Spencer Livermore on an Autumn Statement that revealed much about the government’s failings
The Autumn Statement marked a turning point for Theresa May’s government. It downgraded forecasts, abandoned targets, and revealed an economy in decline. And, of course, it was the first instalment of the bill we will all have to pay for leaving the European Union.
Just two months ago, the Chancellor Philip Hammond told the Conservative Party conference that “the British people did not vote on 23rd June to make themselves poorer”. Yet last week, he set out how Britain and its people will indeed be poorer.
The independent Office for Budget Responsibility provided the detail. Growth next year has been cut from 2.2% to 1.4%. Over the next five years, borrowing will rise by £58.7 billion as a direct result of Brexit – a cost of £226 million a week. Debt as a proportion of GDP will climb to over 90% in 2017/18, reaching almost £2 trillion in 2020. And by that time, the UK economy will be 2.4 percentage points – or £26 billion – smaller than it otherwise would have been, were we not leaving the EU.
Our economy will be weaker in the long term too. Business investment has been revised down by 5% this year, and by 6% next year. And productivity growth has been revised down yet again to just 1.6%.
At this time of huge challenge and change for the British economy, the question for the government in the Autumn Statement, and in the months to come, is whether it can respond in the national interest? By extension, can it advance the interests of the whole of society, promoting fairness and protecting the living standards of all?
We should all have been heartened to hear so much from the Prime Minister and her government about its concern for working people struggling to make ends meet. But the Statement shows the reality. Household real incomes will fall next year as inflation rises. Unemployment will rise, and the fall in the value of sterling will increase the bills British families have to pay. They won’t however, have much to pay them with.
According to the Resolution Foundation, average incomes will rise over the next five years at less than half the rate they did in the last parliament. Average earnings are now expected to be £830 a year lower by 2020. The Institute for Fiscal Studies meanwhile, has calculated that real wages will still be below 2008 levels come 2021. To quote its Director, “One cannot stress enough how dreadful that is – more than a decade without real earnings growth. We have not seen a period remotely like this in the last 70 years”.
And who will pay the price of the deteriorating Brexit economy? Once again, as the government’s own distributional analysis illustrates, the poorest will pay the heaviest price, with the entire bottom third of the income distribution seeing their incomes fall.
We also discovered in the Statement that all of the government’s promises to cut debt and the deficit were for nothing. That all the sacrifices made by working people in their living standards and public services were in vain. After six wasted years, people are poorer, our public services are underfunded, but debt levels are even higher than where they began. All three of the rules set by the Conservatives since 2015 have already been missed or abandoned, and – conveniently – it will be impossible to assess whether the new far looser rules have been met until after the next general election.
What then of the extra £350 million a week we were promised for the health service? All too predictably, the Statement found not a single extra penny of investment for the NHS or social care, despite every single independent health organisation saying more investment is needed.
This Autumn Statement shows a government in retreat and a government without a plan. A government that cannot offer any hope they can overcome the enormous challenges that lie ahead.
Lord Spencer Livermore of Rotherhithe is a backbench Labour Peer in the House of Lords. He tweets @SpenceLivermore
Published 29th November 2016