It is a truth universally acknowledged that a Chancellor in possession of slowing growth and an increasing deficit must be in want of a “resilient” economy. And he might even put aside funds for the restoration of Pemberley. In his first (and apparently last) Autumn Statement, Philip Hammond delivered his vision for charting the British economy through the uncertainties of Brexit, laying out plans for increased borrowing and reducing expectations for growth. Here are five aspects of the Statement to consider.
There’s life in the Powerhouse yet
While differentiating his plan from the work of his predecessor, the Northern Powerhouse remained a fixture of Hammond’s Autumn Statement. He was keen to highlight the importance of all regions of the UK in boosting growth and its productivity performance that languishes behind other developed economies. Improved transportation links and infrastructure in the North and Midlands have been identified as a means to achieve this, but promises to devote attention to regions outside of London and the South East have fallen flat before.
Devolution
As well as this continued emphasis on regionalism, the devolved governments of the UK will be allocated additional money on top of their existing budgets through to 2020-21. Scotland will receive an extra £800 million, Wales £400 million and Northern Ireland £250 million. With the exception of Wales, these regions were staunchly opposed to leaving the EU. A second Scottish independence referendum could be on the cards, and Sinn Fein seized Brexit as the opportunity to renew calls for the reunification of Ireland. As the potential for the union to break up has become more acute, this additional spending may well have been targeted to placate these regional governments.
Innovation, Innovation, Innovation
The Statement devoted significant attention to innovation, science and R&D as part of the government’s Industrial Strategy. The headline announcement was the Oxford-Milton Keynes-Cambridge expressway. Improving this transportation link aims to foster collaboration between the two institutions, necessary for making the scientific and technological developments needed to keep Britain at the cutting edge of innovation. However, one expressway will not remedy the changes to migration policy that may occur following Brexit, deterring the brightest foreign students and workers from coming to the UK.
A housing market for everyone
The high profile move to scrap English agency fees plus the promise to accelerate the rate of house-building with an extra £1.7 billion in spending on housing infrastructure by 2020-21 are welcome. These measures are by no means a cure-all to the housing crisis, and other contentious issues, such as building on green belt land, were not addressed. Yet efforts of this kind and the promise of a detailed white paper on the matter are a step in the right direction to alleviating the pressure on housing stock.
Uncertainty reigns
The overriding tone of this Statement was that of uncertainty, and it was recognised that the implications of Brexit for the economy cannot be predicted with much confidence. Several measures in the Statement underline this, and give some indication of the challenges that lie ahead. Corporation tax was reduced to 17% as predicted, perhaps anticipating a failure to negotiate access to the single market. Expectations for growth have been scaled back by 2.4% for the next five years on pre-Brexit forecasts, and borrowing will be £122 billion more than was thought for 2020. The measures contained in the Statement were clearly intended as something of a buffer against the uncertainties of leaving the EU. Caution was the dominant consideration for the Chancellor, and we must brace ourselves for economic turbulence ahead.
