Philip Hammond made his first speech at the Conservative Party Conference as Chancellor on Monday, but what did he say?
Here are seven things we learned:
- 1) Brexit will come at a price
Although Mr Hammond believes our economy to be “robust” - and highlighted the "better than expected" recent data (most recent of which was this morning's PMI manufacturing data) - he repeatedly signalled the likelihood of difficult times ahead.
He said that there was no room for "complacency", used language like “turbulence” and “uncertainty", and talked of this being a time at which we faced a new “daunting" challenge.
Add this to his comments of earlier today when he said that despite the recent positive economic data, we have to take seriously the central prediction of forecasters that leaving the EU will have a negative effect on economic growth, and it’s clear that as far as the Chancellor is concerned we’re not out of the woods by any means yet.
- 2) Reducing the deficit remains a key goal
Despite the fact the new Chancellor has abandoned George Osborne’s commitment to balance the budget by 2020 it’s clear that Mr Hammond remains at heart a deficit hawk.
He repeatedly emphasised the need for the UK to live within its means and talked of the imperative to get our public finances “back in order”.
He also spoke of the deficit remaining “unsustainable” and even of how “piling up debt for our children and grandchildren is unfair and downright un-Conservative”.
“Make no mistake”, the new Chancellor said (in case there was by now any doubt), “fiscal consolidation must continue.”
Brexit may have delayed the fiscal reckoning but Mr Hammond was clear that a return to surplus is still the ultimate goal.
- 3) Spending will increase, but no sign of big stimulus package
Some of what we heard today wasn’t new but a restatement of prior commitments to invest in the UK’s infrastructure: HS2 will go ahead; there will be significant investments in housing (how much of what was announced today is additional money is something I’ll be looking into); we will see more investment in an airport in the south east (but there were no clues in today’s speech as to whether it will be Heathrow or Gatwick).
Interestingly no mention was made of plans to invest in high-speed broadband connectivity, something which businesses across the country have repeatedly told me would be a significant boost to their futures.
Perhaps Mr Hammond will have more to say on this in his Autumn Statement?
- 4) When it comes to inequality, it’s all about regional inequality
Income inequality and wealth inequality were not explicitly mentioned. Intergenerational inequality got only a nod.
When it came to inequality, it was regional inequality that was Mr Hammond’s focus. He talked of productivity gaps between the regions and of London’s unacceptable dominance.
It’s clear that the “Northern Powerhouse” project will continue alongside the “Midlands Engine", and that decisions on rail and road investment will be taken through the lens of regional development.
- 5) Productivity is at the heart of the Chancellor’s strategy
As Mr Hammond acknowledged, talk of productivity is not a crowd-pleaser.
Yet he devoted a significant chunk of his speech to the subject, and rightly pointed out how poorly the UK does on this measure - we're worse than France and Italy.
But solving the problem is not straightforward as most economists would agree. There is significant disagreement on what leads to low productivity and how to fix it.
Moreover, looming technological developments present a new challenge - rather than increasing productivity, increased automation and the advent of robots may well lead to a significant reduction in need for human labour.
So whilst improving productivity is clearly on the Chancellor’s mind, it’s unclear as yet what he plans to do about it - he laid out some broad brush strokes but was light on detail. Nor did he address the fact that Brexit is likely to raise major productivity challenges when it occurs.
- 6) He's new to the tech party but he is keen to reap the dividend
Mr Hammond is excited about the future - driverless cars, artificial intelligence, virtual reality, 3D printing and more. The Chancellor proclaimed: “This is the future, our future and your children’s future.”
But how will he ensure we reap the technology dividend? Mr Hammond talked about the importance of the UK maintaining its ability to attract the best and brightest to work here.
And we know that the London start-up community was very down on Brexit. For them free movement of talent is critical. But how do Hammond's words square with post-Brexit EU immigration?
The Chancellor signalled government interventions in this area but didn’t provide any details beyond a £220 million investment in “bio-medical catalysts” and “tech transfer offices”.
- 7) Public services are likely to continue to face real-term cuts
This is speculative on my part, in so far as public services were not specifically addressed.
But there was no sign from Mr Hammond that we’ll see a U-Turn on the real-term cuts to the police, justice, social services and other areas previously announced by George Osborne.
The Chancellor may be playing his cards close to his chest before the Autumn Statement of course, but if any U-turns are to come we got no sign of them today.