A budgetary statement by the Chancellor is where it becomes crystal clear that politics and economics are inextricably intertwined. So it was with this week’s Autumn Statement.
Mr Hammond’s measured (some would say dull) style seems more appropriate for the times we live in than George Osborne’s ‘look at me, I’m so clever’ approach – and the attendant banana skins on which he so often slipped.
The political message from this week’s statement can be summarized in two sentences: “Brexit creates what will continue to be a large negative shock to the UK economy. This government will manage that shock responsibly and in a measured way.” While we can all quibble, and no doubt will, about the detail behind that message, it is doubtless the message that was needed. And the Chancellor seems to have done a pretty good job of delivering it effectively.
However, the politics of the Autumn Statement made clear what we have all known for a while. The real opposition to the government lies within its own ranks in the conservative party. The official opposition from the Labour party might as well not exist. As a result, the Autumn Statement was primarily targeted at giving Conservative hard Brexiteers a dose of reality. There was not much of a thrust, or even a parry, at what would be expected to be Labour’s hobby horses.
So far, many of the headlines following the Statement have been consumed with the ideological Brexiteers’ response to the statement, their unwarranted attacks on the Office for Budget Responsibility and their utter rage at the Chancellor for suggesting that there might be any hint of negative economic impact from Brexit. The general reaction to Labour’s response to the statement can probably be summarized as ‘duly noted.’
Economically, the prime purpose of the Autumn Statement was to start the process of shoring up confidence. Confidence that has been badly shaken both by the Brexit vote and what has come to look like a government that is internally fractured and somewhat rudderless in defining its approach to exiting the EU. To achieve this aim, the Chancellor has had to navigate a narrow path. He had to show willingness to loosen fiscal policy and take on more debt to stimulate the economy now that monetary policy has largely run out of road. But he needed to do this in a way that did not signal panic and that reassured the markets there would not be some kind of irresponsible spending splurge. Expenditure would be targeted to areas that would generate the greatest returns to the economy. Helping the JAMs will clearly have to wait.
There is much to argue with and criticize in the detail of the Autumn Statement – not least the credibility of the link between infrastructure investment and industrial productivity and the continued heavy concentration of investment in the South East. Faster roads are not much help when your supply chain shipments from Europe are held up with paperwork at Dover. However, given the current political and economic situation, it is difficult to fault the Chancellor on his first step in handling the difficult situation we find ourselves in.
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