Autumn Statement: Going for growth with borrowing spree

Solid, workmanlike and without any flashy surprises, perhaps the Autumn Statement perfectly reflects the man who delivered it?

The firm focus by Philip Hammond, the Chancellor, on infrastructure and productivity, at least in the number of times they were mentioned, represented a Government apparently keen to brace the UK economy for the Brexit storms that may lie ahead.

Whilst lip service was paid to continuing on the course of fiscal stability set by his predecessor George Osborne, to all intents and purposes that commitment to balance the Nation’s books in this Parliament was kicked into the long grass. Instead, Mr Hammond promised to “chart a new future” and turn Government into an unlocker of pent-up enterprise, whether in the tech sector to keep new firms in the UK, or as an enabler of new housing to ease problems of supply.

But businesses will still have welcomed the nod to what Mr Osborne achieved and its promise of broad continuity of purpose, particularly the totemic commitment to reduce Corporation Tax to 17 per cent. The new National Productivity and Investment Fund, which will put £23 billion into scientific and tech businesses over the next five years, is an imaginative promise to the future.

Less happy might be the millions of people who take part in salary sacrifice schemes, which essentially give them a range of perks, such as mobile phones and gym membership, at little cost to them or their employer. Not for much longer.

Owner managed corporate businesses were also significant losers in the Autumn Statement. They face a potential big rise in taxes following a review designed to level the tax playing field between the employed and self-employed. This will be a blow to the many people who felt encouraged to incorporate their self-employment in recent years, typically quite modest enterprises, to save tax and national insurance. Following consultation, it is likely to mean that they face significant rises in National Insurance contributions.

The South-East may also benefit from changes to the way Government funds affordable housing, and developers might indeed follow leads given by the Government's promise of heavy investment in infrastructure, such as road and rail improvements. We must also hope that the detail will mean relief for the region’s many congested routes. The Statement contained a few crowd-pleasing measures, particularly aimed at the so-called ‘Jams’, people who are said to be ‘just about managing’, including a freeze on fuel duty, a ban on uncontrolled tenancy fees in the rented property sector, and a rise in the National Living Wage to £7.50 from next April. But these seemed almost incidental to something bigger being cautiously moved towards: a fundamental change to our economy.

The big question will be whether Project Spend also produces Project Growth. That is the gamble that underlines the measures Mr Hammond outlined; and it will cost an extra £122 billion in Government borrowing by 2020-21 to find out. Meanwhile, the Office for Budget Responsibility estimates that growth will be 2.4 per cent lower in 2021 than it would otherwise have been before the Brexit vote exactly five months ago. The road for which the British economy is being prepared clearly looks much rougher to the Chancellor than the many others which infrastructure spending intends to make much easier to travel.