Autumn Statement: A new chapter?
November 24, 2016
The Autumn Statement was an opportunity to reset the public finances, upgrade the UK’s productivity through a boost to investment in infrastructure and innovation, and set out a new economic plan in the run up to the start of Brexit negotiations.
There were, of course, some enduring themes from the last administration. The government continues to need to deal with increased deficits against a backdrop of slower forecast growth over the next few years. This means a need to drive through fiscal consolidation with a tight rein on public spending. It also meant little change to the spending settlement for public services with the pressure to do better for less remaining at the top of the agenda for public officials, alongside planning for Brexit (for which new funds were set aside).
For the public finances to be repaired, including a higher stream of tax revenues, we also need real incomes to grow which ultimately requires higher productivity growth. And the economy needs to be resilient to cope with changes over the coming years.
The Autumn Statement therefore provided the ideal opportunity to position the government’s forthcoming industrial strategy as core to the new economic plan and the route by which productivity can be increased. As the Prime Minister said to the CBI, this strategy is about “creating the conditions where winners can emerge and grow” and about scaling up successful businesses.
Delivering effective, efficient and sustainable infrastructure is essential to provide the backbone from which economic success and prosperity can grow and was central to the Autumn Statement. A new National Productivity Investment Fund, worth £23 billion over five years, is being targeted on four areas: housing, transport, digital communications, and research and development (R&D).
This included the pre-announced £1.3 billion investment in repairing the road network and dealing with pinchpoints – welcome news both to employers and also commuters. The form that this investment takes is also important – smaller, shovel ready schemes (following the ‘Eddington principle’) that add to demand now while also increasing supply side productive potential in the medium term.
Transport is one of the ten essential ingredients of good growth in the eyes of the public. But so is increasing the supply of affordable housing, where on top of the £3 billion Home Builder Fund the Autumn Statement added an extra £1.4 billion for 40,000 affordable homes.
Allied to announcements before the Autumn Statement of an increase of £2 billion p.a. by government for R&D and science spending, a new Industrial Strategy Challenge Fund to fund cutting edge research like AI and biotech as well as further support for SMEs shows the real desire to ramp up productivity. Part of the broader investment in infrastructure includes £1 billion over five years for digital infrastructure. This was a signal that the UK remains open for business. Although there was noticeable lack of priority given to education and skills in terms of new commitments.
Growth also needs to be spread across the UK with no places left behind. As we set out in our Good Growth for Cities report, the rebalancing needed across the economy entails not only investment in physical and social infrastructure but also real leadership in a place. This is why further devolution is so important, and where government’s commitment to devolution was reaffirmed.
Finally, as part of the new Prime Minister’s drive for deep rooted social reform, there were some measures aiming to help people ‘just about managing’ including a freeze in fuel duty, a lower taper rate on Universal Credit, an increase in the National Living Wage by 4% to £7.50, reduced childcare costs and reaffirmation of the commitment to increase personal allowance thresholds (£12,500 for basic rate taxpayers and £50,000 for higher rate).
Ensuring that everyone, in every part of the country, can benefit from growth is a stretching aspiration but one that has become so much more important since June 23rd. Good, inclusive growth is no longer a nice to have – it’s essential to the future wellbeing of this country.