UK Budget 2017

 

WEEKLY COMMENT 23-11-2017

By Barry Edwards

UK Budget 2017

 

The comment on the budget has been extensive with the prominent remark being “nothing very special”. Most of the content was pre announced in some form or another and the expenditure commitments are spread over years ahead making the impact of the investment less impressive. Most commentators stated the Chancellor did the best he could with the limited scope available to him. If you would like to look at the full report click on the link below;

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661480/autumn_budget_2017_web.pdf

The first paragraph in the executive summary of the report (The Red Book) summarises the intentions of the budget;

“The United Kingdom has a bright future. The fundamental strengths of the UK economy will support growth in the long term as the UK forges a new relationship with the European Union (EU). The Budget prepares for that: supporting families and business in the near term; setting a path to a prosperous, more open Britain; and building an economy that is fit for the future. It demonstrates the government’s commitment to a balanced approach to managing the public finances and supporting key public services. By investing in the future, the Budget will ensure that every generation can look forward to a better standard of living than the one before and ensures young people have the skills they need to get on in life. It backs the innovators who deliver growth, helps businesses to create better, higher paid jobs and builds the homes the country needs.”

Unfortunately, most think tanks, commentators and economists do not believe that this budget will achieve that ambition and find fault with the whole approach. However, the government is due to publish on Monday next week the Industrial Strategy white paper which should help to explain their long-term plan for commerce in more detail. We shall comment on this next week.

One think tank, the Institute for Public Policy Research (IPPR) has recently published a report examining the problems with the British economy in detail and recommends ways of correcting them which do not conform to the approach taken in this budget. The report is 95 pages long but the summary (8 pages) is a very good guide to content which you can read if you click on the link below;

https://www.ippr.org/files/2017-09/cej-interim-report-summary-170911.pdf

To see the difference between the two approaches, below is the first paragraph of the IPPR summary;

“The British economic model needs fundamental reform. It is no longer generating rising earnings for a majority of the population, and young people today are set to be poorer than their parents. Beneath its headline figures, the economy is suffering from deep and longstanding weaknesses, which make it unfit to face the challenges of the 2020s. Fundamental reform has happened before, in the 1940s and 1980s. The persistent economic problems we have experienced since the 2008 global financial crash demand change of the same magnitude now. This should be guided by a new vision for the economy, where long-term prosperity is joined with justice for all.”

It is clear that the two approaches are fundamentally different and most comment about the budget from economists tends to agree with the IPPR. The budget seems to concentrate on gaining political support for the government in these times of economic stress and the general opinion is that it has had the effect it was designed to do. The opposition’s manifesto commitment to increase government expenditure substantially is considered risky and not likely to convince the public as the recent polls suggest.

Therefore, the budget has at least temporarily calmed the political tensions surrounding the Brexit negotiations allowing the government negotiators some time to achieve some kind of deal that may convince the public that there is a way forward to a resolution. How the talks go over the next month will determine if the ploy has worked.

That’s all for this week.

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