Philip Hammond is a fiscal herbivore who fears bigger beasts

Posted on November 23, 2016

The only rabbit to hop out of a hat on Wednesday was the chancellor. The Autumn Statement was the work of a fiscal herbivore who fears bigger beasts may devour him. He launched a stimulus programme too small to make much difference while recognising Brexit uncertainty will postpone budgetary balance.

Business should expect no favours from this former property developer and disco bunny. But, on the evidence of Philip Hammond’s debut, it need not fear a tax predator in the tradition of George Osborne, who stiffed banks with a retributive levy while funding commemorations of Agincourt and Fighter Command. Hammy prefers bonnet sagas to battles. His personal flourish was a £7.6m grant to preserve a stately home that inspired Jane Austen.

The only serious blow that landed on business was a 2 percentage-point increase in insurance premium tax to 12 per cent, raising the annual take by £840m a year. Individuals will pay. Insurers fear a squeeze to already skinny margins. Two other sallies against business — a harmonisation of national insurance thresholds and a clampdown on salary sacrifice schemes — will raise less than half the amount.

Mr Hammond cocked a deaf, if furry, ear to demands to defer Mr Osborne’s restriction on interest tax relief for big business. Deloitte reckons this equates to a 5 per cent rise in corporation tax. Another interpretation is that the change will bolster equity — broadly a bet on the future — against debt, which typically funds the status quo.

Public odium towards multinationals as “citizens of nowhere” is nothing to how tenants feel about letting agents, whose natural bias is to entice stock on to the books by heaping charges on Generation Rent, many of whom are distressed buyers. The abolition of letting fees will put a stop to that. The loss to agents will probably be greater than their gain on percentage charges levied on slightly higher rents.

That change is justifiable. A right to buy for housing association tenants is not. It is dispiriting to see a Conservative government making free with the property of others, in this case non-profit organisations. George Peabody, financier of low-cost homes, must be turning in his grave like a rotisserie chicken.

The economist John Maynard Keynes may meanwhile be having a chuckle on the other side at the modest size of Mr Hammond’s stimulatory package. The chancellor could get to £23bn for his National Productivity Investment Fund only by lumping together a disparate collection of initiatives over five years, including funds for new homes and £700m for faster broadband.

Thanks to BT’s stranglehold on telecoms infrastructure, Britons can only envy internet speeds in Latvia. BT’s copper-based solution, G.fast, smacks of painting go-faster stripes on elderly street cabinets. Funding directed through an independent Openreach utility would serve consumers better.

The £400m Mr Hammond has allocated as scale-up financing for tech business looks like an even smaller drop in the bucket. But British venture capital is measured in hundreds of millions rather than multiple billions. The UK is smaller than the US, critics of local tech prowess should note. This money has the potential to do good — unless it is allocated with regional fairness rather than commercial promise in mind.

The focus was on the horizon, whence danger may come. Brexit could deliver worse shocks than the slowdown predicted by the Office for Budget Responsibility. Politics are unpredictable. Hence sops to Just About Managing Guy, who, teamed with Worcester Woman and Mondeo Man, could constitute an underpowered Marvel superhero posse.

If Mr Hammond had any message for business it was: “This really isn’t about you.” What the Autumn Statement said about a chancellor who abolished one of his two annual opportunities for grandstanding was: “Lacks ambition.”

jonathan.guthrie@ft.com

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