Autumn Statement Briefing
Thursday 17th November will probably be a watershed day for macro-economic policy in the UK, but really is only phase two of announcements that have already been made since the demise of Trussonomics, including increasing Corporation Tax (or rather reversing a pledged cut) changing a range of personal taxation rates and thresholds and reducing the terms of the Energy Price Guarantee Scheme.
The year 2022 is likely to be remarkable, recording 4.2% growth overall, way above the recent historic growth trends, but ending the year falling into recession. The official data really states the pace of change and dramatic swings we have all had to work with this year. It now looks like 2023 will not be a ‘quiet’ year either, nor 2024…or 2025…
There is some progress on devolution, including an announcement about an elected Mayor/Leader for Suffolk (although no immediate announcement for Cornwall, Norfolk and the North East). Investment in Research and Development has been protected, capital budgets are to be protected for the next two years and HS2, Sizewell C and Northern Powerhouse Rail will proceed as planned. There is also a doubling of investment into energy efficiency – from 2025. There is also a commitment to the agreements made at COP26.
The emphasis on the Autumn Statement is slow increases in public spending, increasing personal levels of taxation and support for the most vulnerable. The result of this will be a significant slow down in personal disposable income during 2023 – coupled with a year of negative economic growth. The short term economic outlook does not look good for our communities, especially as the projections from the OBR for inflation to remain high during 2023 and likely further increases in interest rates to follow.
The expected impact is an increase in unemployment from 3.6% to 4.9% – although this is still a relatively low rate of unemployment and it is unclear whether a short term cyclical increase in unemployment will have any issues on the labour market and skills challenges the country and many businesses are currently facing.
Also within the small print are a number of changes to Welfare to Work policies. Over 600,000 more people on income support (including those already in work) will be expected to meet with a Work Coach to increase their hours and earnings.
The Autumn Statement made Investment Zones probably one of the shortest-lived policy announcements in our field for a long time and many of our members will now probably rue several late nights preparing last minute submissions as a further waste of precious time. The slant is there will be a refocus on universities and areas left behind and delayed until the spring budget.
There is to be a £14bn cut in Business Rates over the next five years, which will be positive for the high street, but may have a knock on impact on some Local Authority revenues. Many businesses have not been paying full Business Rates during the pandemic, so it could be seen in the context of an extension of Business Rates reductions, rather than an additional tax cut,
It is not clear where ‘Levelling Up’ sits within the context of falling living standards. There were some measures to support individuals most at risk for the forthcoming recession and extended cost of living crisis, but little in terms of the geographies that are likely to be home to a significant number of the most economically disadvantaged.
There was no scrapping, winding down or budget cuts to already committed programmes, but there was also no announcement of approval of UK Shared Prosperity Fund Investment Plans. There was no mention of the fund at all…..which may be a good thing, or it may not!
The take aways for Local Economic Development are the were no announcements to cut investment in this sphere as things stand. There were very limited packages of central Government support for businesses – which may put the strain on local capacity in this area. The emphasis of our local support systems has been focussed for a while on productivity, but this relatively low key within the Autumn Statement compared to previous budget statements. Local economic development activity is often driven by government investment to unlock private investment. This component of the budget was noticeable by its absence, particularly with regards to any new money. Whether any new urban regeneration schemes are announced remains to be seen. It is possible that the spring budget is ultimately of more consequence than this Autumn Statement.
One thing is clear, we have a few late entries for ‘phrase of the year’ including, ‘unprecedented headwinds’, ‘fiscal drag’, ‘doom loop’, and probably the favourite ‘eye wateringly difficult’