Hammond has one last chance to make his name and stop Corbyn
Chancellor doesn’t grasp that his refusal to articulate a non-socialist vision is pushing us to the brink
There are two kinds of chancellor. Some are forgotten almost as soon as they leave office, their undistinguished tenures barely even registering as a footnote in the history books. Who still remembers Selwyn Lloyd, father of the useless National Economic Development Council, better known as Neddy? Or Reginald Maudling’s time in 11 Downing Street? Some we vaguely recall, but only for their mishaps: Anthony Barber’s catastrophic boom, for instance.
The other kind are the colossi who bestride the country, changing it forever, and, in some cases, using the job as a launchpad for the prime ministership. Such epoch-defining chancellors usually lend their name to an approach to economic policy; at the very least, they become identified as a leading practical proponent of a particular way of thinking. They are not buffeted by history but alter its course.
In the 1980s, chancellors were supply-siders or even, in Lord Howe’s case, monetarists. Lawsonomics was a mix of brilliant free-market reforms, radical tax cuts and dodgy exchange rate targeting. Due to the influence of Lady Thatcher, the last Tory prime minister to have loved and been inspired by economics, we will always remember the philosophy of the time as Thatcherism. But it was her chancellors who interpreted this approach.
As to Gordon Brown, he spent decades thinking about economics, as his book My Life, Our Times reminds us. Together with his advisers, he reshaped along Brownite lines not just domestic policy-making but also the culture and structure of government. The influence of Brownonomics remains all-pervasive; it was a deeply flawed but strikingly coherent intellectual and political movement. I still own some books outlining its theoretical underpinnings on central bank independence, the Golden Rule and the Private Finance Initiative.
The next big hitter was George Osborne, who rescued the country from fiscal crisis. Osbornomics, born out of a predilection for triangulation, was a form of fusion economics a la Michael Heseltine: he slashed the public-sector workforce and some parts of the budget while intervening all over the place. He cut some taxes and hiked others, including stamp duty; he embraced green energy and much higher minimum wages; he reduced the deficit but his austerity was never that extreme, and he loved foreign aid and HS2.
Yet now, 16 months after Osborne was booted out, we have nothing. Our economic policy is a total vacuum. There is no such thing as a Philip Hammond philosophy, no special approach, no school of thought that he appears to derive inspiration from and certainly none that will be named after him. Nobody talks of Hammondism, and if there are any Hammondites they are well-hidden. At this rate, he will end up firmly in the first category: a do-nothing chancellor who kept the seat warm for his successor and paved the way for a political catastrophe.
Why this is so is a mystery: Hammond is a successful wealthcreating entrepreneur, not a political apparatchik. Yet he appears to have absorbed the Treasury’s worldview, which is to oppose all serious reforms while embracing endless revenueraising tweaks, many of them politically explosive. True, Hammond, together with others in the Cabinet, successfully blocked some of May’s destructive assaults against free markets, but it’s small fry. He has been the least active Chancellor in living memory, at a time when the country is crying out for revolutionary change.
Brown forged an imperialistic department in his image, imposing a cadre of dedicated followers; Osborne brought in his own stormtroopers. Hammond has so far done none of this. He hasn’t hired his own team of economists; he hasn’t appointed any heterodox thinkers; he hasn’t challenged the civil service consensus, which has reestablished itself in earnest. Consumed by pessimism and negativity, he seems to see his only role as trying to slow down Brexit, or to lobby for a new relationship that is as similar to the status quo as possible. Yet the key lesson of the past 70 years is that Tories always fail when they believe that their job, as the “natural party of government”, is to manage the existing “system” better than Labour. The truth is that they only succeed when they are radical and principled.
Rejecting managerialism is especially vital at times of great ideological turmoil, when the public craves a shift in direction and strong, clear leadership. Once upon a time the issues were strikes, inflation and union power; now they are weak wages, a collapse in home ownership and broken institutions. If the Tories don’t explain how they will tackle them, the public will turn to Jeremy Corbyn.
Hammond doesn’t grasp that his beancounting, his risk-aversion and his inexplicable refusal to articulate a non-socialist vision commensurate with the size of the challenge is pushing this country ever closer to the brink. If Corbyn wins, it will be largely because of Hammond’s refusal to engage with voters, to give them hope and to explain, loudly and relentlessly, how pro-capitalist solutions exist to make their lives better.
And if the Brexit process degenerates into chaos, it will partly be because the Chancellor is not providing the economic back-up: the Europeans only believe we are weak because they don’t think we would have the guts to slash taxes by £30 billion and meet each of their protectionist slights with policies to make us the most attractive home for capital in the world. It would be much easier for car makers to deal with tariffs under a zero-corporation tax regime, or for the City to weather the hit if freed from the bank levy. With the right policies, the costs of even a disorderly Brexit can be minimised, and the benefits turbocharged.
This Budget is Hammond’s last chance. He must resist the usual Treasury elephant traps. Can he do it? Can he think the unthinkable, and ignore the mandarins? Can he produce a plan to double house building? Will he have the guts to outline an emergency, pro-growth addendum to the Budget, to be activated if we fail to make progress in the negotiations? I doubt it, but a prompt return to obscurity beckons if he doesn’t stun us all next week.