It’s never a good sign if midway through a speech you feel the need to say, “That’s complicated, but it’s good news.” But Philip Hammond, UK Chancellor of the Exchequer, hit that rut in today’s ‘Autumn Statement’, the annual outline of what the government plans on doing with public money that year – all in all a fairly vital chunk of information. We think we know how he could do better.
Hammond’s long, long list of economic buzzwords (see the end of the piece for the ones we caught) seemed to lose even the room he was speaking to. But hidden within them were some important messages about what the UK can expect from the party in government this year. Here’s the crux of it:
"We think all things considered, Britain's doing pretty well."
Things might seem hard on the ground but Hammond and the Tories insist that Britain is doing pretty well, comparatively. Not only is the economy a lot better than it was during the recession years, but it’s also doing a lot better than other countries.
*** That’s off the back of the standard measurements used in economics, like GDP and inflation rate – it’s worth questioning whether those are always the most accurate and representative ways to gauge how successful the country is.
“...But there are still some big problems we need to deal with.”
Specifically Hammond was concerned with three things. The ‘productivity gap’—British workers taking more time to do the same tasks as workers in places like Germany and the United States. The housing crisis— housing being too damn expensive. And inequality, both between the rich and the poor, and between London and the rest of the country.
“Brexit makes solving those problems a little more complicated, because in the short term the government will have less money”
The big news from the statement was that the government's accountants think the UK economy will grow a bit slower in the next few years than they did when they ran the numbers back in March, before the Brexit vote. This is a problem for Hammond because slower growth means less money coming in to the government coffers through taxation.
“Because we have less money coming in, we’re going to need to keep borrowing money for a while”
The last Chancellor of the Exchequer, George Osborne, made a big promise that by 2020 the government would bring in more tax money than it spent. Today, Hammond said he likes the idea of balancing the budget in principle, but thinks it would be a bad idea to do it right now.
Last year when Osborne promised to balance the budget, the government accountants thought we’d bring in a lot of tax money between then and 2020. Now, partly because of Brexit, the accountants think we’ll bring in a little less.
To try to keep the budget balanced, Hammond would have to raise taxes or cut government spending on things like education or healthcare. He didn’t want to do that, so instead he’s going to let the government borrow money to fill the gap.
“Also, to get things going again, we’re going to increase spending on infrastructure and innovation”
Hammond also wants to put together a big investment package. The idea is that the government can borrow money now and use it to invest in things this like new houses, better roads and faster internet. Not only will this help us in the long run, but in the short run the extra government spending might make up for some of the growth we’re expecting to lose because of Brexit.
“And we’ll spend money on things like health, education, museums and so on, which we’ll pay for by moving tax rates around”
This is where the confusing talk hit its peak and Hammond had to resort to promising us it was all good news. Luckily, the government put out an online version of these plans that is slightly less confusing than Hammond’s presentation.
“But don't worry: We're saving Wentworth Woodhouse!”
Hammond drew laughs when he said he would try not to turn the speech into a long list of specific projects, but he did take a minute to brag about committing money to fix a big mansion in South Yorkshire which we're pretty sure no-one's heard of...
“Finally, we’re going to make some changes to some rules that we think you’ll all like”
Such as:
- Rental agencies shouldn’t be allowed to charge big upfront letting fees
- Make it harder to scam people out of their pensions
- Cut down on people falsely suing for whiplash after car accidents
“Oh, and Economy is right, autumn statements are awful. Let’s stop doing them.”
This actually happened. From next year on, the budget announcement is moving to autumn, and we’ll get a ‘Spring Statement’ instead. He’s promised the spring statement will be less confusing. We’ll be watching.
P.S. Here's all the jargon we spotted – did we miss any?
- High value investments
- Innovation
- Head wins
- Inflation
- Monetary policy
- Growth
- Debt
- Deficit
- Cyclically unadjusted net public borrowing
- Productivity
Come on, Phil. Try for more understandable economics!
