The Chancellor spoke about the importance of growth in last week’s statement but didn’t explain why – or how to get there.
The Chancellor had a lot to achieve in last week’s Autumn Statement: reassure the markets, establish fiscal credibility and ensure economic stability. Not to mention getting a handle on inflation and driving growth. Despite monumental briefing about the size and peril of the fiscal black hole facing UK public finances, the Chancellor pushed back austerity measures. Over the next two years public services would need to make efficiency savings but would be protected from swingeing cuts. ‘You don’t need to choose either a strong economy or good public services’, he told us – here was an Autumn Statement that claimed to do both. It was a neat exercise in political triangulation, but in the face of bleak economic forecasts it lacked a coherent long-term vision for the UK economy. Trust us, it seemed to say, things are going to be dismal; we’ll hold your hand as we walk to the cliff edge.
There were flashes of good policy, notably increasing the National Living Wage by 9.7% and benefits roughly in line with inflation at 10.1%. Never before has something defined as ‘our national mission’ got such a cursory mention, but levelling up was in there, linked to infrastructure investment over the short run. More important was a commitment to repurpose Truss’ low tax investment zones. Investment zones were themselves a shallow and incoherent ruse, given Truss’ belief that headline growth would magically benefit everyone, presumably everywhere. Local government and DLUHC officials should be credited for salvaging something that might actually work to support inclusive local growth. The announcement to fund new innovation clusters based around universities in deprived places was the best bit of this Autumn Statement.
Yet overall it felt a lot like tinkering to balance the books and restore political credibility, rather than an ambitious programme for government. As households face a 7% drop in their real disposable incomes over the next two years, coming after a decade or more of stagnation and public sector austerity, we need a more compelling guiding principle for the future of the UK economy.
CPP’s vision of inclusive economic growth is predicated on enabling as many people as possible to contribute to and benefit from prosperity. This means investing in and improving productivity-enhancing public services, including education, skills, early years, affordable childcare and mental health. The Chancellor acknowledged the role that public services and infrastructure play in driving growth but seemed to think that more money was the only answer – and that not much more was available. Having to compensate for delayed reforms to social care symbolises the perverse situation we find ourselves, although at least the government recognises the impact of failure here. Spending on schools takes per pupil spending back to 2020 levels but given the centrality of skills to productivity and business investment we have to hope that Sir Michael Barber can be the one to finally crack that most persistent of British policy flops.
Delivering inclusive growth also depends on a deeper understanding of the importance of place in overcoming barriers to productivity and growth. In some places chronic ill health, low skills and low levels of business investment are defining problems. In others, it is a lack of convenient, affordable transport and childcare. Childcare was noticeable by its absence, despite the groundswell of evidence and cross-party concern – led in part by CPP’s work on this issue. The Chancellor renewed the Conservative government’s commitment to place-based devolution, yet while mayors in Suffolk, Norfolk and Cornwall are welcome developments, none will be economic gamechangers. Instead of re-announcing investment in northern rail, the Chancellor would have done better to explain how plans under his watch would deliver a reliable service between Manchester, Leeds and our other great northern cities, where previous governments had failed, despite their commitments. Terminating the Avanti West Coast contract would be a swift and impactful place to start.
Absent any guiding principle for growth, there is a real risk that over the next two years the government falls back into old modes of thinking. Boris Johnson’s levelling up agenda was largely an empty, albeit effective electioneering slogan. The White Paper defined terms, made the case and spoke of the need for system change, but it was a kitchen sink of policy measures that amounted more to lofty goals than clear and weighty interventions. Nevertheless, attempts to translate the insight of Brexit – particularly the frustration and sense of powerlessness of ‘left behind’ places – sought to institutionalise the idea that national, headline growth is not evenly distributed by default. It is in places such as Blackpool where the real test of this Autumn Statement lies.
Beyond the sequins of the Tower Ballroom, Blackpool is a place that comes in the top ten of CPP’s Cost of Living Vulnerability Index; where men and women have the lowest life expectancy in England; where one in three private rented properties as classified as ‘non-decent’; and where long-term sickness accounts for 43% of people economically inactive (markedly higher than the 24.6% average for Great Britain). A higher National Living Wage and inflation linked increases to benefits will thinly paint over the cracks. The trickier policy question is whether cities and towns like Blackpool emerge out of this recession better equipped to upskill their workforce, create good jobs and create a better future for their place.
Recent polling for CPP by Ipsos shows that people in the North of England are more pessimistic than the rest of the UK about the future of their local economies, with 65% of those surveyed expecting it to get worse. Whether it is levelling up or another long-term vision for clean, inclusive growth, the UK economy needs more than artful politics.