'Unspectacular' Chancellor's statement to be applauded
I was going to write that the Chancellor's autumn statement was the big event of the past week but given that many of the small and medium businesses that I share an office building with didn't even know there was an autumn statement, I realise I may have been living in an economist echo chamber for a while.
It's true that the autumn statement was just one of three significant events from the past week which will impact on our economy. The other two, which garnered significant attention across the media, were the rates announcement by Minister O'Muilleoir and the decision to keep regeneration powers away from our councils by Minister Givan. The proposals on rates, particularly the suggestion of reframing the Small Business Rates Relief (SBBR) to focus on retail and hospitality received a welcome from obvious quarters (NIIRTA and Hospitality Ulster) and left the Federation of Small Business fuming.
Personally, I think the SBBR has served its purpose several years ago and welcome the proposal to reframe it. The proposal to retain regeneration powers at Stormont, on the other hand, ranks as one of the poorest economic development decisions I've heard in a long time. I have written about that elsewhere.
Returning to the Chancellor's autumn statement, one of the few 'giveaways' revealed significant plans for Northern Ireland to see a close to £300m boost to capital spending over the next five years aiming to give us "greater spending power to boost productivity and promote growth". Although the autumn statement was heavily trailed before the speech, this was a welcome injection that no one was predicting.
While not quite the emergency budget that former Chancellor George Osborne threatened us with before the Brexit vote, there was a definite change in direction from Chancellor Hammond. Back in July the new Chancellor stated he was ready to reset economic policy to respond to any slowdown caused by the UK's vote to leave the EU. That sparked a period of guessing what that might mean. Would Austerity end? Would VAT be cut to provide an instant boost to the economy? Would he usher in an era of infrastructure renewal?
The short answer is no. The forecasts from the independent Office for Budget Responsibility (OBR), while not predicting a recession, did suggest a significant slowdown in the economy and much weaker public finances. As such, the Chancellor was left with little room to manoeuvre in the statement.
All the talk recently has been of helping JAMs (just about managing) but there was little to show in this regard, bar some previously announced moves on tax bands, tinkering with benefits and an increase in the National Living Wage.
Events since the summer have conspired to move the national debt to 'eye-watering' levels and leave the chancellor in a bit of a jam. The Treasury is expected to borrow an additional £122bn over the next five years. To put that figure in context, that would cover all of Northern Ireland's expenditure for about five years! The OBR has identified the element of additional borrowing that they attribute to the decision to leave the EU. This comes to £59bn. I imagine that figure will be argued over for some time.
The perilous state of public finances remains, as does the objective to balance the books. The big change in this regard was the timeframe. Gone is the commitment to deliver a surplus by 2019/20 and in its place a woolly ambition to balance the public finances 'as soon as possible in the next Parliament'. That probably gives the Chancellor enough flexibility to react further as Brexit approaches. It was welcome that the Chancellor has allowed some extra borrowing to fund investment in infrastructure and innovation.
Locally, we stand to gain an extra £250m for capital programmes and there is a queue of worthy projects that will hope to see a share of that. Perhaps the York Street interchange will get the funding it needs.
The additional funding for innovation is welcome - there is a clear link between research and development, profitability and growth. Locally, we have made some significant strides in this regard over the past year, recording the highest growth in spending of any UK region to stand at £750m. Any initiatives to enhance it further are to be welcomed.
Did the autumn statement have any impact on consumers? Don't forget, consumers in Northern Ireland are already judged to have the lowest levels of discretionary incomes so more of us could be classified as 'just about managing'. The measures taken to help consumers were minimal. Increases in income tax thresholds will proceed as per previous announcements and the National Living Wage will rise by 30p per hour in April and there will be no more welfare cuts announced during this parliament.
So, there are some winners from the statement. In terms of putting money straight into people's pockets, there were some calls for a reduction to VAT in order to boost spending and offset some of the inflationary pressures that are building. These calls didn't really get much traction and have been ignored. The Chancellor did freeze fuel duty for the seventh year in a row which, with petrol and diesel prices rising, should save an average car driver over £150 per year.
Many will applaud the autumn statement for being unspectacular and 'steady' in a time of significant political and economic turmoil.
I suspect many, many more won't even know it happened.