Like the UK Chancellor’s right to a tipple at the dispatch box, or the convention that the Deputy Speaker chairs the parliamentary debate, the annual scramble to make sense of the leaks which trickle from the Treasury ahead of the big speech is a Budget tradition. This year there wasn’t much to go on. There were the anticipated funds for social care and business rate rise relief, and a widely trailed announcement on grammar schools – but the consensus of the commentariat was that Philip Hammond had decided to ditch the sort of preparatory media feeding frenzy favoured by his predecessor and save the big announcements for the speech itself in the House of Commons.
Not for the first time of late, the experts were mistaken. The Chancellor didn’t have an Osborne-esque rabbit to pull from the hat – not even a scrawny malnourished bunny. The lobby fodder handed to the Westminster hacks wasn’t an aperitif for the main meal. It was the main meal. There were scarcely any really juicy morsels to be picked over in Hammond’s financial fare at all, although there was one lengthy passage on National Insurance reform for the self-employed, which even the accountants will take some time to digest. In the end, the most striking aspect of this Budget was what wasn’t there.
The Grey Blur
Observers had hoped that today’s speech would give some indication of the Chancellor’s overarching vision for the British economy. Philip Hammond has been an MP for two decades, but precisely what he stands for has become a newly fashionable topic for tea room conversation in Westminster. The bone-dry, Eurosceptic, avowedly Thatcherite fiscal disciplinarian of the not-so-distant past is the same man who campaigned to remain in Europe in June, kiboshed George Osborne’s deficit reduction targets in the Autumn, and then promptly announced an infrastructure spending splurge. It hardly helps that Hammond has drifted up the Whitehall ladder without leaving an obvious policy legacy, leading some Parliamentary colleagues to label him the ‘Grey Blur’.
This sort of ideological hand-wringing is usually the result of largely irrelevant Tory infighting, but Hammond’s intellectual sympathies are profoundly important for business and for the country – and not just because he is settling in for a long stint at the Treasury. They matter because we’re at a unique moment in British political history. This is why many thought the tone of today’s announcement would be so important. The kaleidoscope has been shaken; when the country eventually returns to a steady, discernable political pattern, it will look very different to the UK of 23rd June, 2016. Before then, a new political settlement will have to be reached.
Number Ten vs. The Treasury
Hammond’s boss, the Prime Minister, is in no doubt that the outcome of the referendum was more than just an expression of dissatisfaction with immigration. Like her bearded sage at No. 10, Nick Timothy, she believes that the outcome was a symptom of an economy which has left whole classes behind, and has set out to alleviate society’s ‘burning injustices’. If Downing Street has its way, this will involve some fairly left-field – Tory critics would say left-wing – thinking. Workers on company boards, mandatory caps on executive salaries: this sort of thing is anathema to Treasury mandarins, and it’s hard to imagine Hammond gleefully slashing corporate pay packets.
Hammond’s vague promise today was that if particular markets are failing, “this Government will not hesitate to intervene.” On that, he and the Prime Minister are united. It’s the nature of the intervention which could set them apart. It will be intriguing to see whether it will be No. 10 or the Treasury which ultimately gains control of the new, activist agenda. The litmus test will be the Government’s ‘Modern Industrial Strategy’. This scheme, while perhaps conspicuously not named in today’s speech, could be considered the unspoken backdrop to much of what the Chancellor was saying.
Plus ça Change?
The Industrial Strategy proposes specific ‘sector deals’, in which companies willing to take on apprentices, invest in UK supply chain providers or commit to certain social measures will be granted what amounts to preferential treatment – government contracts, perhaps favourable tariffs, and advanced status in the Brexit negotiations.
Like the executive pay proposals, it could change the terms on which businesses engage with the Government for a generation, or it could drift into obscurity in the labyrinth that is the new Department for Business, Energy and Industrial Strategy. It could bring to an end 35 years of laissez-faire Anglo-Saxon capitalism, or it could simply emerge as a new mechanism for doing what Government has always done, doling out small-to-medium-sized grants and loans to needy industries.
All of this depends on how Hammond shapes the development of the Strategy. On the evidence of today’s speech, he’s holding his cards very close to his chest – and if the political clairvoyants have taught us anything in the last twelve months, it’s that it’s best not to make predictions with cast-iron certainty. But it would be extremely unwise to underestimate Hammond, however dull he may seem. It was Leon Trotsky who originally coined the ‘Grey Blur’ insult, for his comrade Joseph Stalin – and we all know what happened to him.
For more, here's a video from my colleague Will Wallace: