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Round the Corner Fudge is Made

November 24th 2016

Yesterday, Philip Hammond delivered what he promised would be the last ever Autumn Statement. This quirk of the British parliamentary year has long caused more problems than it solved. No other Western democracy demands that the markets and inward investors tolerate - in essence - two budgets a year. It creates uncertainty and disruption - business has long lobbied for a little more stability and for less mid-year dispatch box tinkering.


The reason that Hammond's predecessors have ignored these pleas is that the Autumn Statement has given them a second bite of the cherry. One more day of dominating the news agenda; one more morning of front page photographs of you and your 'box'; one more chance to bribe and cajole the electorate with goodies and prizes and 'targeted reliefs'. In abolishing this moment of political performance, Hammond is sending a message - unlike his predecessor (and many who came before) he will be a Chancellor focused on efficient ministry of the nation's finances rather than on his own or his party's mid-term fortunes.

Did the rest of the package deliver on that commitment? Well gone are some of the more egregious examples of political game playing and short-termism that we have become accustomed to in recent years. Hammond did not spin political traps for the sake of it and his repeated pledges to make best use of low interest rates for Government borrowing - to invest both in infrastructure and in boosting productivity - will have won him (quiet) supporters on all sides of the House. His £23 billion fund is not enough and is not all new; but it is a start and it points to a welcome strategic, long-termist perspective.

A vicious rumour has done the rounds in Westminster for the last few years. It concerns a tax break that George Osborne was determined to include in an Autumn Statement - one that would ostensibly promote investment in TV and film production. Civil servants, so the story goes, pleaded with the Chancellor not to go ahead. This poorly constructed relief would, they explained, be open to flagrant abuse and fraud. It would not serve the purpose that was intended and would prove costly to the Exchequer. But Osborne was determined and he went ahead anyway - solely because, so embittered Treasury officials claim, it allowed him to make a very well-received joke about Wallace and Gromit at Eds Miliband and Balls' expense. Yesterday, Hammond closed that loophole. He also changed a series of benefits-in-kind allowances that had enabled wealthy people to avoid tax and introduced new charges for advisers who devise complex avoidance schemes. The Government is getting serious about extending and maintaining our fragile tax base. There were big doses of continuity too, though. On personal and on corporation tax, the route-maps laid out by Osborne still guide this Government. And on the Northern Powerhouse (for which a new strategy was also published yesterday) Hammond is sticking to the plan.

Theresa May came to power with a promise of change. Her domestic agenda was radical and different to that of her predecessor. Her intent was clear and she was determined. Brexit - whatever that word will eventually mean - has blown her young Government off course in ways she could not have predicted. So it is, too, for her new Chancellor. A dry, fiscal Conservative who co-authored with George Osborne the austerity agenda that reshaped Tory thinking in 2008, he finds himself a reluctant and unlikely New Deal-er. A deficit hawk, he is presiding over record borrowing and unimaginably enormous debt. He is a victim of his circumstances.

At the end of his first (and last) Autumn Statement, Hammond acknowledged that he couldn't completely abolish the institution after all. The law requires him to appear before Parliament to respond to the OBR twice a year - no matter his preferences in the matter. And so a fudge has been reached, with a new 'Spring Statement' scheduled and the budget now moved to Autumn. Unkind observers may divine a cruel sort of analogy, there, for Mr. Hammond's efforts more generally.