Party conference. The King’s Speech. The ‘Cameron Reshuffle’.
It’s becoming hard to keep track of the resets undertaken by Prime Minister Rishi Sunak in an attempt to turn around polling that has consistently given Labour a 20-point lead.
Today’s Autumn Statement was, arguably, another reset moment. A chance to demonstrate that with inflation falling, and economic prudence over the last year, the Government could now begin to plot out a new approach to making us all feel better off.
But in reality, that was never going to be the case. Partly, because the Government simply doesn’t have the fiscal ‘headroom’ to begin plucking rabbits out of hats, and partly because of the political identity of the Chancellor delivering today’s Statement.
Brought in by Liz Truss following the ‘mini-budget’ in 2022, to calm the markets, Hunt recognises, more than most, that with stagnant economic growth, inflation still high, and the cost of living crisis still biting, anything other than ‘steady as she goes’ would risk the stability that he has fought hard to try to create.
And Hunt’s initial summary of the state of the economy laid out the challenge very starkly. Economic growth forecasts for 2024 have been cut from 1.8% to 0.7%, while 2025 has been cut from 2.5% to 1.4%.
So, rather than a reset, today was about setting out the slow build towards the General Election expected next year.
Beginning to show that the Government could offer voters a reward for the pain of the past two years. Beginning to show businesses that the Government has their growth and success at the heart of its approach.
(And with a very clear eye on the politics, consistent ‘name checks’ of Conservative MPs, acknowledging their economic campaigns and ‘wins’.
Of the announcements made, most eye catching was the £11bn-a-year allocated to make 100% full expensing of capital investment permanent. Companies investing in everything from machinery to laptops will now be able to reduce their tax bill by up to 25p for every £1 they spend. A very clear signal to the business community that the current Government is backing business, and another significant nod to the looming election.
£500m was allocated over the next two years for innovation centres focused on making the UK an AI powerhouse, while the first AI Safety Institute will be launched, backed by an initial £100 million investment. There is £50m for boosting apprenticeships in key sectors, and £4.5bn (already announced) for strategic manufacturing sectors.
Speculation in the lead up to the Autumn Statement centred on where and how the Chancellor might offer tax cuts – a measure that his backbenchers feel is critical to election success.
In the end, as widely predicted, National Insurance grabbed the headlines, with a cut from 12% to 10% from January, and the national minimum wage will be increased by 9.8% rise to £11.44/yr from April.
The assumption has always been that the Chancellor would try to offer businesses and voters a limited carrot now, within constraints set by economic performance, while waiting and hoping for a better economic outlook to facilitate a bigger give away at the Spring Budget.
But with the OBR’s forecast suggesting low growth throughout 2024, that strategy is looking more and more precarious.
Jeremy Hunt concluded his Statement by describing it as being “for a country that has turned a corner.”
On whether that is truly the case, the jury is still very much out.
If you are interested to explore how the measures in the Autumn Statement may affect your organisation, or how engagement with Whitehall and Westminster could help drive a better operating environment, please be in touch with the Brands2Life Public Affairs team on [email protected].