Autumn Statement Resolutions

Jonathan Edwards Excerpts

Monday 27th November 2023 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Before beginning my critique, I would like to welcome some of the Chancellor’s announcements. First, I welcome the decision to maintain the benefits calculation based on September’s inflation figure. Considering that energy and food prices are still rising, it would have been callous to change policy, as was briefed beforehand. I also welcome the increase in the minimum wage for those on the lowest wages and the unfreezing of the local housing allowance, albeit I read over the weekend that the unfreezing is only a temporary measure.

On moving those on disability benefits back to work via home employment opportunities, I agree that, if these opportunities exist, we need to help people by offering tailored support. In my view, these reforms would have fitted better within a wider Government strategy to promote homeworking.

I also welcome the extension to business investment relief. The UK faces chronic, long-term productivity challenges, and a key part of addressing them is encouraging businesses to invest for the future. Regrettably, this was not complemented by extra support for public investment. There was no increase in the Government’s capital budget, which has been frozen at a pathetic 1% of GDP. Surely this has to be increased to address our productivity challenges, with the investment targeted at those parts of the UK that have historically underperformed.

The Resolution Foundation estimates that the UK’s approach to public investment represents

“an institutional failure of the British state”.

It says that, had the UK followed the OECD average over the last two decades, an extra £500 billion would have been pumped into the UK economy, resulting in long-term economic benefits.

In the autumn statement, the Government claimed credit for halving inflation since its peak, thereby meeting one of their self-proclaimed key priorities for this year. Inflation at over 4% means that prices are still rising, of course—they are just rising at a slower rate. This means that, next year, energy costs are forecast to be around twice as high as they were before the price spike. I am disappointed that there was nothing in the autumn statement to help the most vulnerable with their bills. With higher energy prices, the Treasury is raking in extra revenue from VAT. Surely some of that revenue could have been used to provide a scheme to help those in dire need.

Furthermore, the OBR report indicates that inflation will remain higher for longer than predicted in its March forecast. As the OBR states, the assumption is that interest rates will remain higher than forecast, at a time when the central bank estimates that over half the impact of the rate rises over the past two years has yet to be felt. The OBR report indicates that economic growth will be slower than even its March forecast, with GDP growth estimated to be only 0.6% this year and 0.7% next year. It states that cumulative real growth from 2023 to 2027 will be 2.4% lower than forecast in March.

The OBR’s revised figures on real household disposable income indicate that living standards will fall at the fastest rate since records began in the 1950s. Living standards will not recover to the pre-pandemic level until 2027-28. The Resolution Foundation estimates that the average worker will be £1,900 worse off in real terms at the end of this Parliament compared with the start.

The real income of the average worker lags way behind the OECD average. Whereas the OECD average for real wage growth between the financial meltdown in 2008 and 2023 was a measly 8.8%, the UK is firmly in the relegation zone at only 2.7%. Such has been the weakness of wage growth that the Resolution Foundation estimates that the average worker is £11,000 per annum worse off after 15 years of wage stagnation, following the financial crash of 2008, compared with pre-2008 trends.

The proverbial rabbit in the hat was the higher-than-expected two percentage point cut to national insurance. This comes at a cost of £46.8 billion per annum over the forecasting period, according to the Treasury’s figures. However, the Chancellor did not comment on the impact of freezing income tax allowances and thresholds, which has resulted in a tax bonanza for the Treasury as a result of so-called fiscal drag. If my understanding of the OBR report is correct, fiscal drag will result in more than £201 billion of extra revenue for the Treasury over the next six financial years. That is the economic equivalent of nabbing the electorate’s wallet and expecting them to be grateful that a fiver has been placed in their pocket.

Once again, the OBR report highlighted the harm that Brexit has caused to the economy. It found that long-term trade intensity will be reduced by 15% as a result of the UK Government’s decision to operate outside the European economic frameworks. Meanwhile, it also found that the flagship post-Brexit trade agreement, the comprehensive and progressive agreement for trans-Pacific partnership, will add only 0.04% to GDP in the long run. Despite this major elephant in the room, we face an election in which no UK political party is willing to entertain the one obvious economic move that could be taken to improve matters for the country, namely reintegrating economically as much as possible with the rest of our continent.

The political debate between the parties in this place has completely converged on the economy. As we face an election, the obvious question is where will future growth come from? Public investment is at historically low levels, exports are struggling as a result of a kamikaze Brexit, and consumer spending is likely to remain suppressed as living standards decline. In this environment, it is a bit far-fetched to expect business investment to step up and fill the void. I wish the official Opposition well when they inherit the mess in front of us.