21 Nov 2014 11:29am

Do we really need the Autumn Statement?

When he arrived at Number 11 Downing Street, the chancellor, George Osborne, announced plans to scale back the pre-Budget report. During Gordon Brown’s reign at the Treasury this had grown into a second major political set piece for the second in command. This interim report had been valuable for the government during the financial crisis, but by 2010 the general consensus seemed to be that it had become a needless burden on limited Treasury resources. But despite rebranding it as the Autumn Statement, Osborne has found himself addicted to the half-yearly cycle and a bi-annual moment in the political spotlight. He has enjoyed the theatre of the Autumn Statement as much as he does the Budget.

This time, with a general election months away, it will be even more nakedly political than ever. But public finances are still too delicately balanced and not robust enough to be toyed with by politicians of any persuasion. As ICAEW chief executive Michael Izza wrote in his recent letter to the chancellor, “The Autumn Statement should put in place policy measures that respond to the challenges of slower economic growth… measures to bring the debt and deficit under control should remain a priority.”

This Autumn Statement may be stripped back further by the desire to keep back some goodies for closer to the election

This is the sort of sensible financial policy that any CFO would suggest. With no one performing such a role in government, the temptation to focus on short-term fixes instead may be too great to resist.

For all that Conservatives will talk about their “long-term economic plan” and how it is working to plan, most predictions are for the public finances to be, if anything, worse than expected. This means there will be even less wriggle room. In this situation, the classic political approach is to re-announce previous commitments and introduce low-cost, high-impact measures. This Autumn Statement may be stripped back further by the desire to keep back some goodies for closer to the election.

Predictions from discussion across the profession picked up in recent weeks include some further response to the Office for Tax Simplification’s tax competitiveness report, with likely areas of activity business rates and corporation tax. There could also well be more announcements around the creation of a “northern powerhouse”, with further infrastructure projects (notably the scoping work on a high-speed east to west rail link) expected.

Further boosting export activity by UK businesses is also likely, with early indications pointing to some activity around export tax credits for exploratory costs (reducing the burden on small firms in particular looking into the feasibility of new markets overseas).

The Budget was notable for its pension reforms and there might well be further announcements to tidy up some of the loose ends on the reform of annuities, notably the promise to offer free advice to all and sundry. The language around what is already referred to in some quarters as “the advice gap” needs to be tightened up and explained in greater detail.

Whether or not Osborne manages to find a rabbit to pull from his red box next week remains to be seen. In the current political climate it seems probable there will be pressure to produce something, but even greater pressure to maintain the line that the economy is on the mend thanks to the steady, sensible long-term plan that is already in place.

As always, there will be full coverage of the Autumn Statement on the economia website. From next week, we’ll be rounding up predictions from across industry and the profession and on the day we’ll have a team of live bloggers and tweeters commenting on the action as it happens. All the content will be rounded up in our usual budget hubpage, while there will also be a special email rounding up reactions to the Autumn Statement. For the ICAEW’s perspective on the day’s events, visit icaew.com/budget.

Richard Cree Richard Cree is editor-in-chief of economia

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