Handling today’s Autumn Statement book brings to mind a Toblerone. The packaging looks similar to pre-referendum versions but its a lot less weighty. At 72 pages, the book comes in at half the length of recent ones.
But how easy is it to digest what's inside the Toblerone Statement?
Growth, the Chancellor and his forecasters admit, is going to take a hit from Brexit - but by far less than previously thought. The official forecasters, the OBR says its best guess is that the process of coming out of the EU will take 2.4% off our GDP - far less than the near 4% the Treasury had warned of pre-referendum. And by 2020, it reckons the economy will be growing by 2% per year again, close to the long-term average. All round, the impact may be less marked than feared - house prices, it assumes, will rise 5% per year, as opposed to the 10% plunge a pre-referendum Treasury claimed.
But that hit on growth has big repercussions for the public finances. Borrowing is set to be over £100bn more this parliament than previously thought, meaning the stock of government debt is set to top 90% of GDP for the first time in 50 years, and could break through £2trillion by 2022. Ouch.
No surprises then that Mr Hammond’s predecessor's fiscal rules have all been broken. It would be easy for the Chancellor to blame that on Brexit and abandon any pretence of austerity. Instead, he opted for a far looser set of fiscal rules - which keep budget-balancing on the horizon (but far enough away to be a problem for the next parliament) and so keep the markets from panicking. But the new rules are loose enough to allow for a cushion of public money if it all goes pear-shaped during our exit from the EU. It’s probably the best a man in his position, facing an unprecedented raft of constraints and uncertainties, could do.
Meanwhile, he’s boosting borrowing by a further £20n or so to ramp up spending on infrastructure and other productivity boosting policies. It’s very Keynesian - or indeed, smacks of Gordon Brown. Infrastructure may be the buzz-word but finding the right shovel-ready projects is always easier said than done.
And it was goodbye Autumn Statement, hello Autumn Budget (or maybe that should be Winter Statement, given they’ve tended to fall in late November or even early December). It’s a sensible move which means farewell to the mad rush in late March to get tax measures vetted and implemented in time for a new tax year.
Elsewhere, new measures were in short supply. A freeze in fuel duty is largely cancelled out by a rise in insurance premium tax (in terms of impact on household budgets and the Treasury’s coffers). Employees and employers will feel a slight pinch from cutting of salary sacrifice schemes, and an adjustment to NICs.
What about the JAM’s, the Just About Managing, the Treasury’s new focus? They’re likely to benefit from the fuel duty freeze, various welfare changes and an upgrade to the National Living Wage (albeit a smaller one than was expected). But the Treasury’s own analysis, as in the chart above, shows most of those on lower incomes will still be worse off by the end of the parliament - by as much as £250 per year - due to measures already announced. And that's before you consider how a rising cost of living will eat into their pockets. Not much in the Toblerone Statement to sweeten that blow.
Naughty or nice? Even before the first Christmas decorations appeared on shop shelves, the Prime Minister seemed to have put business firmly on the naughty step, undeserving of any treats .
Rewind to September: corporates weren’t to be trusted; employees should sit on their boards, and her predecessor's panel of advisors from the highest echelons of commerce were sent on their way. In her party conference speech, Theresa May warned that those tempted to get creative with their tax bills would be punished:
"If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you too”.
Now, however, she's suggesting she'd like to slash the corporate tax rate to even less than the 15% favoured by Donald Trump.
A change of heart, a softening of stance in this season of goodwill? Or is this a canny move in the endless battle to deter tax offenders?
Governments of all shades have tried and failed to close tax loopholes and catch wrong-doers. Such efforts are costly, complex and require international cooperation. Meanwhile, tax advisors have remained one step ahead, concocting increasingly sophisticated schemes that can take a team of dozens of tax inspectors years to unravel. Yet in a decade, HMRC’s budget has fallen by a quarter; it is now smaller, for example, than the amount Google earns in the UK alone. No surprises then, that an exercise to name-and-shame repeat offenders revealed not billionaires or multinationals but hairdressers and other small businesses.
Why not slash companies' tax bills, and perhaps persuade them that intricate tax avoidance schemes aren’t worth the cash their architects charge? Facebook may have a way to go before its tax affairs are perceived as fair but plans to increase its workforce here by 50% signal a big vote of confidence in the UK. Engineers can be situated anywhere; our location (midway between major time zones), skills base and common language make the UK a good bet.
Similar factors lie behind London’s huge popularity as a financial centre despite the decision not to join the Euro. ING Bank's opted to move jobs to the UK, despite Brexit, due to the quality of staff on offer. Other banks are exploring options for moving to Paris or Amsterdam out of reluctant necessity - because the removal of passporting rights may not allow them to operate in the rest of Europe from a London base- not out of desire or petulance. Banks have clamoured for reassurance. The Prime Minister is not a position to offer them much yet; but a tax cut would send out the right message.
But if companies get a tax cut, who picks up the slack? Do the JAMS - those "just about managing" face a further blow? Maybe not, if a lower tax rate persuades more companies to set up in the UK, thrive and hide less cash under the corporate mattresses (or rather, tax shelters). That could - in theory- lead to higher tax revenues, as well as growth and jobs. A win all round?
That was the argument of President Reagan, prompted by economist Arthur Laffer. Rather aptly perhaps for a man born in Youngstown, Ohio - a city that achieved fame as a bellwether in this month's election - Dr Laffer's re-emerged as an advisor to America’s new president-elect. Dr Laffer famously illustrated his concept on the back of a napkin with a hump-backed graph, which he claimed showed the relationship between tax rates and revenue raised. Raise tax rates when they are too high, he claimed, and you could actually collect less tax, cut them, you get more.
But that assumes the tax rate is already too high - and the problem is, no one knows where on the curve they are. If, for example, once Brexit gets underway, trading conditions suffer and profits stumble, a lower corporate tax rate could instead deal the public purse a nasty blow. It would be a big gamble - and one which, as Reagan learnt, can come at a hefty price.
It’s a Brexit side effect not many have talked about, but the days of cheap fashion as we know it could be numbered and that easy pre-payday splurge on the high street may become something you think about more carefully. The pound has lost a fifth of its value against major currencies, specifically the euro and the dollar, since the referendum on June 23rd. In practical fashion terms, this means a dress that cost a retailer £50 to buy from a supplier overseas might now cost £60.
Many things affect the mark-up stores add – rent and wages, for example – and retailers can often find ways of fixing the price of the factory orders they place in advance. But chains such as Zara or H&M usually make a profit of about 15% on anything they sell; a 15% that could be wiped out by a hike in costs. That’s not something the shareholders of any company would just grin and bear. And so the higher prices would eventually be passed on to us.
And it’s not just clothes, either: the Bank of England has admitted that the weaker exchange rate will push up the cost of living more generally.
Theresa May has stated she’d like to trigger Article 50, the process by which we’ll untangle ourselves from the EU, next spring. Lawyers, politicians and civil servants will then have two years to negotiate deals on hundreds of issues – from farming to financial services and way beyond.
If they can’t work out a deal by 2019 – which is very possible – then what’s left on the shelf is hardly a bargain. We lose our free trade deal with the EU, and have to follow the rules of the World Trade Organisation (WTO). These set charges or tariffs on goods shipped in – the idea is to stop cheaper imports flooding in and squeezing our manufacturers out of business. That could slap as much as 16% extra on each bit of clothing or pair of shoes from the EU. So importing that dress I mentioned earlier could now cost retailers £70. Ouch.
But it’s not just about price – tearing up trade deals may mean that dress is subject to lengthy customs checks and form-filling to allow it to enter the country. The journey from catwalk to high street could become more snail pace than fast fashion.
So what? Our wardrobes are more likely to boast ‘made in China’ than ‘made in Milan’ (if not, please feel free to send your cast-offs my way) anyway. But this means we’ll also forego trade deals the EU has with other countries until we agree our own. Again, the rules of the WTO would apply. That, according to shopkeepers’ association, the British Retail Consortium, could slap a tariff of 12% on t-shirts made in Bangladesh.
And if the fate of retail therapy is tempting you to drown your sorrows, or forsake food for fashion, think again. Similar charges may mean a £6 bottle of Merlot costs £7, and could bump up the price of a steak by a quarter. That’s the worst-case scenario. Let’s hope our Prime Minister, who refreshingly batted away the fascination with her shoes as an “excuse to buy more”, prioritises sorting out a deal for the high street.
But if that doesn’t work, how do you Brexit-proof your bank balance? Buying British perhaps, which would boost home-grown businesses. But Marmite-gate showed that a product isn’t just what it says on the tin – or rather, jar. The yeast extract (the leftovers from brewing beer) that makes up the brown sticky stuff is sourced in the UK. It was the rising cost of importing that iconic glass jar, its producer Unilever claims, that lay behind its bid to hike prices. Equally, the cost of imported fabric or trimmings – most zips, for example, are made by Japan’s YKK – could bump up the price of clothes made here.
If so, it might be time to embrace vintage - or invest in a sewing machine.
Depressed by reports from the World Economic Forum that it’ll take 170 years for women to be paid the same as men? Stop whingeing, hand over the baby and get back to work. That appears to be the message from business leader, Lady Barbara Judge.
Lady Judge, the first female chair of the Institute of Directors claimed "I know it’s counter-cultural but I think long maternity breaks are bad for women”. She cited the American system, whereby sizeable companies only have to provide 12 weeks of (unpaid) leave, as meaning women "don’t come off the tracks”. She practised what she preaches: The British-American lawyer had just 12 days off when her son was born.
Accordingly, the Institute of Economic Affairs has also said we should “stop making a song and dance” about the gender pay gap. The think tank claims it’s all about what it calls "different lifestyle choices”: lower pay is a just trade-off for taking on caring responsibilities, and the ability to give birth.
Is that fair? The fact is, motherhood can be a big stumbling block. The Institute for Fiscal Studies found that the gulf in gender pay opens up after kids arrive, so that mothers ultimately earn 33% less than men per hour - in effect, working for free from 1st September to the end of the year.
But Lady’s Judge is letting employers off the hook; her theory that women are to blame for taking maternity leave holds less water than a poundshop nappy. The annual Gender Pay Gap study from the World Economic Forum shows the US slipping to 45th out of 144 countries, due to a lower estimate of women’s incomes and stagnating participation in the labour force, while the UK came in at number 20. Just 4% of CEO’s of America’s largest companies, the Fortune 500, are female. In the UK, the figure for FTSE 100 bosses is (an admittedly still paltry) 7%.
I’ve had babies on both side of the Atlantic. Many new mothers I met in the US were either forced to return to work before they were physically ready, or had already resigned themselves to stepping away from their careers for many years. Tales of battling for recognition, promotion and just reward are equally common from mum (mom) friends on both sides of the water.
Many ideas for narrowing the divide were put forward when I chaired a discussion on the gender pay gap recently at the Cheltenham Literature Festival. Lawyer Miriam Gonzales Durantes has championed the need to change gender stereotypes of careers via her "Inspiring Women" campaign, and was refreshingly open about the need to rely on help, paid and unpaid, at home. The Sunday Times Editorial Director, Eleanor Mills, talked about attitudes towards women, and challenging perceptions in the office, as did EY partner Sayeh Ghanbari. The emphasis was as much on changing workplace culture as women stepping up (or, as Facebook boss Sheryl Sandberg puts it, leaning in).
The slow yet steady rise of shared parental leave and male flexible working also came up. It didn’t get a mention from Lady Judge. Nor did any of the other reasons - from the misfortunes of illness or bereavement through to murky sabbaticals and delayed gap years- that might also lead to a lengthy absence from work. Whether she thinks those could mean mens’ careers could “come off the tracks” is unknown.
We’re knee-deep in the brown sticky stuff. Love it or loathe it, Marmite is as divisive as Brexit - and has become an unlikely emblem of the impact of the decision to leave.
Manufacturer Unilever wants to put up the wholesale price of Marmite by 10% - its key UK customer, Tesco, says no, resulting in an unseemly brawl between two industry giants. That price hike results from the fallout of the “Out” vote - a weaker pound pushing up import costs - rather than the Brexit process itself.
Or is Unilever pulling a fast one? The pound is down around 15% since 23rd June but Marmite is manufactured in Staffordshire (after, ironically, being invented by a German scientist). But the sterling cost of any ingredients imported for the yeast extract may have risen sharply.
And Unilever may be spreading the pain - its vast stable of brands ranges from Hellmans mayo to Dove soap (Unilever isn't bothered if you’re dithering between French or English mustard; it makes both Maille and Colmans). The costs of manufacturing some lines is likely to have risen more than others.
Who will win? Tesco has a reputation for taking a tough line with suppliers, and fiercely guards the sector-leading 5%+ profit margin it has traditionally enjoyed. A dent in that, thanks to one of its biggest suppliers, won't be swallowed easily by the shareholders it’s desperately trying to woo. Also, Tesco CEO Dave Lewis used to be the boss of Unilever; he’s well-placed to know how to exert pressure.
But Unilever knows that customers' attachment to brands makes supermarkets reliant on them to drive footfall in the bitter battle for market share. No surprise, then, that some of Tesco's rivals have apparently decided to live with the hikes - even if it means passing on higher prices to customers. For them, the publicity surrounding this row couldn't come at a better time, if shoppers are turning to them instead.
Whoever blinks first, is this just be a taste of what may be to come? Over half of our food is imported, over 70% of that from the EU. Once Article 50 is detonated and the dust settles on the trade talks, we may have to resort to applying the same tariffs to imports from the EU as elsewhere. DEFRA estimates that could make the foodstuffs affected 11% more expensive. There’s a lot at steak.
As if the pound wasn’t suffering enough, it has now been dubbed the “de facto official opposition to the government’s policies”. That from HSBC’s chief currency strategist (and my former colleague) David Bloom, as the currency slumped amidst indications that we’ll see a “hard” Brexit. By contrast, the economic data of last week suggested the UK continues to expand at a not-too-shabby rate.
HSBC expects further misery with the pound heading for $1.10. But that wouldn't be as much about the “Brexit premium” as fundamentals - such as the whopping size of our trade deficit. But that trade gap existed ahead of 23 June (and could now be eased by the weaker pound eventually making our exports cheaper) - perhaps traders at that point were distracted.
As the shock of an "out" vote reverberated around London’s trading floors at the end of June, more than one economist admitted to me that the $1.34 or so sterling hovered around then was more in line with the underlying shape of our economy than pre-referendum levels. Speculation has always had an uneasy relationship with fundamentals in the currency markets. Add in relative interest rate movements (and expectations) and the Brexit fear factor, it’s easy to see how we’ve sunk to current levels.
It’s said that the value of the £ is our country’s share price. If so, why isn’t our CEO - Theresa May - trying to talk it back up? It may not be in her interest to do so. In the back rooms of 10 (& 11) Downing Street, they’re probably weighing up the pros and cons. On the downside, a weaker pound bumps up the price of imports ( Vin de Table may not be nearing Champagne territory but its inching closer) and so inflation, makes our holidays abroad more expensive and is poor PR for UK PLC. On the other, it makes our exports relatively attractive and an increase in inflation helps to erode the value of our massive government debt. In short, if sterling takes a pounding, the Treasury may be quids in.
Perhaps we shouldn’t be surprised that there hasn’t been a rush by officials to explain away that flash crash. Bank of England Governor, Mark Carney, is however addressing a forum on “...Maintain(ing) Stability in Time of Change” on Friday. It’s hard to see him avoiding comment.
He may be forced to - if currency weakness looking like tipping into sustained freefall. Activity in the market, the volume of bets against the pound, is at unprecedented levels. It’s a further sign that speculative activity and volatility will rule for the coming months - and that forecasting currency movements (always beset with risk) is harder than ever.
These may be respite for sterling as the Brexit process is clarified and gets underway. But in the meantime, it’s time to swap Camembert for Caerphilly if you want to keep the grocery bill down.
Until now, perhaps the most intriguing question concerning the Chancellor, Philip Hammond, hasn't centred on his economic approach - but whether or not he was once a goth. Former schoolmate Richard Madeley (yes, he of This Morning fame) claims he resembled "Johnny Depp in his pomp" complete with shoulder-length raven locks and a leather trench coat, as evidenced by his class photos. The man in Number 11 laughed off the "shocking" allegations, saying goths "hadn't even been invented in those days."
Whether or not Mr Hammond was actually a trendsetter back then, the "fiscal reset" he's unveiling now isn't groundbreaking. He may have shelved his predecessor's target of a surplus by 2020, and found cash for housing and transport projects. But this isn't a Chancellor who's ditching austerity at the first sign of trouble. He admits retaining some kind of framework to eliminate the deficit is essential, not least to maintain credibility with the financial markets. (Ironically, this was also the argument used by George Osborne - yet the UK still lost it's triple "A" rating and despite that, bond yields remain below their levels of five years ago).
On the other hand, the economy is holding up after the "no" vote, so why not just stick with the austerity blueprint? That would be beyond short-sighted. Article 50 and those protracted negotiations are yet to be triggered. To date, firms are at most pressing the "pause" button on hiring or investment, pending the Brexit process. It'll be sometime before we know if both of those, along with trade and consumer spending are going into reverse - or expanding regardless. In short, we ain't seen nothing yet.
Governments and and central banks aren't setting policy for today - their actions take about a year to impact on the real economy. No one knows exactly where these uncharted waters will lead us by then. Already, the most detailed post-Brexit scenarios envisaged pre-23 June - be it from the Treasury or OECD - appear outdated. So while market-watchers might be frustrated by Mr Hammond's refusal to name a new target date for balancing the books, it may be a canny move not to box himself into a corner (remember Mark Carney's dalliance with forward guidance?).
With so many unknowns, pragmatism is perhaps the only realistic option - a sort of austerity-lite. Mr Hammond has hinted that, for now, this may mean a baseline policy of " borrow to invest" - more a leaf out of Mr Brown's book than Mr Osborne's.
But is Brexit forcing this Chancellor into a fiscal reset or enabling a personal belief that austerity was going to far, too fast anyway? That is perhaps is now the most pertinent question (along with whether or not that leather trench coat is still hanging in a wardrobe in No. 11).
Forget austerity, the Budget buzzword for this decade is infrastructure. Just six months ago (yes, really) we had Osborne promising "long-term solutions to long-term problems" with cash for road upgrades and HS3. His successor Philip Hammond has hinted he'll be investing further in projects that boost productivity. So this week it was the turn of John McDonell, the Shadow Chancellor to trump that with a pledge to earmark a whopping £250bn on infrastructure.
Actually (much like his living wage and in the habit of Chancellors on both side of the divide) it's a re-announcement. But there's no doubting the appeal of extra cash for example for more housing, improved rail capacity or faster national broadband. It's not just about making life easier but boosting growth and incomes. (Although it's no quick fix.)
But questions about where the money would be spent - and the benefits - have been drowned out by those about where the it would come from.
Mr McDonnell said Labour would pledge £250bn of government funding over 10 years. That's in addition to £100bn for new public national and regional banks. "Ruinous" was the retort of critics, who point out that would be the equivalent of massive hikes in taxes - for example least another 5% on VAT every year.
Labour's suggestion is that the answer might be to borrow, making the most of those historic low interest rates. Sounds sensible. But we're already shelling out more on the interest of our national debt - close to £50bn per year - than we do on defence.
In addition, Mr McDonnell hopes the private sector would chip in too. As the last Chancellor found, big companies and pension funds can actually be incredibly cautious when it comes to stumping up cash.
Loosening the purse strings and shoring up our economy for the longer-term, particularly in this unprecedented era, has much going for it. Both main parties seem to acknowledge that. But a nod to Gordon Brown's old mate, Prudence, might not go amiss.
Forget, Brexit and Bake-xit, now we have Brex-pitt to keep us awake at night. What now for Brangelina? Now the economy hasn't crashed in the way we'd feared, we can focus on who might be joining Paul Hollywood on Channel4 (one way for Mr Pitt to retain his wholesome (wholemeal?) image perhaps?)
After all, as Joe Grice, one of the government's chief number-crunchers put it: “As the available information grows, the referendum result appears, so far, not to have had a major effect on the UK economy." Yes, forget those surveys that warned us of the biggest slump in confidence in decades, economic activity is...actually doing ok. As in, still growing - we'll find out by how much on 27th October when official figures come out.
So panic over? Well, no. The key words in that commentary are "so far". The bean-counters are still to get data on economic performance over the last three months in from every corner of the country. And when business confidence drops in the way we've seen, the impact on decisions to hire workers or invest in expansion can take months, or even longer, to filter through.
And of course, Article 50 has yet to be triggered and trade talks yet to start. The impact on those sectors - in particular finance and manufacturing - which rely heavily on business with Europe could be substantial. (The silver lining is that a weaker pound makes exports cheaper, and so more attractive. Again,with the way prices are agreed in advance, it may be a while before we reap that reward.)
So our economy could as yet have a soggy bottom. However, the pre-emptive action taken by the Bank of England - and the likelihood of more to come from Philip Hammond in his autumn statement should limit the damage. The way consumer spending has held up so far in particular, is promising
But it will be many years until we know for sure. By which time, Brangelina may have faded from memory in the same way Bennifer has. Who? Exactly.
Any illusions that economy air travel is any way exotic or glamorous is instantly shattered by the question "Chicken or Beef?". (That is, if you needed a reminder after contorting your limbs into a shape resembling a pretzel). But, if British Airways has its way, that query could soon be replaced by "prawn mayo or BLT" - if its reported deal with M&S to supply airline meals goes ahead.
By charging for food, BA would cross one of those remaining lines which distinguishes it from its budget rivals - and caused an outcry. Anyone who's been forced to fork out over a tenner on other airlines for a few basic snacks will sympathise.
So why do it? Last year, BA spent over 1 billion pounds on "operating costs" . Ok, that covered everything from crews' hotel costs to champagne in First Class (no mention of them switching to Lucozade yet) but the airline carries in excess of 40 million passengers a year. Shave even a couple of pound off that per passenger, and the savings for the airline soon mount up.
And its more than cost saving: even with having to fork out for those M&S ready meals, BA now has an additional revenue stream, not to mention being able to offer lower headline fares. An obvious move for an airline under pressure to maintain profits
What are passengers losing out on? On a recent red-eye back from the US, the meal wasn't worth staying awake for - unless you're into fifty shades of beige. A neighbour's gluten-free tray would've been better marked "fun-free". Nor was there anything fun about the "fun-sized" choloate bar which replaced a second meal. Enough to push you to BYO - or even EBYB (eat before you board- less catchy but also less messy).
The slicing of yet another "amenity" may be enough to have you weeping into your (thankfully, still free) G'nT. But ultimately, it may not just be BA's profits but our tastebuds that benefit.