This year’s autumn statement paints a dramatic statement for growth prospects, with the growth forecast for 2017 downgraded from 2% to 1.5% and GDP falling further to 1.4%, 1.3% and not rising until 2020. Business investment has been revised down and CPI forecasts it to fall later this year. £3bn has been set aside to prepare the UK for every possible outcome of BREXIT. This is accompanied an attempt to drive down borrowing, which is forecast to fall from £39.5bn in 2018 to £25.6bn in 2022.
We remain in the red with debt peaking at 86.5% of GDP falling to 79.1% by 2022. Borrowing is back, and public spending restraint is a bit looser, but are the measures in the Autumn Statement going to drive growth and help those most affected by austerity?
The chancellor has raised the deficit further with high public spending and a net tax giveaway. Although debt is at a very high level now, falling debt is potentially sustainable and positive. But are we ok with debt being nearly 90% of GDP and for how long are we ok and how achievable is the reduction against a backdrop of BREXIT?
In term of the announcements so far concerning the West Midlands, a second devolution deal has been agreed and includes £6m for a housing delivery task force, £5m for a construction skills training scheme and £250m for the West Midlands from the Transforming Cities Fund to develop the local intra-city transport infrastructure.
For the wider Midlands Engine area, the budget is supporting the delivery of the Midlands Connect strategy; the government will provide £2 million to develop options to address key constraints on the Coventry – Leamington Rail Corridor, and £4 million for congestion measures.
The government will pilot a manufacturing zone in the East Midlands. This will reduce planning restrictions to allow land to be used more productively, providing certainty for business investment, and boosting local productivity and growth.
These interventions are based on the negotiations with local areas, which in turn are based on an assessment of what will make the biggest impact on growth. But those prospects for growth are based on a detailed set of negotiations, considerations, and assumptions about the future we are building. Those assumptions rely on people’s perceptions of what their future might be.
Like much of the rhetoric around Brexit we are at the whim of sentiment and perception as much as reality, maybe even falling into a malaise of Brexititis, this budget needed to be a balance of realism alongside the need to raise public and business expectations and optimism for the future. But we are, as we were this time last year, in a difficult position and reflecting on the press coverage and expert narrative on the gloom, it’s worth remembering the purpose of forecasting.
We are not dealing with the erroneous musings of Britain’s worst enemy, the tyrant of the people, the expert; we are instead being presented with a series of options and potential consequences by well-informed considered people. We should consider and understand forecasts in order to make the most informed decisions for ourselves. We need to treat economic forecasts as we would weather forecasts, as precautionary, helping us choose the coat we wear, whether we leave the house, or whether we go to the beach. We all use weather forecasts effectively, and understand there is, despite the advances in technology, a chance they may be wrong, but in general, they are accurate enough to plan your days. There is an opportunity to use economic forecasts in the same way, as a guide, as a broad understanding of the direction of travel, as a guide to paths we don’t want to travel.
My previous blogging focussed on the role of forecasting as a tool to identify risks and mitigate against negative impacts. The Office of Budget Responsibility have done their best to forecast in uncertain times and they are doing their job well, but they highlight that the government’s fiscal objective of balanced budget will not be hit until the middle of the next decade due to the uncertainty and the lack of growth. Highlighting the issues policymakers face in a wholly uncertain world, they try to highlight the drivers of the forecast to bring out the areas that government must tackle if they are to avert a disastrous economic future.
My blog at this time last year, pointed to the government not balancing the budget, this has been further emphasised, and instability in business investment and willingness to grow their business in uncertain times is taking hold. The storm is upon us, but we have yet to reach the eye.
What they don’t know is whether this storm brings light showers, torrential rain, snow or tornadoes. The work we are doing at City-REDI is starting to quantify this and has some clear warnings to consider and how we might prepare. Just as we order salt for icy roads and build sandbanks to control flooding, the autumn statement is our first line defence against unpredictable economic climate fronts from Brexit.
At City-REDI, we are constantly looking for ways to better forecast and understand how we can better predict the future and develop interventions that have an impact. If you want to be involved or find out more get in touch with us.
Other Budget and Brexititis thoughts from City-REDI:
The Today Show on Radio4 with Professor Simon Collinson on the current issues facing the government – low productivity and skills.
Prof John Bryson highlights the role of the budget and its purpose.
The work of Professor Raquel Ortega Argiles on the impact of Brexit on the West Midlands.
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