It can't have been easy for George Osborne to watch his successor abolish one of the former chancellor’s favourite political devices. Philip Hammond ended his sober assessment of the public finances yesterday by declaring that the Autumn Statement will be no more.
“No other economy makes hundreds of tax changes twice a year, and neither should we.” Instead, the country will have to make do with one annual budget and a brief statement in the spring, a requirement mandated by the Office for Budget Responsibility. Given this was the valedictory Autumn Statement, did it at least go out with some fireworks? Not really, no.
The statement was short, sober and at times rather insipid. The Treasury document accompanying the speech was just 64 pages in length – contrast that, for example, to the 121 pages consumed by Osborne’s Autumn Statement of 2013. It was also relatively light on gimmicks and political-fiscal trickery. Both of these changes, while depriving journalists of the bi- or even tri-annual drama to which we have become accustomed, should be welcomed. Hammond is keeping things simple: a much-needed trait, given the UK’s exceptionally over-complicated tax system.
Nonetheless, simplicity alone will not be sufficient to drag the UK out of the fiscal mess the new chancellor has inherited. In short, borrowing and spending will rise as growth and tax receipts decline. Tory ambitions for a budget surplus have been pushed into the long grass while government debt is set to reach a staggering 90 per cent of GDP.
Despite the lack of wriggle-room, Hammond still managed to find an extra £23bn to splash on a string of initiatives. The intention, no doubt, is to stimulate demand and thus boost tax revenues.
However, if such faith in unproven stimulus spending remains, then why rule out the growth-boosting potential for tax cuts? Rumoured cuts to stamp duty failed to materialise, as did any further reduction in corporation tax. National insurance is still too high for low-earners, and while Hammond promised to keep the Tories’ pledge to raise the 40p threshold to £50,000, it is increasingly difficult to see how this promise will be kept.
The chancellor may feel that now, ahead of a two-year period of intense Brexit negotiations, is not the time for radical tax reforms. But he would be wrong to rule them out.