Chancellor twists in autumn statement pontoon
December 5, 2012
So here we are, two and a half years into a coalition government and the chancellor’s third opportunity to present an autumn statement. In previous autumn statements the chancellor and the ministerial team at the treasury have looked like rabbits caught in the headlights. The route to economic recovery has been a somewhat jumpy and flighty one-dimensional approach focused upon cutting expenditure, welfare reform, restructuring the economic architecture, and stimulating growth.
Our question in the run up to the 2012 autumn statement was whether the chancellor would stick with this deficit reduction approach or would he twist and introduce new measures to enable economic development? The answer is that he has probably twisted a little, but nowhere near enough in terms of providing the correct levers through which local economies can flourish.
In the run up to today’s statement, the chancellor has come under increasing pressure: growth and GDP output remains sluggish; unemployment stagnant; and demand for services has increased. Add into the mix Lord Heseltine’s friendly damning indictment of government’s approach to economic growth to date and it was clear there was a need for a change in tack.
So what economic levers has the chancellor introduced or continued? There is £5.5bn investment in infrastructure in the form of £1bn of investment in roads, further plans for London underground extension and High Speed 2, and investment in free schools and academies. There is a continuation of the business rates relief scheme for small business for a further year and the creation of a business bank to help smaller businesses access finance and support. And there is the pooling of some departmental regional funding around skills, housing and transport into a single pot; with the potential for this to be devolved to local enterprise partnerships (Leps) and local areas.
The above are all attempts to stimulate the economy. But for us, there are issues. Infrastructure funding is heavily focused upon sustaining the growth of London and the south east; with growth being the imperative word. A single pot for regional funding and economic growth has been seen before. Is government simply rekindling the rump of finances previously assigned to the regional development agencies and filtering them through a new vehicle? And ultimately, these policy levers are moving too slowly, devolution of skills, housing and transport funding and powers in 2015; our places need investment now to stimulate economic development.
The chancellor has twisted, but it may come too late to save the government’s economic credibility. We drastically need a coherent national economic development narrative strategy and a focus to the above growth related initiatives. Infrastructure investment must be more effectively allocated to enable economies beyond London and the south east to be developed.
It must also be focused upon the wider economic, social and environmental challenges facing place and not just growth. Departmental cultures within central government need to be challenged with local economic considerations being considered in the treasury and Department for Work and Pensions as well as the Department for Business, Innovation and Skills and DCLG. And we need Leps with greater capacity and skills to ensure that any devolved resource and power is utilised effectively.
The autumn statement will not receive the same sort of headlines as has been the case for the last two years in relation to the cuts. Nor will it provide the levers by which local economies will flourish. The chancellor may just have to twist again in the March budget. But he is running short of moves.