Get ready for a more mature Autumn Statement – which might mean you get ignored
All Autumn Statements are political, but some Autumn Statements are more political than others.
Under George Osborne, we have become used to very political Budgets and Autumn Statements. The former chancellor consistently engaged the media with policy tweaks – from pensioner bonds to corporate tax cuts. The changes were generally small, but their appeal to key audiences was strong. Throughout, Osborne was always focused on eliminating the budget deficit by 2020.
A great deal has now changed.
First, chancellor Hammond seems ready to loosen fiscal policy – a “fiscal reset”. Certainly, there is very little room to do anything with monetary policy. He has flagged roads and railways as potential targets for government spending, saying that today’s low-rate conditions make it “a good time to invest in genuinely productivity-enhancing infrastructure”.
Second, Hammond has said very little about pensions, savings and investment policy – policy areas that frequently had Osborne’s attention. With the exception of the Lifetime Isa, which is already in the pipeline, the industry might be about to get its longed-for breather from Treasury meddling.
Third, Prime Minister Theresa May has talked about fairness – including between generations. We would welcome a change to the pension lifetime allowance to allow for investment growth. The current system disincentivises pension saving among young people at a time when it is already under threat from low rates.
And if May’s comments about spreading economic gains more evenly are serious, perhaps higher rate pension tax relief will be reduced or – more radically – replaced altogether with a flat rate of pension tax relief. This would redistribute wealth from those who can afford to save more to those less able to save.
A fourth and final change: in contrast to Osborne’s Help to Buy mortgage guarantees and Help to Buy Isa, which did little to address underlying supply, Hammond might deliver government intervention to boost the number of homes being built. In September, Hammond said that the UK’s housing shortage was part of a “toxic mix” of factors harming the economy. May has talked about the state as a vehicle for “righting wrongs, challenging vested interests, taking big decisions” – perhaps the big state will make its powers felt in the housing market.
This article appears in October's edition of City PM Money magazine, distributed with the paper on 27 October.