No alarms and no surprises: There were few surprises when the Chancellor delivered his Autumn Statement last week, and in many ways this was the whole point. This was a fiscal event with the primary aim of reassuring the markets and the country that the government that the ‘grown-ups’ were back in charge and as a result the entire contents were extensively briefed beforehand. Rhetorically Jeremy Hunt attempted to do two things in the statement. The first was to deflect blame for the dire economic situation away from the government. The message was that a combination of Russia, Covid and (unspoken) his predecessor were responsible for the country's economic woes. The second was to reassure both voters and his own MPs that the choices he was making to manage those woes could have been worse, hence the talk of a “balanced approach” between spending cuts and tax rises.
That’s how you get a doom loop: The phrase ‘doom loop’ was heard from both sides of the chamber in the debate, referring to the idea that spending cuts and low investment would trap the UK in a cycle of economic stagnation, leading to more spending cuts. With the short-lived ‘plan for growth’ of the Truss era consigned to the scrapheap, the Chancellor reassured the Commons that the government was still committed to growing the economy. The problem, as IPPR’s George Dibb points out, is that the OBR thinks the measures announced will do almost nothing to lift the UK’s anaemic growth rate.
The big squeeze: The government saw stabilising the public finances as their task in this statement, but for the public the main issue is that their personal finances remain in crisis. Despite the squeeze on households, the government announced precious little help on the cost of living in the statement. The Chancellor attempted to present automatic upratings to pensions, universal credit, and the minimum wage as acts of generosity from the government, whilst announcing a small package of extra grants for the most vulnerable in 2023.
A trap for Labour?: The decision to delay spending cuts until after the election in 2025 was justified by the Chancellor as a decision not to further weaken the economy going into a downturn, but has been widely interpreted as a trap for Labour. The message the government wanted voters to hear around the statement was that they are willing to take the tough decisions to deal with an economic crisis not of their making, while Labour refuse to face up to reality.
Cycle of stagnation: Labour’s main economic argument is that 12 years of stagnation and 12 years of chaos left the UK economy in a historically weak position, and that major investment (particularly in the green transition) is needed to force the UK onto a higher growth trajectory. Squaring this analysis, and the need to rebuild public services, with the commitment to fiscal discipline and the need to avoid the government’s spending trap will be the terrain for the coming years of political battle.
COP27. The COP27 UN climate summit concluded last week in Sharm el-Sheikh with a new funding agreement on loss and damage which would see a global fund set up to provide financial assistance to countries who have been most affected by the climate crisis. Loss and damage has been a key demand of developing nations for 30 years and was first introduced to UN climate negotiations around 1991. The agreement, which came after the final negotiating session ran 40 hours beyond its deadline, does not yet outline how finance will be provided and where it will come from. For more in-depth coverage on the COP27 negotiations, please see last week’s Digest.
Green Central Banking Scorecard. Positive Money has launched its 2022 Green Central Banking Scorecard, ranking the G20 central banks on their climate credentials. The scorecard rates the banks against four metrics: research advocacy, monetary policy, financial policy and leading by example. The Eurosystem central banks (France, Germany, Italy, and the ECB) have topped the Scorecard due to their leadership on greening monetary policy. Japan and China, which rank eight and joint sixth respectively, are credited for their green lending schemes but have “been held back by their failure to decarbonise their monetary policy”.
Winter Power Tracker. The Energy and Climate Intelligence Unit (ECIU) has published its latest Winter Power Tracker, which finds that the contributions of renewables and other forms of generation are reducing the amount of gas that is needed for power generation. The tracker analyses electricity generation from different sources across winter 2022/23. In the period from 1st October to 18th November 2022 (seven weeks), renewables generated 16 TWh of electricity compared to 15 TWh from gas. The 16TWh of electricity generated from renewables would have required 33TWh of gas to generate the same amount of electricity.
Britain Remade. A new campaign has launched which aims to promote economic growth and “put forward practical solutions to the problems holding Britain back”. Britain Remade, headed by former Number 10 adviser Sam Richards, calls for new energy infrastructure, new housing and new local transport connections. Polling commissioned by the campaign found that two thirds of the public would back renewable energy projects, even if they were built near their homes.
CBI conference. Both the Prime Minister and the Leader of the Opposition made keynote speeches at the Confederation of British Industry (CBI) conference this week in a bid to win the support of business leaders.
Who Funds You? UK’s “most secretive think tanks” took nearly £15 million from mystery donors over the past two years, according to new analysis by openDemocracy. Through its “Who Funds You?” campaign, openDemocracy has ranked think tanks based on the transparency of their funding according to the organisations’ own income disclosures. Nine out of 28 think tanks, with a total income of at least £14.3 million, received an ‘E’ rating, the worst possible score, and have made public no or very little information about the sources of this money. The nine ‘E’ rated organisations were the Adam Smith Institute, the Centre for Policy Studies, Civitas, the Institute for Economic Affairs, Legatum Institute, Policy Exchange, and TaxPayers’ Alliance.
New inflation figures. Last week, inflation jumped to 11.1% which is the highest rate since 1981. According to ONS figures, this figure would have been over two percentage points higher (13.8%) had the Energy Price Guarantee not been introduced. Before the Energy Price Guarantee was introduced, research by the IPPR think tank found that capping energy prices would reduce inflation significantly and that returning energy prices to November 2021 levels could reduce inflation by as much as 5.6 percentage points.
Wage price spiral questioned. A new paper from the IMF looking at the historical evidence on wage-price spirals in advanced economics since the 1960s has played down the risks "an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold."
Equal Pay Day. Sunday 20th November marked Equal Pay Day, the day of the year where women effectively stop earning relative to men. The gender pay gap, calculated using mean, full-time, hourly pay gaps, is currently 11.3% - a small decrease from last year’s figure of 11.9%. Read the Fawcett Society’s latest explainer on the Gender Pay Gap.