This week's spending review will echo the cynical political budgets we thought were a thing of the past

It follows that some of the goodies on offer will be temporary. If people know that, they may well save their extra cash – and defeat the stimulus intended. We’re not fools, after all

When both parties have failed to manage the economy, who are we to trust? (PA)

There are three things to bear in mind about the (scheduled – anything can happen these strange days) spending review.

The first is that it hardly lives up to the name. Spending reviews are supposed to give everyone concerned – civil servants, NHS managers, generals, university vice-chancellors, local councils, headteachers – some idea of what will be happening to their budgets in the medium term. A five-year horizon is normal.

Reviews, especially the “comprehensive” variety Gordon Brown invented, are supposed to be grand affairs, like a modern Domesday Book: every item of government spending and each asset and programme undergoing vigorous cost-benefit review by HM Treasury, always seeking value for taxpayers.

Conservative governments pioneered the notion of a medium term framework for monetary and fiscal policy – they too were people with a “plan”.

Not this time round. Sajid Javid will, very unusually, be restricting his horizons to just the next twelve months. The ostensible reason for this is the obvious uncertainties surrounding Brexit. Yet by the same token it would have made much more sense to have a spending review – short term or longer term – in November, post-Brexit (scheduled – anything can happen these strange days).

Thus, the second thing to bear in mind is that this is very much a provisional pre-election giveaway budget of the old school. It is how governments used to run the economy. In the run-up to an election, the chancellor would cut interest rates (and thus monthly mortgage bills), cut taxes and boost spending on public services. The bills would arrive after the election, often with an inflationary consequence, and then there would be a programme of cuts, tax rises and interest rate hikes.

Independence for the Bank of England has taken some of that flexibility away, and the Fixed-term Parliament Act 2011 was designed to stop governments gaming the system. Yet Boris Johnson and Sajid Javid seem eager to resurrect an earlier, discredited, more cynical model of aligning the electoral and economic cycle.

It follows from that that some of the goodies the chancellor will be offering are at best going to be temporary. If people know that, they may well save their extra cash – and defeat the stimulus intended. We’re not fools, after all.

Javid’s predecessor, Philip Hammond was prudent enough to leave aside a considerable amount of “fiscal headroom”. In less technical terms, this was the ability for a chancellor to borrow money to try and support the economy and mitigate the chaotic damage under a no-deal Brexit. Estimates of the sums involved vary, but they could be as high as £46bn or as low as £15bn a year, depending on how you deal with a technical change in accounting for student loans and how the economy fares, all to help offset the extra spending that a no-deal Brexit might inflict on the public finances.

Under no deal, lower growth means lower tax revenues and higher unemployment benefit bills – maybe £30bn a year. Hammond’s headroom was designed to increase borrowing on top of that inevitable new burden, but to keep that bulge in borrowing within the existing fiscal rules.

Overall, Hammond kept to the fiscal framework established by George Osborne, which was to keep borrowing below 2 per cent of GDP per annum, and to see net debt falling as a proportion of national income. This, though, can only happen (if you are increasing spending and cutting taxes) when the economy is expanding at a healthy clip. It isn’t.

As it is such a short review, the Office for Budget Responsibility has, to borrow a phrase, been prorogued. Therefore there is no critique of the programme, and there are no fresh projections for economic growth, which has been sliding in any case due to a slowdown in the world economy, particularly the Eurozone, and because of trade wars, especially between the US and China. This is really no time to be looking for new trade deals.

This, then, is the third lesson. We are about to experience a highly irresponsible budget.

It is not driven by (non-existent) financial rules or official economic forecasts so much as campaign promises made by Johnson. Apparently, for example, Johnson has ordered a doubling of the increase in defence spending without even informing his chancellor (just as Javid's media adviser was sacked without his permission).

National debt stands at about 87 per cent of our GDP. It is manageable, but still high by recent standards, and was scheduled to be falling much faster. It is true that we can borrow at advantageous low rates today – but we should really not be borrowing at all, as we are not in a recession (yet). The point is that the cost of financing UK debt may not always be so modest, and certainly not for financing a rising “structural” deficit – the part that exists even when the economy is booming.

The UK could easily have its credit rating downgraded, and investors demand higher rates to finance day-to-day (i.e. not investment or infrastructure) spending. Plus we’d have no room for manoeuvre in the event of another financial crash or, as it goes, a long depression caused by Brexit. We couldn’t save the banks again, in short.

The headlines will no doubt be generous to Javid. Tax cuts will probably be there for the lowest paid – taking people out of national insurance if they earn less than £10,000 a year, for example. Johnson wants to improve incentives for folk on around £50,000 to £80,000 a year. Inheritance tax might be adjusted downwards. Corporate taxation will be eased, again to attract business post-Brexit.

For a change the mood will be one of post-austerity optimism. There will certainly be more for schools and hospitals, the armed forces, overseas aid and, as has been well trailed, the police. In 2020 to 2021, that is. After that, Javid may be asking for some of it, or maybe all of it, back.