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Tony Travers: Budget will settle whether Macmillan or Thatcher traditions in ascendancy

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Cabinet members for finance and council treasurers will have sympathy for Philip Hammond as he delivers his Budget this week. 

With demands for increased funding for public service pay and the NHS, radical tax reforms plus further cuts to the deficit, the chancellor remains in a very difficult position.

The fiscal cupboard is bare yet he is expected to use a one-off event to produce a transformation of the UK’s economic prospects.

He is also part of a war-by-proxy over Brexit. Brexiteers are desperate for the Budget to fail so the chancellor can be removed, hopefully to be replaced by one of their own.

This ongoing internal strife within the Conservative party is destabilising the UK’s negotiations with the EU27. Department for Exiting the European Union secretary David Davis is also the subject of a whispering campaign, with allegations he has been side-lined by No 10 in Brussels negotiations. What a mess.

It is now expected the UK will offer the EU27 a pay-off of up to £50bn, broadly equivalent to all of UK local government self-determined spending for a year, to kickstart negotiations about trade.

The country faces a stark choice between Mr Hammond’s attempt to smooth over the transitional challenges of leaving the EU or, alternatively, the potentially significant disruption caused by a cliff-edge Brexit. The latter is seen by some Conservatives as an opportunity to kick-start a different kind of British economy, with a smaller State and newly-galvanised industries.

Local government’s key interest in the autumn Budget will be changes to housing policy. The government is committed to a significant rise in housebuilding, though with no incursion into the green belt. How far will Conservative ministers be willing to intervene in the planning system, to use compulsory purchase powers and to reduce housebuilders’ land holdings?

Buried in the answer to this question, as to the approach to Brexit, is a philosophical one about the future of the Conservative thinking: is this a party descended from cautious interventionists like Harold Macmillan and Ted Heath or radical free-market liberals like Margaret Thatcher?

The UK faces a turning point. The 2017 autumn Budget will have provided one of the first signals about the future direction of (at least Conservative) thinking.

Tony Travers, director, LSE London

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