Wednesday’s Autumn Statement should have been easy for George Osborne. UK growth is pretty strong, inflation is low, unemployment is falling and he and his party hold a significant opinion poll lead on the all-important question of being trusted to run the economy. Yes, there are headwinds: productivity is stubbornly sluggish and the export performance has disappointed but overall most economic indicators are pointing up.
But there was one small, actually rather large, problem. The Deficit. Eliminating the deficit over the course of the Parliament was what he asked to be judged on in 2010 – and he has quite spectacularly failed to do it. In the event he was able, largely because interest on Government debt has been so low but also partly because efficiency savings have yielded a bit more than expected, to unveil a set of figures that were actually a bit better than anticipated – but it still made for an ugly blemish on his record.
If the political parties spent most of their time and effort arguing about the deficit it was striking that they spent relatively little time arguing about the actual policies the Chancellor outlined. The biggest story was a significant reform to Stamp Duty. This tax, which allegedly dates back to Tudor times, is to get new bands which will remove the distorting effects it can have on House Prices and, according to the Chancellor will result in a cut for 98% of people who pay it. As the move is supposed to be revenue neutral that must mean it’s going to go up quite steeply for those at the top end. Politically the Chancellor has cover for this because Labour’s plan to tax expensive properties more, a ‘Mansion Tax’ would cost them even more. As an aside, this makes one of the simplest taxes in the book a lot more complicated – tax simplification as an aim in itself always seems to suffer near elections.
There was the much anticipated clampdown on corporate tax avoidance by the likes of Google and Starbucks, some of whose practices had become indefensible. That said the assumptions going forward about how much this might bring in are pretty heroic…
In terms of policy innovation it was very pleasing to see the key ask of the MTA’s Autumn Statement Submission, that the High Value Manufacturing Catapult get more funding specifically to interact with SMEs, approved. There was also a, relatively minor but favourable, change to the rates for R&D Tax Credit, although this was combined with a plan to restrict some of what is claimable with a suggestion that material costs are in the firing line. The MTA will be seeking clarity on this point.
We also welcomed the abolition of National Insurance Contributions on Apprentices, which should make them more cost effective to employ. There was some positive movement around the fringes of Business Rates but overall this is going out to Review rather than a major immediate reform, perhaps because it has become intertwined with the Devolution agenda.
The big ticket items announced on Wednesday were mostly for science and mostly in the North of England with a Centre for Material Science, to be named after Sir Henry Royce and based in Manchester the biggest thing on the present list. There were also goodies for sectors as diverse as Children’s TV production and Church Roof repair.
Finally there was a big number, £900m, attached to the British Business Bank. This is largely a continuation of existing schemes (the Enterprise Finance Guarantee and one which supports Venture Capital) but it does at least indicate that there is some funding available from the BBB through the Banks and other financial institutions. If you’ve been offered funding with a BBB component to it through a finance provider please let the Paul O’Donnell at the MTA know (email@example.com) as we are very keen get a view on what is happening with this headline scheme in the marketplace. All conversation will be treaty confidentially.
James Selka MTA CEO responded:
“We welcome the growth in the economy that is evident this year. Advanced manufacturing has been in a position of strength for some time now, with the MTA’s own data showing that consumption of industrial tooling this year is likely to be some 10% above the levels achieved immediately before the Recession. That reflects widely recognised growth in the output of the aerospace and automotive industries but it is also evident across the wider advanced manufacturing landscape.
“We welcome the Chancellor’s announcement of extra funding for the High Value Manufacturing Catapult to meet additional demand and crucially to provide outreach and technical support to SMEs. That was a key ‘ask’ of the MTA’s Autumn Statement submission and we believe is necessary to help unlock the potential of the UK’s SME manufacturers. We also welcome the uprating of the R&D Tax credit for both large and small firms but will want to be reassured that the credit’s scope for manufacturers is protected.
The many manufacturers who offer apprenticeships will also welcome the Chancellor’s move to remove National Insurance Contributions on Apprentices – making bringing young people into manufacturing a less costly prospect for employers.”