It’s hard not to pity Philip Hammond, a man parachuted right into the post-Brexit crossfire when he was appointed as the new Chancellor.
To his credit, it’s been a steady performance since he has taken over number 11 Downing Street. Hammond has closely shadowed his prime minister’s deliberate steadiness.
Only on brief occassions has the the new Chancellor given a glimpse of his intentions.
In July, Hammond took a break from caution to state: “Over the medium term we will have the opportunity with our Autumn Statement, our regular late year fiscal event, to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months.”
The Chancellor’s debut Autumn Statement will be Hammond’s post-Brexit coming out party. It's hoped the event will finally elicit concrete policies from a government that has been - perhaps understandably - circumspect.
And the “reset” now has a date:
— HM Treasury (@hmtreasury) September 8, 2016
Well, what can entrepreneurs expect? There are a few high-level things we know for sure, mostly backlash from George Osborne’s inglorious sacking by the new Prime Minister.
Hammond has curtailed Osborne’s grand corporation tax (CT) cutting scheme. Speaking at a meeting of EU finance ministers last Saturday, Hammond referred to Osborne’s plans as “suggestions”. “Suggestions made in the last days of office are just suggestions,” he said definitively.
Osborne’s plan had been to slash corporation tax to 15% or lower, a move some saw as direct tax competition with other EU nations. Hammond’s disavowal of that plan comes as a peace offering before the cut-and-thrust of Brexit negotiations ensue. Hammond has still committed to lowering CT to 17% by 2020, however.
The halt to CT cuts could potentially be good news for small businesses, freeing up a little room to cut other taxes like business rates, income tax or National Insurance.
The May government has also toned down Osborne’s other passion project: his budget surplus plans. They’ve not been completely scrapped, though: Hammond has now said the plans have been “postponed” but not abandoned. It is, however, a clear sign of a chancellor who will be more cautious with spending cuts than the previous government.
In an appearance before the House of Lords economic committee, Hammond acknowledged the role of infrastructure projects, but rejected the notion of a full splurge. Instead, Hammond told the Lords: “It is modest, rapidly deliverable investments that can have the most immediate impact, particularly on the road network, but also in some places on the rail network.”
Notably, Hammond’s appearance offered a brief respite from the government’s sanguine post-referendum party line. The Chancellor warned further economic shocks are likely as the UK untangles itself from 40-plus years of EU integration. “We should be realistic and expect that over the period of negotiations there will be ups and downs,” he said.
It could be seen as Hammond laying a cautious foundation before the Autumn Statement. Just this week, the British Chamber of Commerce (BCC) downgraded its forecast for the British economy. The BCC forecast said the UK would “skirt with” but avoid a recession next year, with 1% growth.
The amount of any potential fiscal injection by Hammond will be heavily influenced by what the Office of Budget Responsibilities projections offer him.
About Francois Badenhorst
Francois is the deputy editor of BusinessZone and UK Business Forums.