The end of May’s time at 10 Downing Street is almost certain to lead to the end of Philip Hammond’s 10 year at 11 Downing Street as Chancellor of the Exchequer.
Perhaps now is a good time to review how the Chancellor’s three-year tenure should be assessed.
In terms of the economic position of the UK, the Chancellor will leave a better economy than he found in July 2016. GDP has gone up from £429 billion to £514 billion. The unemployment rate has fallen from 4.9% of the workforce to 3.8% and has meant that we have effectively full employment. Inflation has gone from 0.6% which was well below the target of 2% to 2.1%. The stock exchange FTSE 100 has gone from 6,670 to 7,360.
In terms of public finances, Philip Hammond has overseen a substantial reduction in the deficit which fell in 2018/19 to approximately £23 billion which is less than 1% of GDP. So, in short, with an economy with low unemployment, growth of 1 ½% per annum, inflation at target and a substantial reduction in the deficit, you might wonder why the Chancellor appeared to be the only senior Conservative politician not putting himself or herself up for the job as Prime Minister.
Whilst the economic record has been good “despite BREXIT”, Mr Hammond will only be thought of as a middling Chancellor, despite handing over what will be a very benign economic position. On taxes, he has certainly not been in the forefront of tax reform. However, he has carried out most of the reforms to international corporate tax recommended in the BEPS report of the OECD and the Finance Act 2017 introduced major changes in the taxation of corporates.
He also reduced the number of budgets to one year rather than the two which had been favoured by Gordon Brown and George Osborne. Rather than wishing to increase his exposure, Philip Hammond did the sensible thing by reducing major tax changes to one announcement a year, allowing for most those changes to be enacted before the start of the tax year.
He will not be remembered as being one of the great tax reform chancellors like Gladstone, Lloyd George, James Callaghan or Nigel Lawson. He was one of the chancellors who made significant if steady but unspectacular progress in the economy without introducing measures that might have made a step change in its performance.
In reviewing Hammond’s record as a politician, one can see some consistencies of behaviour across the departments that he occupied. At transport he was one of the longest serving transport ministers without either making radical changes or falling into the mistakes that his successors did. At defence, he presided over a regime which continued the defence cuts but did stand up to the Treasury to try and protect the budget from further savings. When Mr Hammond was promoted to the foreign office there was some concern that he was a hardline Eurosceptic. His opinions appeared to change radically the longer he stayed at the foreign office.
There is a pattern in all this, he does appear to go native in each department that he occupies, taking the advice of his civil servants and formulating a view not dissimilar to the consensus within that department. As Chancellor, he has generally propounded Treasury orthodoxy, even when it conflicted with manifesto commitments such as the alteration to NIC rates for the self-employed. Following a department line is unlikely to lead to disasters but it is certainly arguable that every ambitious politician seeks to put his or her own mark on policy and the best leaders are clear in their leadership goals.
Finally, one of the main reasons that Hammond was never considered for the position of Tory leader is his inability to get on with important colleagues or to judge the political mood clearly. This was shown in the NIC debacle and has been shown in his quite difficult relationships with both the Prime Minister and the Chief Secretary to the Treasury.
In short, Hammond will be able to point to some significant achievements in terms of the economy and has left a better legacy than most of his predecessors. However the lack of political nous as well as an unwillingness or inability to tackle some of the economy’s underlying weaknesses, means that he will bow out as a competent but un-spectacular Chancellor who was never considered by his colleagues as prime ministerial material.
