The economic consequences of Philip Hammond

What are now called ‘fiscal events’—the Budget and the Autumn Statement—have become the biggest dates in the Westminster calendar. The Chancellor lights up the landscape with political pyrotechnics. There are attempts to bribe prospective voters through tax and spending changes, a litany of pork-barrel projects designed to help individual MPs, and fiendishly complicated schemes no one expects. But with the Treasury under new management, this will all change on Wednesday.

Philip Hammond is the least political Chancellor Britain has had for quite some time. The two longest-serving incumbents of recent times, George Osborne and Gordon Brown, doubled up as electoral strategists whose fiscal policies were informed, above all, by political aims. Hammond is different: he does not see this job as a stepping stone to another. Addressing Tory MPs recently about his plans for the Autumn Statement, he mentioned Labour only once in more than an hour.

But the limits to his ambition, and his dislike of the limelight, shouldn’t blind us to his importance. He has already made it clear privately that if the economy grinds to a halt and he needs to introduce a fiscal stimulus, he would rather embark on an infrastructure splurge than cut VAT. Hammond’s logic is that with infrastructure spending you have something left to show for it afterwards — whereas with a VAT cut (Alistair Darling’s policy after the crash) you simply boost consumption.

His new approach raises the question of how he will deal with the cost-of-living squeeze which even some of his closest allies think is coming down the track. If the pound’s fall in value pushes inflation up and wages fail to follow suit, then disposable incomes will be hit badly. The ‘just managing’ classes, whom Theresa May promised to help, might start to ask who stole their recovery.