The political careers of Theresa May and Philip Hammond have been intertwined. Both studied at Oxford at the same time, entered the Commons in the same year, and came into the Cabinet together in 2010 – where they were fellow members of the so-called “National Union of Ministers”: that’s to say, drawn together by a common interest in protecting their departments’ budgets from George Osborne. Both were Remainers, and are details people, loners and older operators (she is 60, he is 61) who have risen through application and brains. So it was not at all surprising that when May became Prime Minister she appointed the Foreign Secretary, as Hammond then was, as Chancellor. Then the problems began – three main ones, to narrow it down.
First, Hammond turned out to have a different take on the economy to his boss. The Prime Minister has become an interventionist over the years: a believer in a “strategic” state, as she once told a conference organised by this website – in an industrial strategy, energy price caps, workers on boards, more council housing. The Chancellor, meanwhile, is an economic liberal or, to be more exact, a practical Conservative businessman who made several million prior to entering Westminster. He watered down some of these policies in Cabinet committee, which incurred the frustration of Nick Timothy, then May’s co-Chief of Staff, only to see them ramped up again in last spring’s Conservative manifesto.
While our hearts are with the Prime Minister (though not on some of the detail), our heads are with the Chancellor. ConservativeHome’s leitmotif is that all else must be adapted to the requirements of Brexit. The Government needs enterprise to make it work. This is not the time to risk investment, growth and jobs by, say, spooking business people about who will sit on their boards. Furthermore, May has mishandled Hammond. She expected an election landslide. It was reported that she would sack him afterwards, a claim that some in her close circle do not deny. She failed to win a majority. So she is now stuck with him – and a relationship in which trust has been damaged.
Next comes a difficulty which has less to do with the Prime Minister than with Conservative MPs. George Osborne was a dominant Chancellor who returned to the Treasury, after the 2015 election, with a small Tory majority at his back. His tentacles reached across Westminster and Whitehall. Yet he and David Cameron were regularly defeated in Parliament or had hastily to recast their plans, or both – on tax credits, disability benefits, Sunday trading, school academisation and much else. Hammond is a more traditional holder of his office and his department’s reach lessened after he took it over. But this did not prevent him from having to tear out a major plank of his first budget last March when he attempted NICs reform.
Downing Street must share responsibility with the Treasury for a schoolboy error – that’s to say, not spotting that the proposal was inconsistent with the 2015 Conservative manifesto. Now, post-election, the Chancellor must work towards a balanced Budget with no majority behind him at all. His party is demoralised by the loss of seats, voter exhaustion with the long squeeze on public spending growth and pay, and an electoral trend leftwards. The popular actions he could take in his coming autumn Budget all involve higher spending or tax cuts: more northern infrastructure, boosting his Productivity Investment Fund further, raising the status of technical education. There is a campaign to cut stamp duty. Hammond has this site’s sympathy in his struggle to get Britain back into the black.
This brings us to Brexit – his third problem area, and one in which his record is more mixed. The Chancellor is the Cabinet’s main force for an implementation plan. There is nothing objectionable to one in principle – that’s to say, withdrawing from elements of the present dispensation after we leave the EU in 2019, but before the next election is due in 2022 (after which any delay would be vulnerable to a new Government seeking to keep Britain permanently in an EEA-type arrangement, which would impossible to square with any proper system of immigration control, and hard to reconcile with the referendum decision to “take back control” ). For example, it may be that the computer system required to run our own customs system isn’t ready in two years.
In private, the Chancellor is clear that any EEA-style implementation period must end by 2022. In public, this view has somehow become blurred. Perhaps the reason is that the intricacies of leaving the EU – the difference between an implementation period and a transition period, say – are hard for most voters to follow. Maybe it is because of obscurities about the negotiating positions both of the Government and of its EU interlocuters. Or perhaps the continuing belief of hardcore Remainers that we won’t leave at all, proclaimed with all the fervour of Sioux natives performing a Ghost Dance, is muddling public understanding of the significance of March 31, 2019 – after which we will no longer be members of the EU, be represented in the European Parliament, or sit in the Council of Ministers.
But some of the fault must lie with the Chancellor himself. While he cannot be blamed for seeking to address the Brexit concerns of some parts of business, he has not embraced leaving the EU with the wholeheartedness of his Downing Street neighbour. His hesitations reflect a hostility to Brexit within his department – one with a withered reputation following the referendum. First, it lost a Chancellor who gave it a Gordon Brown-type grip on government; then it saw its alarmist predictions of a post-referendum recession comprehensively shredded. James Chapman has said that Boris Johnson should be jailed for his referendum claims. If so, he should be sharing a cell with Chapman’s old boss, the man who oversaw those Treasury forecasts – George Osborne.
Allies of the Chancellor are dismayed by the battering he took in this month’s ConservativeHome Cabinet League table. If raising his standing among activists is important to him, he could try two things during the run-up to Party Conference. First, ensure that the Treasury co-operates fully with Downing Street’s coming drive to publicise good news about Brexit more forcefully. And, second, make it clear that he is neither trying to “stop Brexit” – which is all but impossible in any event, given how the Article 50 process works – nor to turn any implementation period into a permanent EEA-style arrangement. In doing both, he would be preparing the ground for something much more important than our surveys – namely, restoring his political support within the Party before his Autumn budget, or trying to.