The Key Lesson From OmNICShambles is How Urgently the Government Needs a Reboot
Comment of the Day

March 17 2017

Commentary by David Fuller

The Key Lesson From OmNICShambles is How Urgently the Government Needs a Reboot

There are your traditional U-turns, and then there are vicious, extraordinary punishment beatings of the sort Philip Hammond has just had to submit himself to. The Government ought to be congratulated for abandoning its absurd, manifesto-defying tax hike on the self-employed. But the way in which good sense has prevailed has been shocking, and casts grave doubt on the Chancellor’s political future.

His fall from grace has been astonishingly swift. No Budget in living memory has disintegrated so fast; no Prime Minister has resorted to forcing a Chancellor to confess in writing to having got it so utterly wrong. His tax plan had already been kicked into the long grass, and the spotlight had moved on to Scotland; and yet No 10 still felt the need to distance itself further from Mr Hammond’s omNICshambolic Budget, even at the cost of exposing a terminal breakdown in the relationships at the heart of government.

Listening to the Chancellor humiliate himself on Monday, one could almost begin to feel sorry for him: he sounded like a dissident who, after several rounds of torture in a sordid cell, realised that he would be forced to repudiate his core beliefs to avoid a full auto-da-fé.

Yet still he remained stubbornly defiant, clinging to the delusion that he would in time be able to reinstate his beloved tax increase, and even claiming, laughably, that nobody in officialdom or government had noticed that the policy was in breach of the manifesto.

His performance bore the tell-tale signs of a lame-duck Chancellor who has been assured that his job is safe but who in fact is now already on his way out, a mere eight months after being appointed.

Never mind that Theresa May had signed off on Hammond’s plans, and that it was she who hired Matthew Taylor, the Blairite, to shake up self-employment rules and taxes; the Chancellor has been ruthlessly sacrificed. The brutality of the put-down suggests that tensions over other aspects of policy were coming to a head, and that patience had been running ever thinner on both sides.

His relationship with the Prime Minister may thus never recover, an insurmountable problem in any administration but an especially dangerous and untenable one in a Government that is preparing to embark on the most complex project since the Second World War.

And:

Mr Hammond may bounce back, but the fundamental problem is that his economic policy is disastrously misaligned with the Government’s central mission of extricating the country from the EU. The Chancellor’s immediate, lethal mistake was to wage war on the Tory base; but his more profound error was to produce a Budget fit for a very different, pre-Brexit era.

Full Treasury buy-in is required for Brexit to work, yet the Chancellor’s support has continued to be half-hearted, and his Budget was a head-in-the-sand exercise, pretending that nothing was about to change. It wasn’t worth the paper it was printed on even before yesterday’s U-turn.

The first problem has been fixed but not the second. If he is to survive, he will need to change course radically. He will need to respond swiftly to events during the negotiations, reassuring and placating the financial markets and deploying a mix of carrots and sticks.

If banks threaten to leave, he should dangle massive tax and regulatory cuts; if car firms say they will up sticks because of the possibility of tariffs, he will need to promise to compensate them in other ways, while reminding them that protectionism cuts both ways. It will require toughness, skill, a permanent campaign and even a permanent Budget process: the full powers of fiscal and tax policy will have to be put behind the Brexit negotiating team.

David Fuller's view

The UK needs a Chancellor who is fully committed to Brexit, as I said earlier this week.  Mrs May has done a commendable job in winning over some former Labour supporters.  Mrs Thatcher did the same, while remaining our most effective Tory Prime Minister.  Mrs May will have a more successful Brexit if she shows from the outset that she a strong Conservative Prime Minister. 

Here is a PDF of Allister Heath’s column

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