1. Mind the gap between the headlines and the substance
There’s been no change to the modern convention that any fiscal announcement should be comprehensively briefed in advance. So we can confidently expect headlines about a sharp deterioration in the economic forecasts, an equally sharp rise in borrowing, the details of a new industrial strategy and a huge rise in punning about JAM (the “just about managing” - which I've written about here).
How much of this will be a substantive break from the past? Obviously ignore the rhetoric – should it happen, borrowing more in response to bad economic news is nothing new, despite all the talk of abandoning George Osborne’s fiscal rules. It was the standard response throughout the last parliament.
Similarly government announcements about more money for science, R&D and skills have been a staple of fiscal events through Brown’s, Darling’s and Osborne’s times at the Treasury. So watch to see what is really anything new about the new industrial strategy (my betting is on a strong local dimension, reflecting Greg Clark’s influence).
2. Timing matters
When you hear the amount being spent on any particular measure, listen for the time period to which that figure applies. Ministers and the media have become addicted to “bigging up” their numbers by adding together changes from a number of years. This can make the numbers sound scarily (or reassuringly) large.
A good rule of thumb in assessing the importance of anything is that if it costs around £100m per year, then in public finance terms its essentially a small beer. Measures in a fiscal sense only start to matter at £1bn per year. At £10bn per year they can actually make a difference to how the economy and society works. £100bn per year and we’re at epic scale.
The important thing is to translate announcements into their “per year” equivalent. So the £100bn hole in the FT sounds epic, but it’s a number cumulated over five years of the forecast. Translated into “per year” figures, it’s basically not very different from the IFS’s forecast of a £25bn to £30bn per year gap. This is still serious money, but a good bit less epic. To her credit, when the PM announced the new investment in R&D, the £2bn figure she used was per year, marking both a substantial investment and a commitment to transparency.
3. Find the right document
Speeches by Chancellors and publications from the Treasury have become seriously unreliable over the past 20 years. As I’ve previously noted, they now set out deliberately to mislead, and Parliament has really done little to check this (though Andrew Tyrie does much good work on Treasury Committee).
So go to the OBR’s excellent Economic and Fiscal Outlook to see what’s actually happened. This will be especially important around the national debt, which for somewhat obscure reasons, could be artificially inflated. The OBR should hopefully give us a consistent time series.
Also check out one of my favourite tables – Table 419. This shows how much the OBR expects the government to underspend against its plans. The OBR’s answer used to be “quite a lot”, but is now “by very little”. Will we get to “not at all” this year, signalling that the government’s wriggle room around its spending plans has been entirely used up?
4. The good, the bad and the missing of public service announcements
Watch for what the Chancellor says about the public services – especially the NHS and prisons – that are capturing the headlines for all the wrong reasons. The worst thing we could see in the Autumn Statement is the announcement of more money in coming years for these areas. This would in effect be a sticking plaster solution.
Instead, it would be great to hear the Chancellor outlining how the government is approaching the reform of these services (things like making sure the NHS’s Sustainability and Transformation Plans engage people on how healthcare can be improved, not on how many hospital beds need to go). The Budget would then be the right time to consider how, and whether, serious reform plans need to be backed with more cash.
Of course, discussion of these spending areas may be entirely missing, despite the fiscal risk they pose to the Treasury’s numbers. This would be a missed opportunity.
5. It is all self-deception, of course
Philip Hammond has consciously set out to be different to his predecessors. He clearly wants to give an Autumn Statement that concentrates on the fundamentals, and to stay focused on his role as Chancellor. If he succeeds in this, he should be praised by all (and doubly so if he commits himself to having only one fiscal event a year going forward). But I rather fear that he would be accused of producing a damp squib.
So watch for this response, which would tell us far more about ourselves than it would tell us about Philip Hammond. Our political culture has created a glitzy environment which gets uncomfortably close to lying to us about things. If we don’t heap praise on someone trying to change that culture, then it’s clear we prefer the delusion.