The autumn statement is one of two set-piece occasions when Britain’s chancellor of the exchequer has the opportunity to set out his view of what is happening in the economy and where Britain wants to go. And just like the budget, it is about the economy, but also intensely political. Both should give a clear view of where the government is heading. Britain got neither of these things. Chancellor Philip Hammond’s proposals were completely overshadowed by Brexit, and the dire state of the country’s public finances following that vote.
Surely this was the time for the British government to confront the uncertainty caused by the vote and give it a clear sense of direction. Yet, the chancellor barely mentioned Brexit. It was the classic elephant in the room.
The decision taken five months ago will have profound consequences for the United Kingdom. It is telling that the Office for Budget Responsibility (OBR) — the government’s independent watchdog — said on the first page of its report that it had a legal requirement to produce its forecasts on the basis of current government policy.
When, not unreasonably, it asked for a formal statement of government policy so it could make its projections, it was referred to two short paragraphs from a speech made by British Prime Minister Theresa May in September.
She seems reluctant to tell parliament what she intends to do. Ministers are rightly expected to engage with parliament and account for themselves. That’s how Britain’s democracy works.
I faced very difficult circumstances as chancellor. The complete collapse of the banking system in 2008 had profound consequences. Yet, I was expected to, and did, attend parliament regularly to explain what the government was doing and how we planned to get through the crisis.
This was the time to confront uncertainty, yet Brexit was barely mentioned. It was the classic elephant in the room
From this government, incredibly, nothing. So for me, the autumn statement has failed the big tests. No sense of direction: Are we really expected to wait until March — when Article 50 is to be triggered — before we hear anything? Yes, Britain has taken the decision to leave the European Union, but it is entitled to debate what it does instead.
How else should Britons judge the chancellor’s statement? First, the politics. Britons have been told that the prime minister’s big concern is to look after people who are “just about managing”. These are the people who used to be described by the last government as hard-working families — a new description, perhaps, but facing the same challenges. Many voted for Brexit because they felt their struggles were being ignored, and I don’t think today will change much for many people who are seeing their living standards fall, and are likely to see that continue.
Yes, confirmation that personal tax allowances will increase is welcome. So too are the minor changes to universal credit, no matter how far off that prospect is. But can Hammond really claim credit for not increasing petrol duty when it hasn’t been raised for years? Politically it is virtually impossible to put up petrol duty, further eroding the tax base. Many people who are “just about managing” depend on public services, like the National Health Service and social care, which are struggling. Six years of austerity is taking its toll on many of the services on which Britons depend.
On the economy, the chancellor needed to do something, regardless of Brexit: Increased funding for infrastructure is welcome. However, most of it seems to be going on housing, which is good, but that leaves less for road and rail. I know from experience that announcing new roads is the easy bit — it will take years to get them built. Reducing corporation tax as planned will be welcome, but many businesses would prefer some certainty on the government’s post-Brexit migration policy. We have a severe skills shortage, much of it met by EU nationals. We simply do not know where the government stands.
Then there is the other massive problem — the UK’s fiscal position. Borrowing will be £120 billion (Dh548.89 billion) more than was planned in March. Debt levels will hit a 50-year high. The new fiscal rules are necessary because the chancellor will need every bit of flexibility he can find.
If the government is going to borrow at that rate, it will have to maintain a credible fiscal policy. I said that we could halve the deficit by the end of the last parliament. The Tories said that was highly irresponsible, but only just managed to achieve it themselves. Now they are telling us they hope to break even in 2025. Even if everything works out with Brexit (don’t laugh) from 2020, the government will face the consequences of the baby boomers starting to retire — they will have to be supported by the millennial generation, who we now know are the first to be poorer than their parents.
A word about forecasts: The Brexiteers are crowing that since the vote, our economy has continued to grow. Of course it has. Because nothing has happened since then. Negotiations have not even begun. Consumers have continued to spend, but behind the scenes decisions are being taken by businesses to put off or cancel investment. They are doing so because, understandably, they don’t know what the new rules are going to be. As the OBR recognises, these decisions take time to show through in the figures.
So Britain’s economy has been growing, but the threat is now all too clear. Whatever happens it will have to trade with Europe. Of course, Britain does need to trade with other parts of the world as well. But it has created a massive problem for itself. The UK must respect the referendum outcome, but the public is entitled to understand what the options are and to hear them debated. The government could at the very least set out all the problems that must be dealt with — from the single market to the customs union and free movement. The public expects the government to lead, not to follow. Wednesday was a lost opportunity to try to find an answer to the biggest questions in Britain has faced since the Second World War.
— Guardian News & Media Ltd
Alistair Darling is a British Labour politician, who has been the MP for Edinburgh South West since 1987. He was chancellor of the exchequer from 2007 to 2010 and is the founder of Better Together, a cross-party anti-independence coalition in Scotland.