Near the outset of his conference speech, Philip Hammond indulged in a favoured Conservative sport: mocking Ed Balls. “I think his Charleston is probably better than his economic analysis!” he quipped of the former shadow chancellor’s turn on Strictly Come Dancing.
Balls may be gone but his fiscal policy lives on. The new Chancellor confirmed that he had abandoned George Osborne’s budget surplus target in order to allow borrowing for investment – the very stance that Labour advocated at the last election.
The investment announced by Hammond remains modest (£2bn for housebuilding on public land and £3bn for private builders) but it is the direction of travel that counts. “When times change, we must change with them,” the Chancellor declared, echoing Keynes’s “when the facts change”. He warned, however, that the “task of fiscal consolidation” would continue and that “the deficit remains unsustainable.” There will be no spending splurge.
But in the most significant line of his speech, Hammond vowed to take “whatever steps are necessary” to “protect this economy from turbulence” (a homage to Alistair Darling and Mario Draghi) The Chancellor, who has struck a more pessimistic tone than some of his colleagues, signalled that the state stands ready to act. Rather than less government, as free marketeers hoped, all the signs are that Brexit will mean more.
The only new announcement in Hammond’s speech was a pledge to guarantee funding for all UK-EU projects signed while Britain remains a member. But this is only the beginning of the interventionism that will define his Treasury reign.
“We are leaving the European Union,” Hammond declared early on. But he warned: “It is equally clear to me that the British people did not vote on June 23rd to become poorer, or less secure.” That was a signal that the Chancellor will seek a softer Brexit than some of his colleagues would like. But Hammond’s words acknowledged the hard landing that the UK could endure. If the market is unable to stop people becoming poorer it will fall to the state to do so. Leviathan has risen once more.
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