House of Commons Chamber

Uncertainty prevails as the 2016 Autumn Statement approaches

By Dan Corry 14 November 2016

Much has changed in British politics since the government last outlined its spending plans. But the upcoming Autumn Statement might give us a clearer picture of what to expect from our government’s new leaders. Dan Corry gives his analysis.

Sometimes the Autumn Statement is quite predictable and just confirms the direction already set out. Obviously Chancellors try to have a few exciting things to keep the commentators and their backbenchers happy, but for most people, unless booze or petrol taxes change, they largely ignore it.

But this year’s Autumn Statement is very important. It is the first economic forecast and statement of policy since the Brexit vote fundamentally changed the direction of UK economic thinking. And it is the first of this new era of  the Prime Minister Theresa May and the Chancellor Phillip Hammond—a leadership that is so far almost impossible to read in terms of what it will actually do. For charities and charitable funders the 2016 Autumn Statement will set the tenor for what we have to work with for at least the next few years.

So what can we expect? At one end is massive uncertainty about how the economy is going to pan out. The experts said that a Brexit vote would lead to a smaller economy in the longer term. The forecasts from the independent Office for Budget Responsibility will probably say that too, and—just as the Bank of England did recently—they will also predict higher inflation as a result of the plunging pound. But there is a great deal of uncertainty around this, not only because economic forecasting is hard, but because of the obscurity of the deal the UK wants or is likely to get. Not to mention the added questions created by the judicial decision on Article 50, brought by a familiar name to the charity sector Gina Miller. The forthcoming ascension to power of Donald Trump as US President adds its own unpredictable global economic and security implications that forecasters really don’t know what to do with.

Meanwhile Phillip Hammond, having thrown off the fiscal rules of his predecessor (who on the one hand argued the rules were absolutely crucial and on the other never seemed to meet them), has much more free reign to go slower on austerity if he wants. Some experts reckon he could have as much as £40bn of spending power to boost the UK economy. This is thanks to the cost of government debt falling since the base rate was cut and the shift away from the objective of eliminating the deficit by the end of the decade. Some of this may go into investment which Hammond has hinted will be a major cornerstone of his strategy. Expect to see this spread around geographically more than usual to address the current Conservative mantra of building ‘an economy that works for everyone’—especially the so-called ‘left behind’ and ‘just managing’ Leave voters.

In more public service and benefit areas there are hints we will see some changes—more prison officers, work capability assessments that are a bit less draconian. But it would be a major surprise if very serious money was injected into the system at this stage. After all, the IFS think tank have predicted the deficit will be £25bn worse than was forecast in the Budget of March 2016. The Treasury hardly ever changes its spots and as a former member of that august institution I would guess that risk aversion is likely to rule the day. There will likely be some attempt to clamp down on those things that were favourites of former-Prime Minister David Cameron, but that the new regime are less interested in and that the data show are not cost effective—like the Troubled Families Programme. So I’d anticipate some new spend and announcements of consultations to promote the type of things the Prime Minister first spoke about on the steps of Downing Street; but probably not that much more.

This might only be a temporary situation though. With the health service and social care now creaking badly, local government scraping the barrel and revelations that many schools are heading into debt, the government will start to take a hit from public opinion in these areas. And even though it is riding very high in the opinion polls, it may not want to risk that. Meanwhile health and social care charities will need to keep an eye on the risks and opportunities of those Sustainability and Transformation Plans emerging fast.

Charities across the board will also be looking out for more signs as to where the devolution agenda is heading. With the Osborne drive to create City Deals and a Northern Powerhouse now gone—as well as the Treasury Minister and devo enthusiast Lord O’Neil—has momentum around this agenda evaporated? Or will there be signs that the Mayors—key ones being elected in May 2017 in the Liverpool City region, the West Midlands and Greater Manchester—are to be given more powers? Such a move would mean charitable funders and organisations will need to adjust to this new reality.

Of course much of this will be different if in fact, as many speculate, Prime Minister May is still playing around with the idea of holding an early election next year—especially given the hiatus with Article 50. In that case we could see a pre-election, feel-good splurge and some juicy tax cuts to help ease the way to victory.

In the world of looking for clues as to what the government is all about and how it is likely to run its economic policy, this Autumn Statement is a big moment. But it might not make everything clear.

Photo courtesy of UK Parliament.