For a man who wants to abolish the Autumn Statement altogether, Philip Hammond is making the most of his first today – unless argues that he is deliberately undermining the whole exercise by announcing big chunks of it in advance.
The morning news is crammed with details of the package, which include:
- A softening of George Osborne’s reductions in the value of Universal Credit. The former Chancellor set the taper rate at 65p in March. This meant that for each pound a worker earns over a fixed threshold, he or she will keep 35p of their benefits. The Chancellor is expected to today that he is lowering the taper rate to 63p. The move will cost £1 billion.
- The National Living Wage will rise by 30p an hour to £7.50 from next April.
- £1.4 billion for 40,000 new homes and more flexible use of existing funding for affordable housing.
- £1 billion for broadband and the mobile network.
- £1.3 billion for roads and other transport projects.
- £37 million of handouts to military charities and other groups funded by fines on bankers.
- “Billions on research and development” to help create higher skilled and wage jobs.
I make that a cool £4.7 billion, not counting the unspecified research and development money, and counting.
However, it is also reported that the package will be fiscally neutral. So prepare for some new tax rises this afternoon: all we have had to date, pretty much, is a crackdown on salary perks. This morning, the Times reports that national debt is to hit a 50-year high.
My sense is that Hammond or Downing Street or both are determined to wring a day’s worth of positive headlines from the statement. Which suggests that they think tomorrow morning’s may not be. Which in turn may mean that they fear a backlash from the Brexit-supporting media over gloomster forecasts about growth and borrowing.
Our view is that given the trio of uncertainties – Donald Trump, what elections may throw up in the Eurozone, and the Brexit negotiations – the Chancellor has no alternative but to leave himself maximum room for manouevre.
However, this is not, repeat not, the time for making cuts in personal rather than business taxes. The time in the political cycle for these is nearer 2020, and consumer spending is healthy in any event. Extra borrowing should be concentrated on “shovel-ready” infrastructure investment – and there is limited room even for this.
Finally, there is a golden rule about any initiative from the Government (or should be). It is that everything it does must be placed in the context of Brexit. Which is why Hammond today should show the Government’s sense of direction over regulation, business taxes and tarrifs for an Open Britain after we have left the EU.