Hammond: Soon To Be The Focus

The 2017 Budget is approaching. Having done next to nothing useful with his Autumn Statement, Hammond has to come up with some firm policies and clear thinking. The time for silly forecasts which are never right is past. As are tiny sums spread over five years to bridge a funding gap. No longer is being the fastest growing economy in the G7 good enough if it means 2% or thereabouts annual growth.

This is because the Treasury has a chronic income shortfall and expenditure is already cut to the point where critical public services are at risk and malfunctioning at pressure points. What is needed is substantial and significant economic growth. This requires a government stimulus in three areas; infrastructure, public rental housing and home production of the stuff we at present import to consume. The last of these is the driver of growth and will be achieved by the private sector mostly with its own money, the first two are the enablers and must be funded entirely by the government, either by borrowing, or printing, or both. Sterling must remain very competitive. Tax concessions can be used as an incentive to kick start the regeneration of home produced goods, as can access to cheap start up funds via a national investment bank. This post is not the place for detail, which is available elsewhere, but it does outline the economic priorities.

The aim is simple. There must be enough revenue to pay properly for essential services like health, education, social care and prisons. If unwelcome rates of high taxation are to be avoided, the solution must lie in economic expansion. Consistent growth of 4%-5% per year for some years is the only way out of austerity, poor living standards, terrible productivity and lower expectations. No matter what the terms of Brexit. And it must be led by cutting imports and replacing the shortfall with home production. In other words the biggest export success of the post Thatcher era has been exporting jobs. Decent skilled jobs to offer a future to a loyal workforce. Those jobs have to be repatriated and our economy, based on consumption, has to consume what we make and grow to a much, much greater extent than is now the case.  Exports will take care of themselves, not least because the low pound and regeneration of industrial capacity across a wide range of goods, will present a much more diverse offer to overseas markets.

What Hammond has to do when he waves his red box on the steps of Number 11 and then holds forth in the Commons on his Big Day, is to inaugurate economic revival. Nothing less.