The recent Conservative Party Conference caused me to conclude (without amazing insight on my part, I must add) that the new Government is quite different from our last one. Fundamentally different.
The world it is operating in is different. Thanks to the outcome of the EU referendum it is an even more uncertain one – despite what some may strive to tell you based on economic performance since the vote.
Most will accept that fiscal (broadly, tax) policy will be influenced, if not heavily determined, by the political views of the ruling party, as well as the performance and predicted future performance of the economy.
Politically, Prime Minister Theresa May has made a big play for the centre ground. This was clear before the party conference; in fact, from her first day in office when she made her maiden speech outside Downing Street. But at the conference she put her position beyond doubt. Here are some extracts from her speech:
- “Our economy should work for everyone but if your pay has stagnated for several years in a row and fixed items of spending keep going up, it doesn’t feel like it’s working for you.”
- “Our democracy should work for everyone but if you’ve been trying to say things need to change for years and your complaints fall on deaf ears, it doesn’t feel like it’s working for you.”
- “And the roots of the revolution run deep. Because it wasn’t the wealthy who made the biggest sacrifices after the financial crash but ordinary, working class families.”
- “If you’re well off and comfortable, Britain is a different country and these concerns are not your concerns. It’s easy to dismiss them – easy to say that all you want from government is for it to get out of the way. But a change has got to come.”
- “It’s time to remember the good that government can do. Time for a new approach that says, while government does not have all the answers, government can and should be a force for good; that the state exists to provide what individual people, communities and markets cannot.”
- “People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer. A change has got to come. And we are going to deliver it.”
It could not be much clearer could it? Inclusiveness. And thus, over the course of the parliament, to the extent it does not damage the economy, you could expect to see some redistributive tax measures.
So what of the economy? Well, most seem to accept that after a pretty stellar post-Brexit vote performance, the forecasts going forward are pretty much uniformly pessimistic. There are exceptions and, given the inherent uncertainties, no one can truly know.
We do know that even before officially becoming Prime Minister, May had said the government would no longer seek to reach a surplus by 2020. As you will recall, this was a key target of the previous chancellor George Osborne.
The current Chancellor Philip Hammond is accepted as being less “showy” than Osborne and his policies, aligned to the general overriding narrative, are likely to reflect that. As for the Bank of England, Hammond seems committed to “doing whatever is necessary to keep growth from suffering too much”.
Monetary and fiscal policy have both been considered. The former in the shape of quantitative easing and low interest rates. Detail on the latter will be clearer on 23 November at the Autumn Statement.
Early in his time as Chancellor, Hammond said: “Over the medium term we will have the opportunity with our Autumn Statement, our regular late year fiscal event, to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months.”
I will look at the possibilities next week.
Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn