The 2016 Autumn Statement: Tackling Inequality, or Business as Usual?
The day has arrived: Philip Hammond's first statement as Chancellor of the Exchequer. Most of you probably won't be too excited about this prospect – and I don’t blame you. But given everything that’s happened this year in the UK – most notably Brexit, a new cabinet, and a new Prime Minister – today marks an important moment. It’s an opportunity for May and Hammond to set out a clear vision for the country, to calm Brexit nerves, and, most importantly of all, to live up to May’s pledge to make Britain "a country that works not for a privileged few, but for every one of us.”
The early signs are not good. Instead of the investing in public services, promoting quality job creation and providing sufficient funds to tackle the housing crisis, what we’ve seen so far amounts to a list of half measures, gimmicks and gestures. Already this week, May has backtracked on proposals to have workers on boards, and signalled cuts to corporation taxes. If Hammond continues in the same vein, this statement will pander, quite literally, to business as usual.
Of course, in light of the vote to leave the EU, we'd expect Hammond to use the Autumn Statement to address business confidence. However, if we are to make the best of Brexit, the first thing we must do is to depart from austerity measures. While Hammond has committed to rejecting his predecessors’ rigid fiscal rules, there is still too much attention being paid to short-term fiscal prudence. At a time of profound change for the UK economy, we need to invest boldly in social and physical infrastructure. Without a commitment to invest, invest, invest, this statement and will fail to speak to the key long term challenges this country faces, and Brexit will be a missed opportunity to rebalance the economy, tackle low productivity and address inequality.
While Hammond will point to big sums of money going into innovation and regional investment, we must not forget that these will fall short of current EU investment. If we really want to catch up and tackle the North-South divide, we need to invest more than we previously have done. The announcement on innovation funding, for instance, only starts to bring us up to the average spend in high-income countries.
The government is expected to promise help for JAMs - those "Just About Managing" - through policies such as a freeze on fuel duty, banning letting fees and reduced childcare costs. An increase in the minimum wage will help those on low incomes, but this could be cancelled out by changes to tax credits. Given that living standards only just started to recover this year after the longest period of decline in living memory, and are now forecast to fall again because of inflation, these tweaks seem like too little too late. Surely we can be more ambitious in seeking to improve the lives of those who are just about managing – and, more to the point, those who aren't managing at all.
All in all, Hammond looks set to fail to make the bold moves needed at this crucial time in British history, and it looks unlikely he will put forward proposals that speak to the deeper economic issues that brought us Brexit. Without reversing planned cuts to universal credit, restoring social security for the most vulnerable, encouraging good job growth and investing heavily in public infrastructure - from housing to childcare, and from schools to the NHS - many individuals and families will continue to be short-changed by our economy.