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Autumn Statement

24 Nov 2016

Ben Kumar, Investment Manager

So, the final Autumn Statement has been given. That was maybe the biggest surprise in the whole speech (other than Philip Hammond showing he has a sense of humour). It addresses the somewhat confusing state of affairs we have at the moment – an Autumn Statement and a Spring Budget, both of which contain overlapping bits of government spending policy for the year.

From now on, there will be just one big fiscal announcement a year for the UK – the Budget, given in the autumn. There will still be a speech in spring, but it is unlikely to contain policy decisions, although the Chancellor reserves the right to do so.

The above calendar shift is actually a pretty good template for the entire approach adopted by Hammond. A reshuffling of existing ideas, dressed up as new, while reserving the right to do other things. It was, basically, a holding pattern. The official website article is again a good guide: https://www.gov.uk/government/news/autumn-statement-2016-some-of-the-things-weve-announcedThe calendar shift is actually a pretty good template for the entire approach adopted by Hammond.


Continuation of short term measures that appeal to most ordinary people.
Even here, this mainly consisted of confirming previous trends in the continuation of increases to Personal Allowances, freezing fuel duty for a seventh year, and offering savers a new National Savings & Investments bond.

Similarly, the living wage increase has been in the pipeline for some time now, and so was well telegraphed beforehand. The shifting of letting agent fees from tenant to landlord continues the clampdown on buy-to-let investors that George Osborne had been pushing through in the previous administration.

Confirmation of a longer term aim to keep reducing borrowing, whilst promoting growth.
Off the back of reduced growth forecasts, Hammond pushed out the aim of getting a surplus to "early in the next Parliament", and continued to emphasise that public spending would be constrained.

On the growth front, meanwhile, a range of funding was announced – housing
and infrastructure are likely to enjoy the most tangible effects from the earmarked £4bn. The new National Productivity Investment Fund, despite being granted £23bn, is probably going to have a tougher time finding projects – increasing productivity is a fairly nebulous investment goal!

Some mention of making things more difficult for corporations to keep profits offshore was made, but the claim of raising £5bn from this seems noticeably absent from the government website link above.

Confession that he was prepared to increase borrowing.
There has already been some moving of goalposts when it comes to looking at the deficit – Hammond is now targeting the cyclically-adjusted borrowing costs (where presumably the definition of the ‘cycle’ gives him more flexibility). It seems clear that he is prepared to increase borrowing levels further if it is necessary to stimulate the economy. That seems as good as saying "we’re keeping some spending power in reserve in case we need to counteract Brexit".

Much like everyone else’s approach to budgeting for Brexit, there was a lot of noise around the central message of "we don’t know what is happening, so we’ll wait and see".

Ben Kumar
Investment Manager

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The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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