This week saw the Autumn budget. Its always tricky, trying to sum it up in these pages. By the time it goes to press, there will have been huge volumes of commentary and analysis.
The speech looked at three main points. What the state of economy is; measures to grow it; and tackling debt.
Despite many claims to the contrary, the UK economy has done better than some would have us believe. We have been one of the best performing mature nations since 2010, and our economy has recovered faster since the pandemic. The government promised to halve inflation, and it has achieved its target, from 11.1% to 4.6% currently (and forecast to continue to drop back to the target of 2%). The government’s policy on steadfastly keeping public sector wage inflation down has hugely helped.
Clearly, the big issue being faced is the cost of living. Measures such as 6.7% increase in benefits, pensions up by 8.5%, cutting of national insurance employees contribution from 12 to 10%, and a rise in the minimum wage by £1.02 to £11.44 will all help households. Similarly, a freeze in alcohol duty will at least keep the cost of going out within reach.
But the majority of his speech was on how we grow the economy. Liz Truss’s disastrous contribution a year ago was foolish because it increased inflationary liquidity by pushing unfunded tax cuts. Jeremy Hunt has given targeted tax cuts that encourage investment into plant and machinery, making sure that business invest on greater productivity. Improve our productivity and there is a greater economic output for the same input. We all end up doing better.
And on debt, the Office for Budget Responsibility has forecast this will start to fall.
Of course, only time will tell whether these measures will work, will increase our standards of living, and improve conditions for us all. As we have seen in the past, the reality of an interconnected world throws spanners in the works of great ideas with wars in Ukraine and the resultant energy price shock, global pandemics, and terrorist attacks on innocent people. Governments must react, and it is not always easy. Next year will see a general election and all these ideas will be tested with the electorate against opposition parties’ ideas. It will be interesting to see what those alternative ideas actually are. We’ll know soon enough.