The Autumn Statement or a New Political Game in Spotting the Politics of Tokenism

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Houses of Parliament

By Professor John Bryson
Professor of Enterprise and Economic Geography, Birmingham Business School

In 1777, Samuel Johnson proclaimed to James Boswell, his friend and biographer, “When a man is tired of London, he is tired of life”. I must admit to being tired of Autumn Statements and of a British political system that is not focused on encouraging and supporting job creators as well as job takers. Today’s statement contains 110 measures that are intended to grow the economy. There are two issues here. First, how many of these measures are directly linked to enabling responsible inclusive prosperity. Second, if these measures are so important, then why are these measures only being implemented now?

The 110 number is pure politics in action. According to the OBR these measures will raise business investment, reduce inflation, and increase GDP whilst getting more people into work. These seem to be a magic set of measures. There is an omission here in that national economic growth is driven predominantly by consumption rather than investment. There is a tension here in that encouraging consumption could be inflationary. Nevertheless, consumption should account for around 76% of GDP and the share of growth accounted for by investment should rarely exceed between 32% and 34%. The UK government needs to encourage consumption but a new form of decarbonised or climate friendly sustainable consumption. There is nothing in this budget that will encourage a new form of sustainable consumption.

The 110 measures are a mixed bag with many reflecting the politics of tokenism combined with the politics of opportunism. This Autumn Statement is highly innovative as at its heart is a new political game of spot the measures that will enhance sustainable economic growth and those that are token political interventions. Political tokens include offering £10,000 off electricity bills for those living closest to new transmission infrastructure and the £7m to tackle antisemitism.

On the economy, a token £50m has been allocated to funding apprenticeships in engineering and other key growth sectors, but this is small change. Government should not be funding these apprenticeships but ensuring that the incentives are in place to ensure that firms support the capacity building activities required by their businesses. This reveals a strange distortion that exists in this Autumn Statement. This is a Statement based around the economy as it was in the last century rather than this century. The evidence for this comes from the business tax break which permits a business to claim back 25p in corporation tax for every £1 invested in IT, machinery, and equipment. This strategy fails to appreciate that in the UK in 2023 a company’s most important asset are its highly skilled people. Thus, companies should be able to offset training costs against corporation tax and such a strategy would ensure that businesses invest in capacity building activities. Moreover, larger firms should be encouraged to work with universities to design and fund courses that are targeted to meet the needs of their firm.

The UK has a productivity problem and part of this problem is with the provision of public services and this includes the NHS. There needs to be a more effective public sector. Too often politicians ignore the productivity challenge that sits at the centre of public service provision in the UK. Jeremy Hunt acknowledges this challenge but sets a token key performance indicator based on increasing public service productivity by at least 0.5% per year. One could argue that this is the correct measure as it is achievable but imagine such a target being adopted by the average private sector business.

In 1994, Paul Krugman proclaimed that “productivity isn’t everything, but in the long run it is almost everything”. Of course, Krugman was wrong as innovation is almost everything; innovation drives productivity enhancement. Thus, we need radical innovation that will transform public service provision across the UK producing better, as well as cheaper, public service provision for all. A target of 0.5% a year will not drive the level of innovation or ambition required.

There are measures targeted at individuals. These include raising the National Living Wage by 9.8% and cutting employee National Insurance rate by 2% from 6 January. This will make a difference in some households and will be reflected in reduced household debt and in consumption. However, the reduction in National Insurance rates should not be celebrated as this funding is meant to support social welfare provision including the state pension. This rate should have been left at 12% and even increased given increased social care pressures.

This Autumn Statement contains a mixed bag of interventions but does not make a major contribution to shaping the wider framework conditions required to support sustainable economic growth. The Labour Party argues that it is time for a change in government and that they will forge a new future for the UK. Unfortunately, no UK political party has yet to project a vision, and linked action plan, which would underpin an approach that would lead to responsible inclusive prosperity.

It is important to place this in context. All governments play three roles. The first involves creating the conditions that are supportive of sustainable economic growth and this then underpins taxation that supports the other two roles. Second, the provision of public and social services. This includes regional, national, and international infrastructure that no one company can afford to provide combined with social welfare support to ensure that all are included in the prosperity that comes from sustainable economic growth. The third role is often considered to be the first duty of government, and this involves, according to the UK Home Office, keeping “citizens safe and the country secure”. Nevertheless, times have changed, and the first duty of the UK government must be in ensuring responsible inclusive prosperity and new forms of sustainable consumption.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.

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