The politics of the Autumn Statement

Here’s our take on the Autumn Statement.

Trump card

The new Trump administration, with support from Congress and the Senate, is almost guaranteed to bring in big tax cuts. In itself, that could be a good or bad thing, depending on what you think of the Laffer Curve, but either way it’s relevant to this week’s Autumn Statement. US tax cuts are likely to encourage inflation and raise the cost of national debt in most developed countries, which makes the new UK borrowing splurge announced on Wednesday start to look a lot more pricey. The UK’s financial position is still precarious and temporarily ‘cheap’ money is probably not the answer. You don’t help a bankrupt by giving them a new credit card…

Oh ye of little faith

However much Brexiteers moan about the OBR being overly pessimistic about UK growth in the brave new world, it’s worth noting the Treasury’s advisers have still predicted post-Brexit growth. Whether you are a Leaver who didn’t believe economic predictions before, or a Remainer who doesn’t believe them now, the diminishing public trust in official statistics is a worry – not least because it could mean at the next election voters feel they can take a gamble on parties that have not been considered economically credible before.

Not fixing the roof, but packing the bus

Talking of elections, the Autumn Statement was more about preparing the campaign bus than fixing the roof. The Chancellor has a reputation for being politically and economically cautious, but he has in fact made a big bet that things won’t be as bad as he says they could be. The Statement set out how he hopes to have enough “head room” in the 18months leading up to May 2020 to be able to “invest” in some pretty voter-friendly measures if they’re needed.

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