Ham­mond’s coup d’etat prom­ises the softer Brexit busi­ness wants

The Sunday Telegraph - Money & Business - - Business - JEREMY WARNER

IT’S been a bad 12 months for HM Trea­sury. As an in­sti­tu­tion, it is used to get­ting its way, but fol­low­ing the vote for Brexit, which it ve­he­mently op­posed, it was pretty much frozen out of the de­bate, a de­flated, de­mor­alised, al­most ir­rel­e­vant voice in gov­ern­ment. The Chan­cel­lor, Philip Ham­mond, be­came a dead man walk­ing; even if Mrs May didn’t fire him, her joint chief of staff, Nick Ti­mothy, surely would. That, how­ever, was be­fore the elec­tion, which once more changed ev­ery­thing. To­day, the Trea­sury man­darins are back in the driv­ing seat.

In the ab­sence of any lead­er­ship from the en­fee­bled Theresa May, the Chan­cel­lor seems to have seized his op­por­tu­nity and be­come the de facto Prime Min­is­ter. While the ac­tual one is away walk­ing in the Ital­ian Ty­rol, and the “blond wom­bat” is con­ve­niently out of the coun­try, do­ing his standup comic rou­tine in Aus­tralia, it is Mr Ham­mond who has been mak­ing the weather.

No doubt he can ex­pect pushback from Brexit purists, but the Trea­sury view – that we can­not af­ford to take risks with the econ­omy and the pub­lic fi­nances – is for the mo­ment pre­vail­ing; Brexit must be more of an evo­lu­tion­ary process, it in­sists, than the big bang, clean break Nigel Farage and other true be­liev­ers want.

This is quite a turn­around. In the lead up to the ref­er­en­dum, the Trea­sury cam­paigned fu­ri­ously for Re­main, pro­duc­ing two sup­pos­edly defin­ing and deeply neg­a­tive as­sess­ments of the im­pact of a vote to leave. To­gether they formed the back­bone of what be­came known as “Project Fear”. Yet in the end, they were ei­ther ig­nored or dis­be­lieved. When Michael Gove, a leave cam­paigner, said “we have had quite enough of ex­perts”, he meant pri­mar­ily the Trea­sury.

Pre­sid­ing over these as­sess­ments was the bi­cy­cling econ­o­mist, Sir Dave Rams­den, chief eco­nomic ad­viser to the Trea­sury. Last week it was an­nounced that Sir Dave would in­deed be on his bike; he’s mov­ing across to the Bank of Eng­land to take up the post of deputy gov­er­nor. I don’t want to sug­gest he’s be­ing put out to pas­ture; his new role puts him in pole po­si­tion to suc­ceed Mark Car­ney as Gov­er­nor in two years’ time.

Sir Dave’s years at the Trea­sury should in any case be re­mem­bered not for his work on Brexit, but for the bril­liance of Gor­don Brown’s “five tests”, which fi­nally put the ki­bosh on Tony Blair’s push to join the Euro. The five tests were re­mark­ably pre­scient in high­light­ing the dan­gers of mon­e­tary union.

As it hap­pens, the Trea­sury was also spot on in pre­dict­ing a 12pc Brexit de­val­u­a­tion, but it was wrong about the ef­fect on jobs, in­ter­est rates and house prices. Ri­val as­sess­ment by “Econ­o­mists for Brexit” was much more on the money in say­ing the vote would have vir­tu­ally no im­me­di­ate im­pact on growth, but as so of­ten hap­pens in eco­nomic fore­cast­ing, the Leave econ­o­mists were right for the wrong rea­sons. They also pre­dicted no im­pact on ster­ling, and con­tin­ued, quite high real wage growth.

Both the Trea­sury and the Bank of Eng­land as­sumed a big im­pact on pri­vate con­sump­tion and in­vest­ment; in the event, there wasn’t much. Yet as is now plain, the ef­fect may just have been on a long fuse. Both show clear signs of slow­ing as we head to­wards the door.

And that’s why, to me, the Ham­mond ap­proach to Brexit makes ob­vi­ous sense. For many Brex­i­teers, any po­ten­tial short term dam­age to the econ­omy is a secondary con­sid­er­a­tion, or even a price worth pay­ing for ex­it­ing the EU. But that can never be true of the Trea­sury, charged as it is with the na­tion’s purse strings.

The Trea­sury ap­proach is de­signed to achieve two things; by guar­an­tee­ing an­other five years when in ef­fect the na­tion’s trad­ing re­la­tion­ship with the EU won’t change, the Trea­sury hopes to pro­vide suf­fi­cient medium term cer­tainty to avoid an in­vest­ment strike. At the same time, it en­sures that none of the eco­nomic ad­van­tages of mem­ber­ship of the sin­gle mar­ket are given up un­til we can be sure there are suf­fi­cient al­ter­na­tive free trade agree­ments to com­pen­sate. In other words it gives the econ­omy time to adapt to the new re­al­ity.

As I say, all very sen­si­ble. Now watch the pol­i­tics make mince­meat of the eco­nom­ics.

Amaz­ing Ama­zon

Few busi­ness lead­ers are ever re­mem­bered be­yond their own life­times, but one who surely will, per­haps even more so than Henry Ford, Bill Gates and Steve Jobs, is Jeff Be­zos. As he briefly be­came the world’s rich­est man last week, some­one pub­lished a tweet which pic­tured a nerdy, slightly shy look­ing young Mr Be­zos along­side a men­ac­ing con­tem­po­rary im­age in which he looked much like the Ter­mi­na­tor. Once he sold books, read the tweet. Now he sells ev­ery­thing.

Of all the tech gi­ants, Ama­zon is to my mind by far the most im­pres­sive, con­stantly in­ven­tive, al­ways push­ing the bound­aries, and most im­por­tant of all, giv­ing the con­sumer what he wants be­fore he even knows he wants it; in the full­ness of time, Ama­zon’s trans­for­ma­tional im­pact on the econ­omy is likely to prove much greater than any of the other so-called “fangs” – Face­book, Ama­zon, Net­flix, and Google. What’s dou­bly im­pres­sive is that Mr Be­zos has done it by break­ing all the con­ven­tional rules of busi­ness. Stick to your knit­ting and don’t di­ver­sify; Mr Be­zos has fever­ishly diver­si­fied cre­at­ing a true con­glom­er­ate. Re­ward your in­vestors; Ama­zon has never paid a div­i­dend, pre­fer­ring in­stead to vest vir­tu­ally all its bur­geon­ing sur­plus back in the busi­ness. Know your lim­its; there are none at Ama­zon.

If all this sounds like shame­ful cor­po­rate puffery, I make no apol­ogy. No doubt there are ba­nana skins aplenty await­ing the mighty Mr Be­zos. And in­evitably, a ver­i­ta­ble posse of reg­u­la­tors is al­ready in hot pur­suit. But some­times, busi­ness achieve­ment de­serves to be cel­e­brated, and it is hard to think of a more de­serv­ing case than Ama­zon.

‘It is all very sen­si­ble. The Trea­sury’s ap­proach gives the econ­omy time to adapt to the new re­al­ity’

Cul­ture clash: Boris John­son, the For­eign Sec­re­tary, dur­ing his tour of New Zealand

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