Autumn Statement Analysis from PLMR

An overview from our CEO, Kevin Craig

Today’s Autumn Statement was, like all such statements in the modern era, trailed in the principal media outlets of our nation. The country woke up to speculation that the Government would raise the National Minimum Wage to £7.50 per hour, reduce some of the cuts to universal credit, support more affordable housing via a new fund, and also would resolve to stand up for cash-strapped renters by the ending of punitive letting fees.

The focus is all about helping those who are “Just About Managing”. Careful, cautious, constrained. Brexit. Downgraded growth forecasts. Accepted debt levels higher than in recent years of Conservative Government narrative.

The Government is all about steady growth and the setting of low expectations for the period ahead. Today saw a further watering down (softening) of the welfare reform agenda of David Cameron, and the headlines will focus on the Government’s aspiration to do more for “ordinary working class people”.

Whatever the detail, the mood music around today’s Autumn Statement could have been attached to many set-piece moments of the Blair/ Brown years. It is part of a constant political strategy to place Theresa May’s Government on political ground that will help marginalise Labour under Jeremy Corbyn – who has been largely absent from Autumn Statement speculation.

 

Brexit

Joe Mitton is a former G20 negotiator, adviser to the now Foreign Secretary, and heads up PLMR’s Brexit Unit.

Against the backdrop of a reported split within Cabinet on Brexit negotiations, Philip Hammond’s Autumn Statement acknowledged predictions that Brexit may cost the economy a total of 2.4 percent in growth in the long term.  He has abandoned the target of returning government accounts to a surplus by 2020. This Chancellor’s particular interest is in raising productivity. UK workers’ productivity rates are below those in several EU countries.  Hammond is investing in skills, R&D and infrastructure to try to get Britain’s productivity “match fit” for a post-Brexit competitive global economy. The cut in corporation tax is clearly designed to attract and retain Foreign Direct Investment following the vote to leave the EU. However, companies choose to base themselves in the UK for many reasons, and tax rates are but one consideration.  Moreover, the Republic of Ireland will almost certainly cut its tax rate to below the UK’s rate. Overall, this is a Keynesian stimulus budget, designed by a Chancellor who has not hidden his views that a hard Brexit could cause some turbulence in the UK economy as we head towards exiting the EU.  A range of tax cuts coupled with a lot of new spending indicates a government keen to stimulate the economy ahead of triggering Article 50.

 

Education

Ollie Lane led the schools media team at the Department for Education for three years, and is now Associate Director at PLMR.

Today’s Autumn Statement may be met with criticism from some in education that the Government is not focusing on what they consider urgent priorities.

The Chancellor announced £50m for new grammar schools, the Government’s flagship education policy and one that Mr Hammond told the House would raise standards.

But he has given no extra money to schools claiming they are in extreme financial straits and are having to make cuts to staff or curriculum.

Schools will certainly hope that some of the £1bn Mr Hammond has set aside for extra cross-departmental spending will find its way to Sanctuary Buildings – and will then trickle down to them.

One area that will certainly please the sector is the money announced to promote cultural education in schools – some schools say there has been a drop-off in music, drama, dance and the arts in general in schools in recent years, so this money will be welcomed.

 

The Energy Sector

Tim Knight worked in renewable energy development prior to joining PLMR, and is now Head of our Energy Practice.

There was no over-arching theme to the energy announcements in this year’s Autumn Statement, but several notable developments. In line with the Government’s narrative on helping those who are Just About Managing, fuel duty rise was cancelled for the seventh year in a row. This is especially significant given the potential for inflation to rise in the Spring.

The UK’s oil and gas sector is continuing to feel the squeeze from a global over-supply, and the Government reiterated its support for the industry by reducing its administrative costs.

But the green lobby may take some crumbs of comfort from support for electric and hydrogen vehicles, a timely announcement given the recent furore over air quality in our major cities.

Given the long-term nature of energy investments, there is a feeling among many in the renewables industry that there is still a lack of the long-term certainty that will help to trigger the investments needed to transform the UK into a truly low carbon economy. Similarly, it remains to be seen exactly how green energy will be incorporated into the long-heralded Industrial Strategy.

 

Health and Social Care

Nathan Hollow is a Senior Account Manager with an extensive track recording supporting health and social care clients to protect their reputations and respond to some of the UK’s most well-known investigative national media outlets.

This time last year, the headlines (many created due to PLMR’s work) were dominated by warnings of challenges facing the health and social care sector unless urgent funding was provided. Twelve months on, many remain concerned about the future of the care sector.

Today’s Autumn Statement provided no additional financial support for the health and social care system. Indeed, the NHS is not mentioned in the full 65-page document.

As delayed transfers of care reach their highest level in recorded history, costing the NHS up to £820m a year, many in the sector will question the wisdom of this decision. The increase in the National Living Wage to £7.50 from April 2017 – a pay rise healthcare workers thoroughly deserve – is one which may also prove unaffordable for many care home and domiciliary care providers, with large organisations facing multi-million increases in their wage bills.

Whilst the 2% Council Tax precept will be available again next year, there are fears this will be too late to avoid a catastrophic collapse of the health system.

As we approach the winter crisis season, feedback in the sector may well be that a traditionally reserved politician has taken one of the biggest political gambles of his career.

 

Planning and London

Rebecca Wakefield is a leading consultant within our planning practice, currently focused on large regeneration projects and neighbourhood planning schemes.

We were expecting the Chancellor to provide incentives for swift housebuilding and he has certainly gone some way to achieving this with the £2.3bn investment for local infrastructure in high demand areas to unlock land for 100,000 new homes.

Philip Hammond was keen to stress the importance of affordable housing, setting aside £1.4bn for 40,000 affordable units across the country and confirming the GLA’s £3.15bn for 90,000 affordable homes in London.

The Chancellor highlighted the forthcoming Housing White Paper, which will include changes to planning policy to speed up the process for applicants, local authorities and the Local Plan process. This is the detail that the industry is focussed on, and whilst we thought this could be released before Christmas, the use of the words ‘in due course’ may prompt doubts that it will arrive within that timeframe.

One interesting take away was the fact that while home ownership is still an ambition for the government, with Right to Buy and Help to Buy both still available, Hammond was clear to profess a need for a mix of tenure types, including both ownership and rent, to make sure that housing worked for the many, not just the few

 

Scotland

Robin Dyet is PLMR’s Scotland Manager and has extensive experience of working in both Holyrood and Westminster, as well as a variety of roles across the public, private and third sectors.

The key points for Scotland from today’s Autumn Statement relate to the increase in the block grant and the progression of City Deals.

The Chancellor announced that following an increase in infrastructure spending, calculations using the Barnett Formula would result in an £800 million increase in Scotland’s block grant. While further adjustments are still to be made to take into account Scotland’s new tax powers, this additional budget can be allocated in whichever way the Scottish Government deems fit.

The other big news for Scotland was the Chancellor’s announcement that all of Scotland’s cities are now on track for increased devolution. With agreements already in place with Glasgow, Aberdeen and Inverness, and the negotiations with Edinburgh continuing, it was confirmed that Dundee, Perth and Stirling will also have opportunities to agree City Deals.

For many rural Scottish communities, that face poor Internet connectivity, the Chancellor’s pledge to invest £1bn in digital infrastructure for faster and more reliable broadband will be particularly welcomed.

Finally, Mr Hammond’s declaration that the Government has no plans for further welfare savings in this Parliament will have been noted by many in Scotland. With new powers over welfare having recently been devolved it will be interesting to see how the Scottish Government reacts and whether it takes a different approach.

 

Transport

Francesca Dobson is a Senior Account Manager, working across the transport, charity and leisure sectors. She previously worked with airports, airlines, and the association of travel agents on the successful campaign to scrap child Air Passenger Duty (APD).

Ahead of today’s Autumn Statement, Philip Hammond indicated he was keen to move away from his predecessors, both Osborne and Brown, by investing in what he sees as a “double economic benefit” both from the initial spending and from whatever is created by that investment.

As part of this, today the Chancellor announced an extra £1.3 billion investment in transport – particularly on roads. The funding is aimed at tackling congestion issues, which lose the country an estimated to lose 100 million hours every year, and also increasing productivity (an area where we lag behind other European countries).

Alongside improving our current networks is the desire to modernisation. To this end, the Chancellor announced nearly an extra £1bn in a range of schemes including:

·         Increasing the number of charging facilities for electric cars

·         Accelerating the implementation of smart tickets

·         Trialling digital railways signalling

These investments should increase productivity in the long term. Importantly, they are also aimed at preparing the UK economy for Brexit by tackling what many perceive as inadequate infrastructure that harms the UK’s competitiveness rankings.