The age of the imperial Chancellor is over. Gordon Brown and George Osborne relished in the theatricality of the Autumn Statement, springing policy surprises and roaming across departments.
Philip Hammond today drew the curtain on this era. As he paid tribute to a watching Osborne, he added: “My style will, of course, be different from his.” He would “prove no more adept at pulling rabbits from hats” than “[the] Foreign Secretary has been at retrieving balls from the back of scrums” (a jibe which visibly unsettled Boris Johnson).
The new Chancellor was true to his word. His only surprise announcement was an anti-rabbit: the abolition of the Autumn Statement. Hammond has ended what was a second Budget in all but name. The effect was slightly undermined by the announcement of a Spring Statement (responding to the OBR’s forecasts). But the change in style was unmistakeable. Hammond promised to avoid “a long list of individual projects being supported”, casting himself as the nation’s accountant, rather than an aspirant prime minister.
But what of the substance? Osborne vowed in 2015 to deliver a budget surplus by the end of this parliament. Since then, as Hammond understatedly remarked, “times have moved on.” The Leave vote, and the £59bn hit anticipated from Brexit, has ended what little hope there was of eliminating the deficit. The dry Hammond is no Keynesian but he recognises that the facts have changed. The ambition of a surplus has been postponed until the next parliament, with cyclically-adjusted borrowing only required to fall below 2 per cent by the end of this one (a looser target than Labour’s). The national debt, which will peak at 90.2 per cent in 2017-18, is similarly not due to decline until 2020.
In an age of uncertainty, Hammond has insured himself against economic calamity. But he deployed little of his potential firepower today. Though he explicitly borrowed to invest (as Ed Balls, rather than Osborne, proposed in 2015), he did so modestly: £23bn over five years. Austerity, Hammond made clear, has been modified, rather than abandoned. The departmental spending cuts announced last autumn remain in place and planned welfare reducations were softened, not scrapped. There was no new money for the NHS despite an ever-greater funding crisis.
Osborne is gone, but Osbornomics endures. At Prime Minister’s Questions, immediately before the Autumn Statement, Theresa May declared: “Austerity is about us living within our means”. Yet Brexit, and all that could follow from it, could force its abandonment. If the “just managing” can manage no more, it would take a brave government to impose further deprivation. The sober Hammond is hoping for the best but preparing for the worst.