Chancellor Philip Hammond yesterday delivered a lacklustre Autumn Statement which went long on narrative while offering very little that was genuinely new or, because of the extent of pre-briefing, surprising.
His unflashy presentation was a genuine departure – something he was clearly keen to highlight in his opening sentences, in which he compared himself to his predecessor Geoge Osborne, noting he was likely “less adept at pulling rabbits out of hats”. The style was also more strategic than tactical – setting the framework and overall objectives explicitly without taking it upon himself to set out the granular detail of everything the Government is doing.
The Chancellor was clear we are sailing into uncertain times, and need to be “match fit” for Brexit. In light of UK economic growth forecast to be 2.4 per cent less than if the UK had not voted for Brexit, he was unapologetic about the reorientation of the Government’s strategy, saying the Brexit challenge made more urgent than ever the need to tackle the economy’s long-term weaknesses.
To this end, Hammond presented his much heralded “fiscal reset” – essentially, an abandonment of any ambition to eliminate the deficit by 2020, with the “early 2020s” (more likely mid-2020s) targeted instead. This underpinned a fiscal exercise that was strongly expansionary – the Government is planning to spend up to £8bn extra annually by 2022.
The Autumn Statement was notable for its pre-briefing of the offer that would be made to the “Jams” (household that are just about managing) – playing to Theresa May’s focus on the same group.
In truth, they were offered relatively little, given the scope of the overall exercise. The most high profile measure here was probably the ban on letting agents’ fees. In a similar vein, Hammond announced the Government will consult on banning pension cold calling. The national living wage will rise further still from £7.20 to £7.50 in April, and the Government also reduced the taper rate that applies in Universal Credit from 65 per cent to 63 per cent – meaning workers will lose 63p, rather than 65p, of their welfare for every pound they earn above their work allowance.
In what has now become an annual ritual, fuel duty is also being frozen for the seventh consecutive year. None of this was a surprise. In fact, the only genuine surprise of the Autumn Statement – the 20 per cent rise in insurance premium tax, to 12 per cent from June – is something that will undoubtedly hit the Jams in the pocket at a time when prices will be rising due to the devaluation of sterling.
This perhaps betrays Hammond’s true focus. For all the narrative about Jam, the “meat” of the Autumn Statement was productivity and infrastructure – a play to business and an explicit response to the requests of business organisations.
Housing, research and development and transport were consequently the big winners. The regions outside London were also specific targets, with Hammond making clear his ambition to bring the output of the rest of the UK into line with the capital. This is slow-burn stuff. For this to work, Hammond will likely return to the theme in future fiscal statements. We can therefore expect that future fiscal exercises will double-down.
Hammond finished by announcing the end of the Autumn Statement and the reintroduction of Autumn Budgets. This was a clear return to the style of pre-1997 Chancellors – and heralds, hopefully, a more measured approach to policymaking, with a clearer view of the landscape and more forewarning of changes to come ahead of the point at which they are effective.
This feels consistent with a more strategic approach from the Treasury. However, although I do not subscribe to the view that this necessarily means the Treasury has been muzzled – it nevertheless leaves an open question about where the centre of gravity on key questions facing the Government now sits. Hammond as Chancellor controls tax and expenditure, and runs the Government economic service, which therefore determines much of Government thinking on economic outcomes (e.g., re Brexit). He also cannot be removed easily. The question is whether he will learn from his predecessors and assert HMT influence on the issues that matter.
James Dowling is head of public policy at Lansons