03 October 2016

Philip Hammond’s speech marked a focus on the actual role of Chancellor – a welcome break with the last 20 years, says Julian McCrae.

Philip Hammond today gave a conference speech you might expect from a Chancellor of the Exchequer. It dealt with fiscal sustainability, raising productivity and, of course, the economic issues involved in Brexit.

The latter will undoubtedly get most of the attention – being hugely over-interpreted in line with a post-referendum tendency towards Kremlinology.

But the most important part was what was not in the Chancellor’s speech today.

While the big themes on productivity have changed little from Gordon Brown, Hammond avoided littering his speech with the standard conference fare of meaningless micro announcements.

On fiscal sustainability, the Chancellor signalled a continuation of Osborne’s de-facto 2010 to 2015 policy of controlling day-to-day spending, while borrowing for infrastructure and to cover the cost of any economic downturn. But he did avoid any of the Osborne political tank-traps, such as legislating fiscal targets, designed as much to discomfort the Opposition as to achieve any particular economic aim.

Having set out the high-level themes, the Chancellor’s task in the run-up to the Autumn Statement is to put the detail into the 'plan to deliver long-term fiscal sustainability' that he promised.

With the Chancellor unlikely to abandon George Osborne’s cuts to day-to-day spending, the Government still faces a huge spending challenge. None of the pressures on public services have gone away. The performance of key parts of the NHS, such as A&E, is still declining.f2The pressures on areas as diverse as social care or the prison service remain both obvious and severe. And Theresa May has inherited manifesto pledges, like the seven-day NHS, that commit her to not just maintaining, but increasing, the scope of public services.

As austerity is far from over, at the Autumn Statement Philip Hammond needs a plan to implement Osborne’s spending cuts while maintaining the scope and quality of public services. To be credible, this plan will have to set out a clear set of priorities, build on work already in place, and engage the public in the contentious changes.

This sounds obvious, but in the seven months between the 2015 Spending Review and the EU referendum, David Cameron’s Government conspicuously failed to do this. This Chancellor, who prides himself on getting the Ministry of Defence’s budget under control, will, no doubt, want this to make another break with the past.