Autumn Statement 2017: The ‘long term’ Chancellor reveals a steady hand

Autumn Statement 2017: The ‘long term’ Chancellor reveals a steady hand

Kieran O'Connell

If Philip Hammond wanted his Autumn Statement to say one thing it was:  “I will take a different approach to George Osborne”.

You could say that the clue was already in the name: George ‘Submarine’ Osborne was renowned for his inclination to wield political power behind the scenes, surfacing for set piece events and then retreating once again, reportedly to avoid the fallout from the unravelling of his announcements.

Philip ‘Spreadsheet’ Hammond, with his eye for detail and former stewardship of two major spending departments – DfT and MOD – before leading the Foreign Office, always was going to be a different beast.

Watching growing populist movements around the world gain ground, and having already sensed the UK’s appetite for change made clear in the 23 July referendum, Hammond has put the brakes on the policy agenda which has defined UK politics and economics since 2010; austerity. Stating that he would relax the fiscal framework set by his predecessor, he has sought to create the space to achieve two things.

First, he aims to drive consumer consumption by increasing the amount of money in people’s pockets. Seeking to help low earners, he will soften the impact of the Universal Credit taper rate, while the Living Wage will increase next April. Planned cuts to fuel duty have been cancelled once again, while income tax thresholds are to rise.

Second, he wants to create long term business confidence in a UK that edges closer to leaving the EU, creating new incentives designed to deter corporates from postposing inward investment decisions. Recommitting to reductions to corporation tax and business rates, while announcing new funding for high value sectors will be a welcome precursor to his industrial strategy.

And in order to provide further commercial certainty he has cancelled the trend of presenting two fiscal statements a year. There will be a ‘Spring Statement’ in response to the OBR’s latest findings each year, but he has opted to present a single Budget Statement each Autumn from 2018 – no doubt turning Party Conference season into an opportunity to throw even more red meat to the faithful.

But perhaps most significantly, today’s statement could be interpreted as the first serious move to define ‘Brand Hammond’. Keen to move away from the spreadsheets and into the limelight, he has marked his desire to be seen as a long-termist Chancellor who got Britain Building.

Increasing public debt to fund new building and infrastructure projects has been anathema since the last Labour government (and is possibly aided somewhat by cheaper borrowing made possible by the Brexit vote). But Hammond foreshadowed his approach to today’s statement while speaking to a pack of reporters in Washington DC last month, telling them “when I say investment, I do mean investment”.

To Hammond the deficit, growth targets and public spending levels are not political levers on a headline-generation machine. There must be short term compromise between all components of the economy for the long term benefit, solving the productivity puzzle and boosting growth.

He demonstrated that he is comfortable providing new subsidies for housebuilding if it lowers the barriers to the first rung on the property ladder. He is equally comfortable with spending £23bn on infrastructure if it provides tangible benefits to people living in digitally disconnected parts of the South West or turning the Northern Powerhouse and Midlands Engine into tangible things.

There has already been speculation about whether No 10 intervened in what was meant to be a prudent, if somewhat dull, fiscal statement in order to provide some good news for ‘Just About Managing’ voters and to shore up business confidence ahead of Brexit negotiations.

I would argue instead that the Chancellor has taken a long term view on what will provide the best Return on Investment for a UK which is soon to leave the EU. He will be judged on the future impact of his decisions. His harshest critics will likely be his own party who, until now, were mostly signed up to Osborne’s fiscal plans. Hammond’s statement today represents a significant change in rhetoric around fiscal responsibility and committing to remaining indebted is likely to cause some disquiet.

But what today’s statement did make clear is that business must now frame their policy pitches in a way that are as far sighted as the Chancellor’s investment plans. Departments will be directed to consider the long term impact of any new commitments they make to industry and business must be sure that they can answer any questions about their sums. And with this being the last Autumn Statement of this government, the space to make policy proposals to each Budget Statement is set to become increasingly crowded.