November 23, 2016
The Autumn Statement 2016 – questions we’ll all want answers to
There has been – to put it lightly – a fair amount of change since the last ‘fiscal event’ (the Budget) back in March.
When George Osborne stood at the dispatch box to announce cuts to Corporation Tax and Business Rates, and increases in the Personal Allowance and the threshold for the higher rate of Income Tax, scarce could he have imagined that it would be his last budget.
Yet just three short months later Brexit happened, the Prime Minister resigned, and for a while the good ship Britannia had no captain.
With Theresa May now at the tiller and Philip Hammond in charge of the books, the Autumn Statement represents the first opportunity for the Govt to say what state the ship is in, and the course in which we’re headed.
Background to the Autumn Statement
“The Autumn Statement is based on the latest forecasts from the Office for Budget Responsibility for the economy and public finances.” (Gov.uk)
Here’s a quick recap of the situation we find ourselves in:
- A new cabinet and a new Chancellor of the Exchequer
- Several indicators in the economy, since Brexit, of changing economic patterns
- Speculation that inflation could rise above the Government’s expectations to 4% – a marked increase since before the referendum when inflation was negligible
We will all have felt the factors contributing towards this situation, particularly the drop in the value of the £ against the $ and the €, leading to:
- Increased cost of Holidays in Europe and the US particularly (and the effects on tourist exchange rates)
- Increased price of petrol & diesel (fuel is priced in $)
- The knock on effect on the price of goods in the shops as a consequence (remember the great Marmite stand off)
These factors (together with the usual effects of other market forces) all help fuel inflation, which the Chancellor will be keen to keep an eye on and keep down as much as possible.
So what will the Chancellor be thinking about as he makes the Autumn Statement?
Certainly the next couple of years look like being tough for ‘UK plc’. The High Court ruling on Brexit – giving Parliament the authority to debate and agree the triggering of Article 50, and the Government’s appeal (to be heard in December) – does not help.
And news in the north of the country will do little to dispel that feeling.
A new draft Consultation bill giving Scotland the ability to reconsider the question of independence before the UK leaves the EU has been published. The Consultation will be open until Jan 11 2017, and will cast a long shadow from Holyrood on the run up to the intended date for triggering Article 50 in March.
Then of course, should Article 50 be triggered as planned by the Government, there will be the well-publicised difficulties of a lengthy and messy divorce from the EU, to be hurried through by early 2019.
The political outlook raises all kinds of questions for business, not least:
- Will investors still put their money into the UK, or a UK minus Scotland, or into a newly-independent Scotland-in-the-EU?
- Will overseas firms who have businesses here already stay here, and invest, as they consider the implications of:
- Tariffs and customs checks increasing if/when the UK leaves the EU
- the fate of EU workers here, and the ability to hire them post-Brexit
The questions we’ll want answers to in the Statement
With such difficult and uncertain times ahead, these are the questions we shall be asking as the Chancellor makes his statement:
- What are the Government’s plans to strengthen the £?
- How do they intend to reduce inflation?
- What steps will they take to make the UK a nation in which foreign business will invest?
- How does the Government plan to limit the cost of Brexit to the man in the street?
- What will they do to boost the earnings of the low paid in society?
I will post an update after we’ve had time to digest the Chancellors words and plans and see how these questions have been answered.