I’m trying to picture the scene in No. 10 Downing Street as Philip Hammond discussed his first big set piece as Chancellor with his boss, Theresa May.
In many ways, it must have felt like the impossible brief. The PM might have said: “Be interesting, Philip [I’d doubt he often goes by ‘Phil’], but don’t go overboard. Give them a bit of comfort, but don’t promise too much. Try to be a bit dull, if you can.”
Regardless of your political persuasion, he did a pretty good job of fulfilling the brief which the country probably expected of him, irrespective of what was actually said behind closed doors in Downing Street.
After several years of George Osborne’s showboating style at Budgets and Autumn Statements, Mr Hammond struck a very different pose as Chancellor. No eye-catching giveaways, no grand U-turns, and – really – not that much to write home about.
In fact, about the most interesting thing he revealed was that this would not only be his first Autumn Statement, but his last. I’m sure much will be made of that on both sides of the political spectrum, but I see it as a positive move.
Next year’s Budget double aside (he’ll prepare a spring 2017 Budget as planned, then another in autumn to start the new annual cycle), restricting the big fiscal announcement to one Budget could deliver policies which have been more thoroughly considered, consulted upon, and reduce the likelihood of having to retrofit amendments in future.
The changes to Entrepreneurs’ Relief, hastily enacted the week prior to the 2015 general election with a view to frustrating aggressive tax avoidance efforts, had to be hastily updated the following year. It transpired that individuals which should have continued to benefit were being caught by some of the rules, and were blocked from receiving the lower 10 per cent tax rate.
By giving himself more time in between big announcements, perhaps Mr Hammond will be able to provide a smoother and more stable tax environment for businesses?
Increasing investment in R&D, to the tune of £2 billion a year by the end of this Parliament, is a welcome step and has proven to provide economic benefits. In Scotland, where tech, science and research-based industries are producing some excellent businesses, a share of that investment could provide a positive real-world impact.
Similarly, boosting venture capital investment by £400m, unlocking investment of £1 billion, creates additional funding for growth businesses. When so many of our successful companies are SMEs, new sources of investment will help good companies scale, employ new staff and grow their customer bases. That’s exactly what we need.
As ever, the detail of how new economic incentives will be deployed is the important bit, and what happens after Autumn Statements and Budgets is something we’ll be watching closely. But if there’s a theme to be discerned from yesterday’s announcement, it’s that the Government wants to create a business environment which has the confidence and investment to innovate, spawn world-class companies and develop a highly-skilled workforce.
The Chancellor talked about the UK’s productivity performance, which in case you weren’t aware, doesn’t bear much in the way of comparison with most of our significant competitor nations.
He’s not the first person to notice it, but he clearly wants to do something about it. As well as the assistance for R&D and growth funding, his announcements of £1bn for digital infrastructure and 100% relief on new fibre installation are extremely welcome. Connectivity is absolutely part of the productivity equation, after all. Whether or not these measures will improve things, we’ll need to wait and see – but it’s a start.
It wasn’t an unalloyed picture of positivity, though. For Scotland’s many smaller businesses, particularly sole traders and unincorporated businesses, we had hoped for a bit more in the way of detail around the Government’s Making Tax Digital initiative. This will require quarterly reporting to the Revenue, among other things, which could add an extra administrative burden to those organisations which are probably less well-resourced to cope.
The only nod to this was contained in the documents which accompanied the speech (available from the Government’s website if you’re so minded), which merely confirmed the Government would publish in January its response to the consultation which closed in November. We’ll be looking closely at that to discern exactly what action businesses will have to take, since the first stage of implementation is scheduled for April 2018 and concerns smaller businesses first before being rolled out more widely.
There was also a notable absence of any changes to the proposed introduction of interest rate relief restrictions in April of next year. The policy is intended to apply to those borrowing money to invest overseas, who would otherwise have received tax relief on interest payments on these borrowings.
Implementing this policy seems to go further and the impact on individual sectors could be detrimental. Property companies, for example, which might borrow large amounts to fund UK projects could be disproportionately affected by the extra cost to borrowing this could introduce. Specific exclusions from naturally highly geared sectors or at least a softening of this measure would have been welcomed by lots of people.
All of that said, Mr Hammond’s main job yesterday was not to rock the boat. The opposition threw lots of stones after he sat down, but then again he wouldn’t expect anything less.
Focusing on innovation, connectivity and creating an economy which embraces growing businesses is a good thing. So there were no big shocks, and certainly no grand flourishes, but hopefully in his first public outing as Chancellor, he provided enough encouragement to start moving the UK towards greater productivity and self-confidence to invest in enterprise.
I wonder what Theresa May might have whispered to him as he sat down?
“Well done Phil. They’re half asleep.”
John McAuslin is a partner at accountancy firm Johnston Carmichael
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel