The latest forecast from the Office of Budget Responsibility predicted growth over the next five years to be "2.4 percentage points lower" than would have been the case.
He introduced a new target to return the public finances to balance "as early as possible in the next Parliament". But there was a need to address the weakness of UK productivity, and "grow the potential of the economy and protect the tax base".
"So we choose in this autumn statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain's productivity," Mr Hammond said. And this commitment could be funded in the short term from additional borrowing.
He announced a new £23bn National Productivity Investment fund, to be spent on innovation and infrastructure over the next five years.
For transport this would mean an additional £1.1bn for English local transport networks, "where small investments can offer big wins", focused on relieving congestion and installing important upgrades; £220m to address traffic pinch points on strategic roads; and £390m "to build on our competitive advantage in low emission vehicles and the development of connected autonomous vehicles", plus 100% first year capital allowance for the installation of electric vehicle charging infrastructure.
In an unexpected move Mr Hammond unveiled £450m for a trial of digital signalling on railways.
The DfT would continue to work with Transport for the North to develop detailed options for Northern Powerhouse Rail. More details of this and other projects was promised from Transport Secretary Chris Grayling "over the coming weeks".
There was a commitment to continued higher infrastructure investment. Mr Hammond said: "We must sustain this effort over the long term if we are to make a lasting difference to the UK's productivity performance"; he had written to the National Infrastructure Commission to ask it to make its recommendations on the future infrastructure needs of the country on the assumption that the Government would invest between 1% and 1.2% of GDP every year from 2020 in economic infrastructure within the commission's remit – compared with 0.8% definition this year.
The chancellor also backed the NIC's interim recommendations on the Oxford-Cambridge corridor, published last week, with £110m of funding for East West Rail and a commitment to build the Oxford-Cambridge expressway, with an immediate £27m of development funding. This could become "a transformational technology corridor, drawing on the world-class research strengths of our two best-known universities", he told MPs. The expressway will be included in the second Road Investment Strategy, alongside dualling of the A66, and improvements to the M60 North West quadrant.
It was also necessary "to drive up performance of our regional cities," he said. A strategy for addressing productivity barriers in the Northern Powerhouse was published alongside the statement, with the go-ahead for a programme of major road schemes in the north of England.
A Midlands Engine strategy would follow shortly, but immediate funding of £5m for an evaluation study for the Midlands Rail Hub, a programme of interventions in and around central Birmingham that could provide up to 10 additional trains per hour, was also announced.
Mr Hammond also announced £1.8bn from the local growth fund to LEPs around England, £80m to accelerate the introduction of smart ticketing and £150m to improve transport flood resilience.
All in all, the focus on infrastructure as a means to improve productivity appears to be good news for transport as a whole.
Overall, the infrastructure measures were welcomed by the industry but were criticised by shadow chancellor John McDonnell as too little. Andy Burnham MP, Labour candidate for mayor of Greater Manchester, said plans for the North should have been bolder: "The North is crying out for a clear plan for transport – our motorways are full. The region is also crying out for a skills plan after the referendum. Today was a chance to meet both with a bold plan for east-west rail investment and a clear timetable for it. The Northern Powerhouse Investment Fund is welcome but we needed more than the dribble of low-key announcements we got."
David Fowler, Editor, Transport Times
Some key industry figures respond below:
David Brown, Chief Executive, Transport for the North
I welcome the Government's continued commitment to the Northern Powerhouse and the important role that transport connectivity has to play in this, as confirmed in the Autumn Statement and with the publication of its Northern Powerhouse Strategy. In addition to this, the Chancellor referenced the progress made by Transport for the North in developing options for Northern Powerhouse Rail. The Government has stated that it will continue to work with Transport for the North to consider these options over the coming months, and will announce next steps in 2017, as planned.
There was other welcome news in the Northern Powerhouse Strategy, in which the Government gave the go ahead for important improvements to strategic road routes, including the Manchester M60 North West Quadrant and the A66, within the Second Roads Investment Strategy (RIS2). These are just two of the routes which form part of our Major Road Network for the North, which is currently in development. The Government also confirmed that it is continuing to consider other cross Pennine road routes and we will be working closely with DfT to inform this consideration. I welcome the improvements announced today as a positive step forward. I look forward to future commitments to invest in the major transport infrastructure projects required to transform the Northern economy, like Northern Powerhouse Rail.
Nick Crossfield, Managing Director, Alstom UK & Ireland
Championing infrastructure is nothing new from a Chancellor in difficult economic times. What's different from Philip Hammond's first Autumn Statement is the explicit link he draws between infrastructure and innovation as the solution to the UK's growing productivity gap.
The Chancellor has backed a high-tech, high-value, knowledge economy. The commitment of £450m to trial digital signalling is a sure sign of this. The rail industry should seize this opportunity to be at the forefront of innovation in infrastructure – we offer a solution to the productivity problem like few others do.
We have a good track record. New rolling stock, predictive maintenance like Alstom's HealthHub, and ambitious construction projects like Crossrail are all serving to reduce journey times, improve passenger experience and reduce costs. The digital railway will combine signalling, infrastructure and digital technology to transform the capacity and reliability of the railway.
Last financial year alone Alstom generated £176m of direct GVA to the U.K. economy, and per head that is already 20% higher than manufacturing as a whole. The Chancellor's commitment to digitalisation and innovation will help us leverage that even more successfully in the future.
Investing in skills is just as critical as investment in technology. As the industry moves away from its 'hammer and spanner' roots towards tablets and big data, the Government must continue investing in future generations of engineers.
Just recently Alstom broke ground on its new technology centre in Widnes. This will become our UK centre for research and development, providing 15,000 training days a year in engineering, manufacturing, project management and other vital skills.
There remains a skills crisis within the STEM sector and while we at Alstom are investing in high quality apprenticeships and trainees, more needs to be done to ensure the industry can deliver on the Chancellor's vision.
Today's statement marked a step in the right direction. Industry and Government now need to work together, to ensure the UK gets ahead. And stays there.
Philip Hoare, Managing Director, Transportation, Atkins
The last few months have brought about significant changes to our political and economic landscape but yesterday the Government made a conscious effort to reinstate business certainty in complex and challenging times.
The post Brexit era must be one that drives growth and productivity and more than ever, it is important for the Government to maintain a robust pro infrastructure and pro investment agenda. Positive statements, by the Chancellor, on increased funding for transport priorities including rail, roads and local transport projects across the country is welcomed. Promises of further capital investment for digital signalling, the strategic road network and progressing the advent of Connected and Autonomous Vehicles are both welcomed and exciting as it signifies a commitment to invest in the future of transport in the UK.
Proposed plans must be cross-cutting and in recognition of wider drivers of growth and industry needs. A push on innovation and infrastructure is a step in the right direction but specific measures to ensure the UK can continue to compete globally and kick start inward investment should be strategically linked with a credible, innovative and holistic industrial strategy. Importantly, this is the time for the Government to move the needle on the Modern Transport Bill to better support a transformative transport sector.
Undoubtedly, the new fiscal climate remains volatile as we mitigate our departure from the single economy. This is why stronger assurances must be built into specific measures for economically productive infrastructure development.
Whilst we are encouraged by the overall message, the next step must be the implementation of spend priorities – moving promises from paper to the city regions and local communities where efficient transport links are needed.
James MacColl, Head of Campaigns, Campaign for Better Transport
Yet again, the Government is spending big on roads. The Chancellor announced an extra £1.1bn on local transport and relieving congestion but it's not clear what all the money will be spent on. The announcement of the controversial A66 dualling across the Pennines suggests much of it will be for big new roads rather than fixing the potholes and derelict pavements we already have. Campaign for Better Transport argues that when it comes to infrastructure, we should fix it first. With more detail expected from the Department for Transport in the coming days, will this Autumn Statement signal a missed opportunity to set us on path to a low carbon future supporting local sustainable transport improvements, or business as usual for big dirty schemes?
James Stamp, Global Head of Aviation, UK Head of Transport, KMPG LLP
Today the Chancellor announced funding for more road and rail capacity. Specific improvements, such as alleviating road network pinch-points, and the Midlands Rail Hub, are welcome, as is the positive sentiment about Crossrail 2.
However, even with investment in specific schemes, a stark fact remains: demand for transportation will always be ahead of our ability to pour more concrete. Making more from the capacity we have is – and will stay – key. Without this, congestion will remain a limiting factor on productivity.
It is therefore vital that investment in transport innovation tackles not only the specific issues of today, but also fundamentally how and why people will travel in the future. Smart ticketing, autonomous vehicles, and smart infrastructure all individually promise incremental benefits, and investment in this area is therefore encouraging. But the exponential change that could be unleashed by combining these initiatives (along with better use of data for providing information and choice to passengers) together is the real prize. Translating the potential of Mobility-as-a-Service, enabled by digital technology, to reality will require collaboration between policy makers, private operators, and transport authorities. It must be a key aim for the Government.
Steve Gooding, Director, RAC Foundation
Things can always be better but against a backdrop of deteriorating public finances this autumn statement was broadly positive for drivers and road users.
The continued duty freeze indicates the Chancellor recognises transport is the biggest single area of household expenditure and two-thirds of workers commute by car.
However, it is worth remembering that even if fuel companies wanted to give petrol and diesel away for free they couldn't. Drivers would still pay 69.5p a litre – 57.95p in fuel duty and VAT on top of that.
The £1.3bn earmarked for roads has been confirmed as new money. Most of the cash will go on improving the more than 200,000 miles of local roads that the majority of drivers use on a daily basis; however the local road maintenance backlog remains a formidable one with the cost to clear it entirely estimated to be £8.6bn.
With the ultra-green car market still not fully fledged, the continued financial support will reassure car makers they are investing in an area that ministers are determined to see a success.
Tucked away in the statement's small print is a recommitment to the National Road Fund which will ring-fence vehicle excise duty for spending on strategic roads from 2020.
Jim Steer, Director, Steer Davies Gleave
We can't be sure it's '"new money" – with the rail sector due to set its five-year investment plan in 2017 – but £450m for digital train control signifies a policy shift for rail. With the digital railway project now headed by David Waboso, who led the successful implementation of these systems on London Underground, Network Rail can look at a main line application.
This needn't be seen as a trial (the technology is proven), except that the national rail network isn't the closed unified system that London Underground operates. Getting digital benefits – including the much-vaunted 40% capacity increase – means complementary capital spending on trains and stations, and changes to operating procedures (there is no second person control of train doors on LU, for example).
So choosing the right application is an important challenge, but Waboso's view is that the choice needs to be one that brings demonstrable benefits. There are enough over-stressed lines as candidates.
The appeal for the chancellor in this development is that digital systems offer the prospect of making better use of existing track capacity. This aligns well with the need he identified to address the very weak level of UK productivity compared with west European economies, and fits too with his support for innovation.