2013 Autumn Statement: ResPublica ResPonds

8^th December 2013

ResPublica's ResPonds to the 2013 Autumn Statement

Thursday 5th December saw the Chancellor George Osborne deliver his fourth Autumn Statement to the Commons. Following a week’s worth of predications and the usual leaks to the media, to somewhat subdued anticipation the Chancellor used his opportunity at the despatch box to formally outline the Government’s plans for Britain’s economic future.

The central message from the Chancellor was clear – the economy is improving but the fight is far from over. Figures from the Office for Budget Responsibility (OBR) will for some, lend some weight to the Coalition’s deficit reduction strategy. The OBR upgraded expected growth for 2013 to 1.4 per cent (2.4 per cent for 2014), predicted the fall of the deficit from 2013-14, and announced a small surplus in 2018/19 (a year earlier than expected). Public borrowing is set to fall and with it, unemployment is forecast to gradually fall over the next five years. However, with disappointing business investment and trade figures, and concern that the OBR’s forecasts rely too heavily on consumer-led growth and an increasingly buoyant housing market, Britain’s path to economic recovery may not be as steady as the headline figures suggest.

Big announcements from the Chancellor signalled some welcome news for small businesses and the high street, a blow for foreign property owners, announcements regarding the state pension and energy bills and an attempt to address the housing crisis.

Having featured heavily in his 2013 Budget further measures to help small businesses were expected, especially following industry pressure and Labour’s recent policy commitment. A cap on the inflation of business rates at 2 per cent from next April and the doubling of small business rate relief are welcome measures that assist those small and medium sizes enterprises who are the backbone of our economy. An 18 month 50 per cent cut in the business rate for shops moving into premises that have been empty for at least a year will no doubt help reduce the many vacant shops on our high streets and caps off a good return for small businesses from the Treasury this autumn. Warren Alexander, Chief Executive of the Charity Retail Association, recently called for Osborne to support the high street through such measures in the Disraeli Room.

However whilst most welcome, we should hope that this is the beginning of far wider small business reform that look at permanently reforming business, provide greater access to finance and form a strategy to encourage the development of support networks. As Louise Beaumont from Platform Black argues, the fundamental issue remains that our small businesses quite simply not getting enough finance.

After dominating the news and undoubtedly causing much strain on the Coalition partnership, energy bills were bound to feature and the Chancellor pledged to reduce the average household bill by £50 by reducing green levies or shifting them into general taxation. The Government are right to place energy bills at the top of the political agenda but as ResPublica’s Caroline Julian argues, party leaders must step outside failed paradigms and think much more innovatively about the UK’s energy market and the battle against rising household bills. ResPublica’s most recent Green Paper highlighted the potential for community energy to grow 89 times its current size, enabling more localities to benefit from a greater ownership stake and in some cases, lower energy bills.

Housing, a growing concern and for many the most pressing issue of the current political debate, made an expected appearance. With the OBR predicating the continuing trend of rising house prices, one would hope that the Government is without doubt that housing market needs serious attention. The anticipated capital gains tax on foreign property owners will help rein in London’s astronomical property market but until not April 2015, and the tightening of the rules relating to second home owners may help restore some market stability. The Chancellor’s acknowledgement that the housing supply must be encouraged to steady the market is welcomed, as is the £1 billion commitment of loans for developers to boost housing construction.

However, whilst it is clear housing is certainly on the Government’s agenda, the Statement failed to provide the long term vision for housing that Boris Worrall from the housing association Orbit recently argued for. Nor does it provide the blueprint for the 250,000 homes we need to build each year, and unlock nearly enough land as would be made available through the introduction of a Land Value Tax.

The state pension became a central feature with the long-expected and broadly agreed announcement that the pension age will continue to keep in line with life expectancy. The pension issue is part of a wider savings debate and the doubling of the workplace saving scheme Save As You Earn, as well as increasing Junior Isa and Child Trust Fund limits are moves to be applauded. But they fail to go far enough and with the Child Trust Fund now closed to new accounts, the Government needs to create a long-term savings strategy to encourage all income and age groups to prepare for their retirement.

Employee ownership made a cameo but welcomed appearance in the proceedings. Building on announcements in March, a further £25 million will be made available to incentivise the employee ownership sector. ResPublica has been a great support of employee ownership and made the case for its effective introduction in a variety of sectors in our essay collection Making It Mutual.

With all attention starting to focus on Spring 2015, the more Winter than Autumn Statement signals the beginning of the economic debate that will take us into the General Election. Whilst the announcements bring welcome additions to key areas, the fact remains that we are yet to fully recover from the economic downturn. The Chancellor’s strategy may have prevented further dips, but there is a long way to go before we can profess to be enjoying a successful and long-term recovery.