Is Hammond just Osborne in disguise? Today we'll find out
After the leave vote, it's time for an overhaul of how this country does economic policy. We can start by ditching George Osborne's failed austerity programme, and making sure no part of our country is left behind.
The former chancellor's charter for budget responsibility was a poorly conceived measure. On advice from economists, Labour opposed it last year. We argued not only that the targets were likely to prove unachievable but attempting to achieve them would result in damaging cuts to public services and investment. We were, unfortunately, proved to be entirely correct. The former chancellor missed his target on welfare spending, missed his target on reducing the debt, and was set to miss his target on the fiscal deficit before he abandoned his entire plan in the wake of Brexit.
There is no need to mourn its removal. Six years of austerity measures, inflicting huge pain on some of the most vulnerable in society and sacrifices for ordinary workers have been in vain. As new research from the Institute for Fiscal Studies shows, most people in work have seen no improvement in pay for seven years, while pay for young workers is still well below its 2008 level. Andy Haldane, the chief economist at the Bank of England, has described a "lost decade" for earnings, emphasising that more than half the population has seen no recovery in pay since the financial crash.
Britain's deficit with the rest of the world - the current account deficit - remains at close to an all-time high and leaves us exposed to the kind of currency panic we have seen since the referendum. Household debt is rising, while business investment was falling even ahead of the vote to leave. Output per hour worked has stagnated since 2007, leaving Britain lagging far behind countries like the US, Germany and France. Austerity left us with a low-productivity, low-investment, high-debt economy. Worse, with Osborne's recovery built on sand, much of the country simply hasn't experienced any real improvement in its circumstances.
Britain has the worst regional inequality in Europe. Those parts of our country left behind are those that voted to leave, as the Resolution Foundation demonstrated. Too much of the wealth we produce is concentrated in the hands of too few people in too few places. The vote to leave came as a shock to the Westminster political elite because they did not see that for too long our economy worked best for a very few.
The failure to plan for Brexit, coming after Osborne's austerity failures, leaves our economy perilously exposed. There are serious uncertainties about Britain's relationship with the world, including (for instance) the ability of British banks to access EU markets through the EU banking passport. These uncertainties are hitting investment already, and are likely to hit the whole economy shortly, as the IMF's sharp downwards revision of its previous forecasts shows.Under these circumstances it is essential that the government provides some stability for the domestic economy. But so far the new chancellor, Philip Hammond - despite indicating that the previous fiscal rule is now unworkable - is refusing to say whether he intends to maintain the cuts it demands or revise the government's fiscal stance.
As things stand, despite the major shock of the Brexit vote, government departments are looking to make spending cuts and the government is still planning to cut its investment. Hammond has insisted that any new policy must wait until October, when the Office for Budget Responsibility reports on the economy. But action is demanded now, and businesses and households need to know how the government will respond to any potential downturn.
That's why Labour is today proposing in parliament that the discredited charter for budget responsibility is repealed. We want a full discussion of the available alternatives and the government's position clarified.
Any new macroeconomic policy must allow for a serious increase in government investment, as Labour's fiscal credibility rule allows, and as Labour has called for in its £500bn investment commitment.
In the interests of responsible government, we are very happy to discuss both issues with the Treasury team. Action is needed now: will the new chancellor step up to the mark?