Of those of us who wanted to Remain in the European Union, Philip Hammond’s elevation to Chancellor by Theresa May has represented a piece of news that we could deal with. A serious and uncompromising fiscal hawk to bring a semblance of sensibility to the radical tendencies of the Brexiteers was exactly what the country needed.
However, Hammond’s small “c” conservative tendencies need to be rethought. The changing political landscape across the country, and the new economic divides laid bare by the Brexit vote, mean that the Budget needs to set Britain’s stall out for the future economy. While May’s talk has been of “industrial strategy”, there is little else to suggest concrete action to make Britain a competitive beacon of the global market.
With the safety net of the European Union guaranteeing access to the Single Market, the UK has become slack at addressing the endemic problems that exist in the country. For the UK to become the “truly Global Britain” that the Prime Minister aspires the nation to be, the Chancellor must take action on skills, innovation, technology and corporate tax.
We urgently need to differentiate the UK from other European countries with new schemes to boost innovation. While the Industrial Strategy Green Paper identified that innovation is important, the UK still only invests 1.7 percent of GDP in this area. This is below the OECD average of 2.4 percent and far behind the leading backers of innovation: South Korea, Israel, Japan, Sweden, Finland and Denmark – which contribute over 3 percent. If a “global Britain” is to emerge, the UK needs parity with these nations to boost its competitive offering and make the country a world-leader, rather than one of 28 countries in the EU. Hammond must act to address this shortfall. While the temptation may be to play it safe and save ahead of Brexit economic uncertainties, this may cost the UK its economic status in the long-run.
The area that particularly requires decisive action from the Chancellor is skills. With the government determined to continue with its aim of driving immigration numbers down to the “tens of thousands”, it is apparent that this risks taking a pick axe to the economy. Gordon Brown talked of “British Jobs for British Workers” back in the late 2000s, but failed to bring about the skills training revolution necessary. The economy is reliant on migrant labour – how would the economy manage if the Prime Minister’s stated target were reached? Firms reliant on foreigners from all sectors have been lining up to express their concern. Low-skill migration cuts mean that sectors such as food manufacturers are particularly vulnerable, with 40 percent of workers being non-British. Skilled industries would also suffer – one quarter of scientific researchers are foreign-born.
Skills are a long-running problem, likely to be exacerbated by Brexit, so Hammond cannot afford to adopt a wait and see approach. He therefore must do more with this Budget than simply “batten down the hatches” pre-Brexit – he must act decisively to treat it as the first statement of a new era in British history.
