ANALYSIS

DAVID SHAND City Editor PERFORMERS should always leave their audience wanting more. This is never an issue for the Chancellor’s tax and spending showpiece as a plethora of demands from the public and private sector compete for limited funds, inevitably leaving some disappointed.

The shopping list took on extra significance this time following the Prime Minister’s pledge to deliver a major boost to health spending, as well as signalling an end to austerity, further testing Philip Hammond’s aim of balancing the nation’s books and eradicating public borrowing by the mid-2020s. The omens were not good for “Spreadsheet Phil”, who was delivering the first Monday Budget for 56 years. The last chancellor to do so, Selwyn Lloyd, soon afterwards became a casualty of prime minister Harold Macmillan’s “Night Of The Long Knives”.

He will have been mightily relieved to have landed a £13billion windfall, due to unexpectedly high tax receipts, which will go some way to achieving his boss’s lavish commitments. But a combination of Brexit uncertainty and the lack of a Government majority have restricted his options for introducing radical policies.

The light at the end of the tunnel flagged by Theresa May and echoed by Hammond could turn out to be that of the Brexit train which – with a wrong turn in negotiations with Brussels – could derail the UK’s growth prospects.

Without a crystal ball to see how much a hard Brexit might harm output and tax revenues, it was no surprise that Hammond’s third Budget was widely billed as a holding exercise, focused on addressing imminent spending demands and enabling him to strengthen the UK’s financial defences.

Yet he could also see the merit in the warning from business leaders that a “business as usual approach” would not be enough at a time when uncertainty over the nature of Britain’s exit from the EU has already had an impact on industries such as car manufacturing and led to widespread scaling back on investment.

Britain’s economy has so far confounded some of the doomy pre-referendum predictions, with record employment, a resilient performance by its powerhouse services sector, steady consumer spending and an uptick in wages. But without financial incentives to spend on plant and machinery, technology and staff, it is hard to see much progress being made in closing the productivity gap with other leading economies and addressing a shortage of skills in key areas such as manufacturing and construction.

Hammond’s decision to boost the Annual Investment Allowance to £1million answers calls from the British Chambers of Commerce that the Government is serious about helping companies prepare for change, but it remains to be seen whether the pledge to reduce the contribution of smaller firms to the apprenticeship levy goes far enough to address concerns the scheme is a turn-off for employers.

While extra spending on roads and high-speed broadband are steps in the right direction, a real step-up in productivity will only arrive with fundamental regional transport and other infrastructure improvements that will deliver on Hammond’s predecessor George Osborne’s bold ambition for a Northern Powerhouse.

Much of that regional talent inevitably makes its way to London and there is reasonable hope that the capital will retain its status as one of the world’s leading financial centres, despite the efforts of European rivals to weaken its position.

Hammond must ensure the UK remains attractive to inward investment against increasing competition from around the globe.