This article is taken from our FREE daily investment email Money Morning.
Every day, MoneyWeek’s executive editor John Stepek and guest contributors explain how current economic and political developments are affecting the markets and your wealth, and give you pointers on how you can profit.
.
I’ve written about Budget days many times in the past. That of course, is because we’ve had a lot of them, and writing about money is my job.
I’ve often said that the best thing the chancellor could do, would be to stand up, say “I’m not changing anything”, and then sit down again (I’m paraphrasing – I’m not always as polite as that).
Today, Philip Hammond has promised that he’ll do just that. His spring statement, he promises, will not be a mini-Budget.
If he sticks to his guns, he may well win my “least-worst chancellor of the 2000s” award…
The candidates for least-worst chancellor of the millennium are…
My working life as a financial journalist has only seen four chancellors of the exchequer. Gordon Brown was the first and the worst. Many people seem to have an image of him as being dour, but with deep integrity and conviction, unlike his dilettante, money-obsessed nemesis, Tony Blair. Bad at showbiz, but good at “deep thinking”.
Rubbish. He was a mendacious control freak. He turned the Budget into a twice-yearly political party broadcast for his own candidacy as prime minister. Many of the problems we complain about now – pension deficits, dodgy PFI contracts – were born in the Brown era, primarily from his desire to pretend that the country’s balance sheet was in better nick than it really was.
Even Brown’s greatest achievement – keeping Britain out of the euro – was born of a desire for control. He didn’t want to give up his power base in the Treasury, and realised that handing the currency over to Brussels would also mean handing over a huge chunk of economic control.
So he’s by far the worst of the four.
Then you have Alistair Darling. I’d argue that he was the best. He had the integrity to warn that the entire economy was about to go pear-shaped before the financial crisis. He kept his head down, got on with the job and kept it together throughout 2008 and the aftermath, despite having a difficult boss on top of everything else.
Then George Osborne came along. He started off promisingly, and I still think that the pension freedom reforms are a good thing – perhaps even his best achievement. But in the end, he was just another Brown – he wanted the top job, and so he couldn’t resist pulling the whole performing-seal act every chance he got. As a result, he added complexity and uncertainty, rather than taking it away.
We got Brexit. So George managed to keep himself in the public eye and in politics by popping off to run a local London newspaper (as you do) and to plot his revenge on Theresa May.
And now we’ve got Philip Hammond.
“Spreadsheet Phil” shares a few things in common with Darling. One is a reputation for being relatively dull. That’s good. Another is the fact that he clearly has little or no desire to take the top job. That’s even better. Finally, given how much he riles various members of the party, he really doesn’t seem to care about working with hostile colleagues.
Temperament-wise, this is exactly what you want in a chancellor. The real problem with Osborne and Brown is that they didn’t want to be behind the scenes. They wanted to be centre stage. So they kept changing things. Every six months, the Budget was stuffed full of fireworks – it was their chance to shine.
And it just created a massive headache for the rest of us.
The wonders of doing nothing
Stasis is massively under-rated. It’s hard enough to plan for the future at the best of times. If the legal landscape changes every six months, it’s almost impossible.
Even a less-than-ideal system is better than one that won’t stand still. You can work around a bad system, as long as you know its contours. But if you keep having the rug pulled out from under you, you rapidly fall into a state of learned helplessness. Indeed, if you want to be a bit more cynical about it, constant change is a way for the people in power to maintain control.
Anyway – all of this is a roundabout way of saying that if Hammond really can avoid mission creep by sticking to his guns and keeping today’s speech to nothing more than a “trading update” for the UK, then it’ll be a victory for us all.
As to what he might say? GDP has beaten forecasts, as has productivity growth. As a result, the public finances are in better condition than expected (relative to recent forecasts rather than hugely over-optimistic ones from years ago, of course).
But we’re still massively indebted, and our projected interest costs are rising. So Hammond has been at pains to say that he doesn’t want to get his chequebook out.
There are a couple of things he plans to announce – so he can’t resist a bit of showbiz. There’s a consultation on taxing “single-use” plastics. This is partly to tackle all this stuff about “microbeads” clogging up the ocean. And there’s the potential for a tax targeting the digital revenues of the likes of Google and Facebook.
If there are any new announcements on top of this, I’d expect them to be NHS-related. It’s the hottest political potato and the key vote winner.
Otherwise, I’m hoping it’ll be an uneventful (and blessedly short) chat. Fingers crossed!
By the way, if you’re a fan of podcasts, don’t forget to subscribe to the MoneyWeek one – the latest came out yesterday afternoon. Merryn and I don’t even mention the spring statement, but we do talk about bull markets and what kills them off. Have a listen here.