There is only one activity less productive than watching the Autumn Statement, and that is watching the prime minister's questions that precedes it. Every question even tangentially related to tax and spend receives the rote reply: "I would not want to pre-empt my honourable friend the chancellor". Perish the thought.
Rather than sitting through Jeremy Hunt's speech, you'd have been better off reading the accompanying Treasury documents and the Office for Budget Responsibility's (OBR) economic and fiscal outlook. Think of them as the highly acclaimed novel to the speech's heavily panned screenplay.
These documents contain the forecasts, scorecards and anything else the chancellor chose not to divulge, because he was too busy raising the plight of the Scotch Whiskey industry or the Jolly Farmer pub in Bramley.
Much of the briefing prior to the Autumn Statement was about tax cuts and boosting growth. And there were deliverables on this front, including making 'full-expensing' permanent. This enables businesses to offset investment in things such as plant and machinery against tax, worth roughly £9 billion a year. Meanwhile, national insurance paid by employees will fall from 12 to 10 per cent from January.
These will generate the headlines that the chancellor and prime minister are after, while placating (for perhaps five minutes) unhappy Conservative backbenchers. But for a fuller picture, we need to delve into what Hunt did not say.
First, that despite spending £27 billion of his precious (and in some ways illusory) fiscal headroom, the OBR shows that tax as a percentage of GDP will still peak at 37.7 per cent in 2028-29 – a post-war record.
The tax cuts announced today are real, but they do not come close to undoing previous rises. Much of this is a result of fiscal drag, whereby income tax allowances and thresholds are frozen, drawing more people into higher bands. Consequently, the tax burden is still way up on 2019.
The second unmentionable is on public sector investment. There is to be a long-term cash freeze, which of course equates to a real terms cut. As the Institute for Fiscal Studies' Paul Johnson points out, UK public sector investment is already far below that of most comparable countries and this will have a downward impact on growth.
Third is day-to-day spending. As frequent readers of this newsletter will know, both the Conservatives and Labour are committed to implausibly tight spending plans, conveniently pencilled in for after the election. Yet the public sector is already crying out for more money (see: NHS waiting lists and the criminal justice system) and that is before getting to the long-term NHS workforce plan or more money on defence.
Fourth, there is debt. It is quite remarkable that even though borrowing is forecast to fall steadily from 5 per cent of GDP this year to just 1.1 per cent by 2028-29 (which would represent the lowest level since 2001-02), debt as a percentage of GDP is essentially flat. This is because the economy isn't growing fast enough to offset even low levels of borrowing.
And therein lies the problem. What ties all of the above together is the same issue that has dogged the UK economy for the last 15 years: economic growth, or lack thereof. The OBR's GDP forecasts may not be as pessimistic as those of the Bank of England, but it has still downgraded growth next year from 1.8 per cent to 0.7 per cent, and in 2025 from 2.5 per cent to 1.4 per cent. These are substantial revisions with major implications for taxation, spending and borrowing.
The chancellor isn't wrong to identify growth as the core issue, nor was Liz Truss before him. But where is it going to come from? Clearly not from unfunded tax cuts, rejoining the EU, or relaxing planning restrictions.
The reality is that until Britain can unlock sustainable economic and productivity growth, the chancellor – whether Conservative or Labour – will be stuck carving up ever smaller portions of the pie to a pretty miserable electorate,
In the comment pages, Chris Blackhurst declares the Barclays back with a bang – now that the Telegraph sale has been turned completely on its head. Anna White says that fixated on house prices, both the press and politicians failed renting Londoners. While Fat Tony calls London far too anti-dog — he wants his with him in every shop and restaurant.
And finally, hear us out: Angus Steakhouse isn't all bad. In fact, it’s quite romantic, says Josh Barrie.
