chancellor can show how the system is broken and put forward bold, democratic alternatives.
Bring it on.