We asked economists what they want from Philip Hammond's first Autumn Statement

 
Jasper Jolly
David Cameron Chairs Weekly Government Cabinet Meeting
Man of mystery: Philip Hammond will reveal his first Autumn Statement on Wednesday (Source: Getty)

During the rapid post-Brexit shuffle at the top of UK politics many a word was spoken in haste, and perhaps none more so than confident predictions that Philip Hammond would put paid to George Osborne’s austerity politics with a bold return to Keynesian government investment.

That might have been a bit rash, but it demonstrates the air of mystery around the most powerful man in Britain. The chancellor will reveal a bit more of his thinking on Wednesday, when he delivers his first set-piece event: the Autumn Statement.

We asked economists, think tanks and industry groups what they thought should be in there.

Something borrowed

Economists’ eyes will be on the updated forecasts from the Office for Budget Responsibility. The independent OBR will evaluate where it thinks Hammond’s plans will take the UK economy, after abandoning the pledge to eliminate any deficit after 2020.

The widely respected Institute for Fiscal Studies predicts Hammond will have £25bn less to play with than Osborne-era predictions, which could make it politically harder to borrow to invest.

Why the borrowing? Freed somewhat of Osborne’s deficit reduction target, Hammond could look to invest to boost long-term productivity. Investments in productivity are seen by some as a win-win, as the government can recoup money later in increased tax receipts.

"If the announced measures are bold enough, they might have the potential to deliver a recovery in productivity that will support a sustainable improvement in the UK's fiscal position in the long term," according to Joan Hoey and Danielle Haralambous from the Economist Intelligence Unit.

Build and productivity will come

Roads and railways could also receive a boost. Hammond should focus on the “unsexy” investments, according to Scott Corfe of the Centre for Economics and Business Research. “Research consistently shows that road projects provide far greater value for money than ‘sexy’ rail projects such as HS2.”

A different approach for rail would be welcomed by the Adam Smith Institute: Ben Southwood, head of research said, “HS2 is a giant wasteful white elephant, whereas meaningful improvements to Northern commuter lines are just ignored.”

Housebuilding could also get a boost to tackle supply shortages. The latest figures on affordable housing in particular show falling numbers being built.

“The chancellor should take immediate steps to address concerns around housing, and should start by halting the ongoing fire sale of public land,” said Laurie Macfarlane, an economist at the New Economics Foundation.

The nation's taxation

Every interest group in Britain has a case for tax cuts for their sector. Hammond’s task is balancing the competing sectors.

The corporation tax rate is already due to fall to 17 per cent but pressure is already coming from business for further falls. "The corporation tax rate could go down to 15 per cent and as far as 10 per cent (for some profit streams at least) in order to keep the UK competitive in a world of higher tariffs/import duties,” said Lee Nuttall, head of tax at law firm Gowling WLG.

Read more: BBA chief calls for clarity for banks on Brexit

Ben Southwood, head of research at the free-market Adam Smith Institute, wants a wholesale change to how taxation in the UK works.

“My main hope is a long term strategy for rationalising and improving our creaking tax system. It’s too complicated and it does too much damage to economic efficiency for the amount it raises."

Brexit and the City

If ever there were a time to deliver some running commentary on Brexit, this would be it. The City in particular will be looking for any signs of what to expect for the UK’s relationship with Europe.

The British Bankers Association is calling for an “agreement on transitional arrangements as part of any implementation and confirmation of these arrangements as soon as possible.” They also want a clear approach to passporting and cross-border data transfer.

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