Philip Hammonds ambitions stretch beyond just about managing
The British chancellors autumn
statement today will give some clues as to the scope
of the May governments plans
Matthew d’Ancona
The greatest challenge facing British Prime Minister Theresa May is to be defined by more than Brexit. This is no small task. Britains prospective departure from the European Union (EU) has enabled her to declare that Britain is living in a new, post-David Cameron era whose parameters have been set by the quiet revolution of the referendum. Her main conference speech in October mostly written by her aides, Nick Timothy and Chris Wilkins was a significant document in the recent history of Conservative ideas, embracing unambiguously the good that government can do and pledging to put the power of government squarely at the service of ordinary working-class people.
Fleshed out into substantive policy, this would suggest a fundamental shift in Tory assumptions about the state. Yet, the electorates decision to leave the EU and its hideously complex ramifications threaten to eclipse all else that the PM hopes to achieve. This is the political context in which Britains Chancellor of the Exchequer Philip Hammonds first autumn statement today should be seen. The chancellors principal objective is to ensure stability and, in as far as he can, to future-proof the economy against the uncertainty the Brexit negotiations will inescapably nurture. But his political mission is to offer specific grounds for hope to those that the government has claimed as its prime constituency: the so-called jams, those just about managing, a close demographic relation of Ed Milibands squeezed middle.
Over the last week, Treasury sources were discouraging expectations that Hammond will execute a screeching U-turn and reverse the 3.4 billion (Dh15.6 billion) cuts in universal credit made by former chancellor of the exchequer George Osborne (and strongly opposed by his old foe, Iain Duncan Smith). Much more likely is a package of modest measures to assist those on low incomes help with childcare, a fuel duty freeze, a housebuilding surge sweetened by the promise of more to come as the public finances allow. Which, of course, is a constraint of wholly unpredictable severity. Mindful of the deficits scale, Hammond will not ditch austerity outright or even substantially: those expecting a spending bonanza on his watch are in for sharp disappointment.
But the cloud of unknowing into which UK plc is headed as it leaves the EU means that the fiscal future is less predictable than at any point since the crash perhaps further back. The Institute for Fiscal Studies warns that, between now and 2019-20, the chancellor must borrow 25 billion more than planned to cushion the blow of Brexit. The Resolution Foundation predicts a borrowing gap of 84 billion over the next five years. In the last week, the figure of GBP100bn has also entered the political bloodstream.
Today, we shall hear what the Office for Budget Responsibility will forecast. But all such prophecies require a family-sized health warning: Five months after the referendum, the fiscal outlook is emphatically a known unknown.
Yes, employment is up, inflation down and retail sales improving: the Brexiteers are duly crowing, insistent that the economic future is one of unprecedented rosiness. But tax revenues are lower than anticipated, imported inflation a clear and present danger as the pound falters, and global trade imperilled by a president-elect who believes he can protect the US motor industry with tariffs and reopen coalmines by political fiat. Against this blurred background, Hammond would be irresponsible to offer more than navigational signals. After a patchy start their relationship unfavourably compared in past months to the strong Cameron-Osborne alliance the PM and chancellor know they must march in lock-step this week.
On Monday night, in a speech to the Confederation of British Industry, May promised more money for research, science and infrastructure as the basis of the governments industrial strategy. Today, Hammond will add detail to these pledges, spelling out a programme of investment that may not set the world alight but will at least plot a clear trajectory. Expect, too, to hear a relentless emphasis upon productivity (entrusted to the able business secretary, Greg Clark), and upon the dual power of devolution and technology to close the gap between the south-east and elsewhere. As one cabinet source puts it: This is about Britain in 2030, not Britain in 2017. People need to understand the scale of the challenge. In truth, much of this is not new. In July, Osborne indicated his readiness to ditch the governments commitment to achieve a surplus by 2020.
As for infrastructure, it was the last chancellor who told the 2015 Tory conference: We are the builders. In the same speech, he even foreshadowed the central premise of Mayism: Ive always been able to see the problems with government. Now I understand too the power of government to drive incredible, positive change.
Accordingly, Hammond will doubtless pay tribute to his predecessor and declare fealty to his central mission: To tame the deficit, as the markets and responsible governance demand. But he cannot afford to be seen as an agent of docile continuity.
The writer was previously editor of the Spectator and also writes for the Evening Standard and GQ.
