Autumn Statement: Hammond’s opening skirmish

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A relaxed and occasionally humorous Philip Hammond yesterday took the Commons and the country through a sober and measured Autumn Statement that contained few theatrics.

Chancellors tend to be a breed apart from other politicians, characterised by tenacity to the point of being bloody-minded, and often with rapier wit. John Harris interviewed a handful of them and you can’t help thinking the job is a form of warfare.

Philip Hammond fought his first engagement, and it was a skirmish rather than a full scale battle. The initial reaction to the statement is generally a phoney war, until the likes of the Institute of Fiscal Studies lay down a bombardment of analysis, trying to cut the barbed wire of the mass of detailed statistics that usually lie behind the statement.

Hammond chose the ground on which to fight carefully.

Firstly, he relaxed Osborne’s fiscal straitjacket so the country will borrow a lot more. Borrowing is up 129% from £94bn to £216bn, over the five years to 2020-21, and public sector net debt will continue to rise as a share of GDP, peaking at 90.2 per cent in 2017-18.

Secondly, he (or rather the Office for Budget Responsibility) put a cost on Brexit. The OBR forecasts that the EU Referendum will hit growth by 2.4 per cent over 5 years.

Thirdly, he is determined to address the structural problem of productivity in the UK economy. The UK performs poorly on productivity compared with other Western developed countries, none of which is doing well.  Productivity is now the economic lodestone of the Government.

Fourthly, we had the much anticipated investment in infrastructure. The Government had briefed that it was walking back from large scale projects, but buried away was a proposal to work up plans for HS3 and a decision to come out in favour of Crossrail 2.

The Chancellor worked from the Brownite playbook, stitching together a range of existing, new, and aspirational projects into a portfolio attracting a very large amount of money.

Indeed, the aspirations and the numbers were pretty similar:

“To tackle obstacles to housing supply, the Treasury has supported the Deputy Prime Minister’s Sustainable Communities Plan – a long-term programme of action backed by £22 billion of investment to improve housing and planning in order to build sustainable thriving communities, linking housing policy to improvements in public services, transport and the environment.”

Ed Balls, speech to the Chartered Institute of Housing, 15 June 2004

“I can announce today a new National Productivity Investment Fund of £23 billion to be spent on innovation and infrastructure over the next five years. Investing today for the economy of the future.... The challenge of delivering the housing we so desperately need in the places where it is currently least affordable is not a new one…So we will focus government infrastructure investment to unlock land for housing…”

Chancellor of the Exchequer, Autumn Statement, 23 November 2016.

This is not to make a political point, but merely to observe that we’ve been here before and this time the Government really has to follow through.

The Chancellor listed a gamut of investment in the digital railway and telecoms, the commitment to roads and housing, and the more balanced spread of funding including to Northern Ireland, and much more, all of which will provide welcome jobs and growth.

But the Chancellor is going to have to hold his nerve in the run up to the 2020 General Election by which time the full force of Brexit’s economic impact will be felt.  And for that he may well need tenacity to the point of being bloody minded.

Julian Smith is Head of External Affairs at APM and writes in a personal capacity.

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Posted by Julian Smith 2 on 24th Nov 2016

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Julian Smith is head of external affairs at APM.

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