After the drama of the Brexit referendum and the election of Donald Trump, there seems something almost mundane about turning our attention to the coming autumn statement.

Normally a set-piece event in the parliamentary calendar would have dominated media coverage and political commentary for weeks in advance. There would have been speculation about the measures the chancellor would announce; which groups would win and lose economically; and whether the government or the opposition would end up stronger politically.

But the normal rules have been up-ended. Jeremy Corbyn’s re-election means that the government has no short-term worries about its political dominance. And the Brexit referendum means that debate in Westminster is now dominated by questions of how Britain will leave the European Union and what its future relationship will look like.

In all this, we should not forget the importance of the decisions the chancellor will announce on Wednesday.

We know that the most economically depressed regions of our country were the ones which voted most strongly for Leave. The distributional impact of the government’s measures, and the wider rebalancing of our economy, are important if we are to stem the rising tide of populism.

More widely, Britain’s withdrawal from the EU – especially if it is a ‘hard Brexit’ that involves leaving the single market and the customs union – will make it harder and more expensive for our companies to export to Europe. This is an economic shock that will make us poorer overall so the government must grow the overall size of the pie, not just seek to divide it more fairly.

So what are the tests for Philip Hammond on Wednesday?

First, it is time to replace George Osborne’s rigid fiscal rules with a proper, flexible alternative. Osborne had ruled that the budget must be in surplus every year from 2019-20. But as Paul Johnson of the Institute for Fiscal Studies argued, such a hard constraint provides an incentive for short-term, damaging spending cuts or tax rises whenever economic forecasts worsen.

A better rule is that the current budget must be brought into balance over a rolling three-to-five year period. This would give a stronger incentive for long-term decision-making. And because it excludes capital investment – the part of government spending that can generate the greatest benefit for the economy – it would also allow for more investment in infrastructure, as called for this week by Alison McGovern.

Second, there can be few things more likely to fuel populist anger than making grandiose promises of help, only for people to end up worse off.

Theresa May pledged an ‘economy that works for everyone’ and an autumn statement that helps the ‘just about managing’. But the Resolution Foundation have calculated that over the course of this parliament, the poorest half of households will face flat or falling incomes as a result of weaker economic growth, higher inflation and the cuts to working age benefits.

The government must ensure that the distributional impact of the autumn statement is fair and in line with what May indicated on the steps of Downing Street in July. Her chancellor can start by reversing the £3bn cuts to work allowances that Osborne announced and that would simultaneously hurt low-income working families and weaken their incentives to work.

Third, he must set out a vision for how Britain can thrive economically after Brexit. And it is here that the government is most confused.

At one end of the spectrum are the free-marketeers such as Liam Fox and Daniel Hannan. They want a ‘hard Brexit’ that enables them to scrap regulations, cut taxes and make trade deals so that Britain becomes a top destination for overseas investors.

Then there are those around the prime minister who might accept a ‘hard Brexit’ in order to get control of our borders but who want to impose more regulations on business and to subsidise favoured sectors to keep them in the United Kingdom.

Finally, there are those such as Hammond who want a ‘soft Brexit’ in which Britain keeps more of its access to European markets. In return they accept that we could not have complete control of our borders and that we would still be bound by EU rules, including against state aid.

These visions are mutually incompatible and they have contradictory implications for future economic policy. Generating a messy compromise between them risks leaving us with the worst of all possible worlds, in which Britain simultaneously finds it harder to export to Europe and harder to attract capital from outside Europe.

The chancellor must use the autumn statement not only to rectify the mistakes of his predecessor but also to set out a clearer vision of the UK’s post-Brexit future.

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Stuart Hudson is a former special adviser to Gordon Brown and a partner at the corporate advisory firm Brunswick. He tweets at @stuarthudson100

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