Autumn Statement - Chamber Chief's View

Date published: 01 December 2011

In terms of economic progress, the Autumn Statement could best be summarised as disappointing, but hardly unexpected.

The Office for Budget Responsibility's growth forecast went down sharply for this year and next, and the amount of government borrowing went sharply up - a worrying reverse of what is needed in these difficult times. However, the better news was that there were some good measures to stimulate growth.

As regards business and the growth agenda, there were some potentially encouraging and positive proposals contained in the statement around credit easing, transport infrastructure, skills and international trade. Many of which we had highlighted in our pre-statement letter to the Chancellor. So it was good to see that we have had some impact in representing our members' views, but the big question remains: will it be enough to deliver the level of growth needed to reverse the cycle?

It's easy to criticise the lack of a coherent growth strategy, but these were steps in the right direction and demonstrated some much-needed additional investment in growth. We will keep watch on this and, rest assured, we will keep up the pressure to make sure businesses in Greater Manchester have a strong voice and that government makes firm investments to support the country's second biggest economy.

Chamber's Chief Economist Gives Autumn Statement Breakdown The Chancellor started his Autumn Statement with the updated view of the economic forecast from the independent Office of Budget Responsibility. He started by telling us what we all know: the economy has and will grow significantly more slowly, and his "Get Out of Jail Free Card" is the debt crisis in Europe.

The forecast is now for growth in the current year of 0.9%, down from 1.7% and 0.7% for 2012, down from 2.5%. Lower growth will inevitably mean lower tax revenues and it is anticipated that unemployment will continue to rise, causing benefit payments to increase. These two elements of income and expenditure are both moving in the wrong direction for the Chancellor to remain hopeful of achieving his deficit reduction plan within this Parliament, and as a result, the public sector will see an additional two years of cuts in line with the 2010 spending review and the plan is now to balance the books by 2016-17.

Finance And TaxationThe Chamber welcomes the proposals around easing access to finance for small businesses and awaits further details. We are disappointed that the Chancellor will go ahead with an increase in business rates at the full rate of inflation, though the ability to defer a large proportion of this tax increase will limit the immediate impact of the increase. Businesses will be pleased that the planned increase in fuel duty this coming January has been abandoned and August 2012’s increase has been reduced by 2p, as this would impact on costs, particularly for transport and distribution firms.

Skills And Employment
The Autumn Statement saw a number of skills and legislation announcements confirmed answering some of the concerns that the Chamber has raised with a number of government departments. One of the policy wins included the announcement of investment for schools with the focus on maths being welcome. The Chamber has been vocal around the impact of the decision to scrap the building schools for the future programme and we await further details on the initiative to refurbish schools.

Trade And Innovation
The Chamber has been lobbying strongly for the restoration and increase of the UKTI budget. The additional funding, directed at SMEs and mid-sized firms, is, therefore, extremely welcome and we will be encouraging our members to take advantage of the services available. Recent Chamber research shows that the North West could miss out on an additional £2.5bn of trade per year by 2016 if it doesn’t seek to increase the number of SMEs exporting and expanding the model of those that currently do.

Carbon Reduction Low carbon businesses will benefit from the broader growth and finance initiatives announced but there still seems to be some misunderstanding at senior levels that economic growth can be achieved within a low carbon environment and that low carbon technology is in itself a huge growth area. It is a welcome boost for the Green Deal with an extra £200m announced. Concerns still persist though following the recent decision to slash Feed In Tariffs and bring forward the date this takes effect from.