Why Philip Hammond will spend the Autumn down the back of the sofa

The government is considering lifting the 1pc public sector pay cap in the autumn Budget. In the post PMQs briefing, a No 10 spokesman said they had ‘heard the message’ from the ‘weary’ electorate and would look at recommendations from review bodies on the issue. However, just hours later at the afternoon lobby briefing, hacks were given mixed messages. The Prime Minister’s spokesman said ‘the policy has not changed’.

Now there are a few things to note here. Firstly, the fact they are even looking at the pay cap is a win for Labour. Not only have they tabled amendments to the Queens’ Speech calling for the cap to be dropped, it suggests that the Conservatives are losing the economic argument. When Ed Miliband was Labour leader he knew that any spending plans would give the Tories the opportunity to accuse Labour of having a ropey grasp on the economy and no plans to pay off the deficit. Now that the Tories’ own deficit target has been pushed until the next Parliament, these attack lines have less effect – and the Conservatives rarely bother to use them anymore anyway.

If the cap is scrapped it will please many Tories, with Chris Grayling, Michael Fallon, and May’s new chief of staff Gavin Barwell among those who have said the party ought to look at increasing the pay of public sector workers. What’s more, the very fact that it’s being pondered might be enough to prevent any Tories from straying and voting for Labour’s amendment.

However, it presents Philip Hammond with a challenge come the Autumn Budget. Scrapping the cap would not be cheap (the reason Osborne kept it was because it saved so much money) and Hammond already has to deal with the cost of the NICs U-turn and DUP deal. Add to this the fact that the vast majority of the Tories’ 2017 manifesto money saving measures have been scrapped and Hammond has an unenviable task on his hands.

It follows that the Autumn Budget is looking increasingly like it will be one of the big crunch tests of this government. And even if Hammond gets his party through it, the Conservatives’ economic record could receive some long term damage.