The Autumn statement was finally delivered on Wednesday. It was impeccable timing. Squeezed between the Supreme Court rejection of the Rwanda option and the release of the revised numbers for net migration. It was an "Autumn Statement for a country that has turned a corner", said the Chancellor. It was a statement for an economy that had "'hit a dead end" said the Shadow Chancellor Rachel Reeves.
The Autumn statement was a message of continuity. The next stage in the process. The process of thirteen years in government. A period which encompasses five prime ministers, seven chancellors, nine business secretaries and twelve growth strategies. The economy may have turned the corner but policy at times appears to be going round in circles. The Chancellor announced his economic advisory council, set up last Autumn, has, just one year later, been stood down.
It was a statement with generous gives. Pensions uplifted by 8.5%. Welfare benefits uprated by 6.7%. A near 10% increase in the living wage and a 2% cut in the employee rate of National Insurance. Plus a permanent extension of "Full Expensing". The process in which capital expenditure on plant and machinery can be fully expensed against corporation tax in the accounting year.
So where has the money come from?
Just six weeks ago on the 4th October, The Chancellor warned there is no money, as the OBR advised of a £19 billion deficit. Now just 44 days later, there appeared to be a surplus of around £30 billion. A £50 billion swing in just six weeks.
Increasing tax revenues from Corporation Tax and Incomes Taxes have been upgraded as tax hikes on CT and freezing of allowances on PAYE have boosted revenues. Higher inflation and higher incomes have generated "fiscal drag" forcing more into higher payments on higher rates.
Nominal GDP has also been upgraded with a higher GDP deflator activated. Nominal GDP is forecast to increase by 6.7% in the current year. It could well be higher, rising by 8.5% despite the low rate of real growth in the year of just 0.6%. This is important in reducing debt and debt interest to GDP ratios even as debt continues to rise.
Has the Chancellor been prudent?
Not really. Hunt has taken a modest improvement in the public finance forecasts and spent most of it. The spending targets will be met by unspecified fiscal restraint (spending cuts) at some point in the future.
The OBR have to accept the Treasury spending forecasts as given, despite any detail in year three onwards of the forecast period.
Asterisk budgeting "cuts as yet to be identified" return. Health and Welfare are likely to be the beneficiaries. Local government, further education, justice, courts, prisons, HMRC the likely losers.
On full expensing,
On full expensing, Hunt said, "In the Spring, I introduced full expensing for three years. This means that for every million pounds a company invests, they get £250,000 off their tax bill in the very same year.
'The CBI, Make UK, Energy UK and 200 other business leaders have said making this measure permanent would the "single most transformational thing" I could do for business investment and growth. But because it costs £11 billion a year, I made clear that I would only do so when it was affordable."
"Well, with inflation halved, borrowing down and debt falling, today I deliver on that promise. I will today make full expensing permanent. That is the largest business tax cut in modern British history."
Will the impact be that great?
The OBR say it will increase annual investment by around £3 billion a year and a total of £14 billion over the forecast period. Not much of a pay back on a tax cost of £11 billion a year. Fortunately, the OBR suggest the cost to the exchequer is a more modest £4.5 billion a year. [EFO Table 3.1].
The anticipated uplift to investment is also unrealised in the Economic Outlook. The UK capital stock is expected to increase by just 0.2% by the end of the forecast period. Investment reacts in a payback model, not so much to the cost of capital but the anticipated cash flows from higher rates of growth.
The largest business tax cut in modern British history ?
Hunt said it was "the largest business tax cut in modern British history". Paul Johnson, the Director of the IFS (Institute for Fiscal Studies director) suggested that was a "tiny bit cheeky"when contrasted with the much bigger hike in corporation tax, up from 19 per cent to 25 per cent. Corporation tax revenues will increase by 23% or £40 billion over the two year period this year and next as a result of higher CT rates.
Income tax receipts will increase by £27 billion this year and over £20 billion next as a result of fiscal drag. A significant offset to the £10 billion National Insurance giveaway.
Has the Chancellor has been prudent!
The cuts had to be funded somehow. "I am going to increase duty on hand-rolling tobacco by an additional 10% above the tobacco duty escalator." He said.
The IFS suggests there are adequate risks to the forecast outlook. There is no provision for the freeze on Fuel Duties to continue. (There has been no change since 2010, a cost of £6.2 billion). It assumes business Rate Relief £2.5 billion would stop in April and cuts in public service spending for unprotected departments could be worth £20.0 billion.
So What Next?
The OBR are forecasting growth of 0.6% this year, 0.7% next and 1.4% in 2023. Inflation is set to average 3.6% in 2024, falling to target in early 2025. Unemployment is set to peak at 1.6 million, a rate of 4.6%.
Public sector net debt is expected to peak at 93% of GDP up from 89% this year. Borrowing is set to fall in each year of the forecast, even as interest payment rises to £120 billion.
Markets reacted well to the Autumn statement. Sterling closed at $1.26 it was $1.21 at the end of October. Ten year gilt yields closed at 4.23%. The Tories jumped four points to close the gap on Labour, only to lose the gain as the immigration figures were released.
Speculation already begins on the election date and content in the Spring budget. There could well be scope for a further income tax giveaway. Further NI or CT cuts would be unlikely. Inheritance Tax is hardly likely to shore up the Red Wall.
On the whole it was a balanced Autumn statement, undermined by the inadequate provisions on spending, diminished by the Chancellor's claims of the "Largest Business Tax Cut in Modern British History" ... Cheeky or what!
Latest inflation figures were released on Wednesday. Inflation CPI basis eased to 4.6% in October from 6.7% prior month. The fall was marginally better than the expected 4.7%, boosted by the adjustment to energy prices and the Ofcom cap, as we explained last week.
The effect was a near 22% drop in energy prices year on year and a 1% plus drop in the headline inflation rate. Without this the government would be unable to claim credit for "halving the inflation rate". Unable to move on to the next objective, later this week, to stimulate "growth".
What exactly Sunak and Hunt have done to achieve the halving objective is largely unclear. "VAT on children's clothing, I've scrapped that. VAT on food, I have scrapped that as well. VAT on protective boots for PMQs, I have scrapped that too. VAT on flights to Rwanda under review." Who could ask for more from Downing Street?
Goods inflation eased to 2.9%. Service sector inflation, remained disturbingly high at 6.6%. Insurance costs continue to rise at over 20%. Food inflation was 10%. The underlying inflation rate was down to 5.7% from 6.1%.
Producer price trends remain in negative territory. Output prices fell by -0.6%. Input prices were down by almost 4%. Oil prices sterling adjusted were down by almost 10% year on year.
Latest earnings Data ...
So good news on producer prices and goods inflation. Not quite so good on service sector inflation. The latest earnings data present additional cause for concern. The latest data for September suggest earnings growth was 7.9% year on year from from 8.2% prior month. (based on the 3 month average).
Public sector earnings were 8.6%. Private sector earnings were 7.7%. Service sector pay growth was over 8%.
The jobs market is tightening slowly. Vacancies have fallen from a peak of 1,300,000 in May last year to 957, 000 in the latest three month period to October. The unemployment rate is probably running at 4.5% into the fourth quarter, with an unemployment level of just over 1.5 million.
According to experimental figures released by the Office for National Statistics Office last week, the unemployment rate was 4.2% in Q3 unchanged from the prior quarter.
The jobs market is tightening, but average earnings at 8% is just not compatible with a 4% inflation target, let alone the 2% inflation mandate. The Bank of England will look for a slow down in earnings growth into the early part of next year if inflation targets are to be met.
So What Happens next?
Inflation is expected to average 4.5% in the final quarter of the year, then slowing to 3% by the end of 2024 according to the latest forecast from the Bank of England. This assumes a steady glide path through the year ahead. Let's hope so ...
On Thursday last week, the ONS released the monthly estimate of GDP growth for September. For some analysts, growth was stalling. For others growth was crawling, with some evidence of modest growth year on year.
We should call this the Schrodinger's cat economy. An economy both simultaneously alive or dead, With a government, objectively standing aside, undertaking a sort of quantum thought experiment to see what happens next.
The data set was flat compared to the previous three months. Compared to the third quarter last year, growth was up by 0.7%. This, after growth year on year, of 0.6% in Q1 and Q2. Assuming no growth in the final quarter, the economy will have expanded by 0.6% for the year as a whole.
This projection (0.6%) is in line with the Bank of England latest Monetary Policy Report for November. It's also in line with the latest National Institute (NIESR) UK Economic Outlook Autumn edition also released last week (0.6%).
The devil, as they say, is in the detail. Manufacturing growth was up by 3% in the third quarter. Construction output was up by 2.5%. Service sector growth was up by just 0.5% as a whole. Strong growth in admin and support (5.2%) was offset by 5.2% decline in transport and storage. Strong growth in accommodation and food (2.3%) plus 3% growth in information and communications, was offset by slowdowns in financial services, professional services, insurance and real estate. (-0.8%.)
It is a story of sectors, not widespread economic malaise. Car sales are up 20% year in year. Interest rates appear to have peaked. The Bank of England is projecting zero growth next year and just 0.4% in 2025. As we said last year, Why So Gloomy? The models ain't that great.
NIESR have plugged in growth of 0.5% in 2024 and 1.0% in 2025. The average of forecasts from the panel of independent forecasts published monthly by Treasury is 0.5% in 2023 and 0.5% in 2024. The OBR (published in March) had a negative 0.2% out turn for the current year and 1.3% growth next year.
So what do we know about growth? Not stalling but crawling. Crawling until the government gets a grip on policy. The King's speech was well articulated in presentation but stuttering in content. The Autumn statement does not offer up much hope of a boost to growth. The NIESR expectations seem reasonable for now.
Stalling or Falling ... What to expect from inflation ...
The inflation figures for October will be released on Wednesday this week. The Bank of England and most analysts are convinced the headline CPI index will fall to 4.7% from 6.2% last month. Thereafter inflation CPI may hit 4.5% by the end of the year.
The large fall expected is a result of the adjustments to the Ofgem energy price caps. The 25% increase introduced in October last year, is now consolidated into the twelve month comparison. In October this year a 7% reduction in the price cap is now included into the year on year comparison.The Ofgem effect could have reduce the headline rate by over 1%.
The impact on the underlying or core rate will not be as dramatic. Last month the core rate fell from 6.2% to 6.1%. Service sector inflation increased to 6.9% from 6.8%. The core rate may fall below 6% but service sector inflation remains a key concern for the Bank of England and the Monetary Policy Committee.
Of further concern is the trend for earnings. Average earnings at 8% is just not compatible with a 4% inflation target, let alone the 2% inflation mandate. The MPC models assume a more modest interpretation of the earnings trend. 7% growth in earnings is the figure best sought in this week's data.
If the data on earnings and inflation fail to meet expectations, then Chief Economist Huw Pill's projections of a early rate cut will fail to materialise. But this was never our forecast view anyway and it is certainly not the view of the Governor ...
Meeting last week, the MPC voted by six votes to three to leave base rates unchanged at 5.25%. Three members Megan Greene, Jonathan Haskel and Catherine L Mann voted to increase Bank Rate by 0.25 percentage points to 5.5%.
Interest rates will remain high for an “extended” period of time and may even have to rise again if inflation trends off track, Governor Andrew Bailey has warned.
“Let me be clear, there is absolutely no room for complacency. Inflation is still too high. We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target. We will be watching closely to see if further increases in interest rates are needed. But even if they are not, it is much too early to be thinking about rate cuts.”
The Bank expects inflation to fall (have fallen) significantly in October, thereafter to hold below five per cent by the end of the year.
“We expect inflation to take another, larger, step down in October’s data when it is published in two weeks’ time. From 6.7% in September, we think it will probably fall to just below 5%. We then expect it to remain around that level for the rest of year.” Inflation is unlikely to return to target 2% until the first quarter of 2025.
The Bank published projections showing the economy will grow by 0.6% this year, then flat line next year with zero growth expected in 2024. In 2025 the economy is predicted to grow by 0.4 per cent.
Major concerns include service sector inflation and wage growth. “Despite the softening in the labour market, nominal wage growth remains much higher than would be consistent with the inflation target, if sustained at these rates.” It was said.
The ONS measure of annual growth in regular average weekly earnings in the private sector was 8.0% in August, higher than expected and more consistent with an inflation out turn of 4.5% rather than the 2% target.
“The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet. How long a restrictive stance will be needed will ultimately depend on what the incoming data tell us about the outlook for inflation over the medium term.”
Financial markets expect the Bank to begin cutting interest rates in the second half of next year, although some analysts think the UK’s sluggish economic performance may prompt the MPC to start loosening policy sooner.
The monetarists in the camp. alarmed by the latest money supply figures. think now is the time to start cutting rates. Friedman claimed “Inflation is always and everywhere a monetary phenomenon”. M4 growth slumped to negative -3.9% in September. The 2% target could be hit much sooner than expected with a more damaging outlook for jobs and growth, if the monetary maxims hold.
So interest rates may have to rise ... or may have to be slashed? The Pound trades at $1.24 this morning up from the October $1.21 low. Ten year bond yields trade down at 4.3% down from the 4.7% high last month. For the moment, the markets have decided, no cuts or hikes in prospect, rates on hold well into the New Year.
In September, a majority of FOMC participants judged that one more increase in the target federal funds rate, at a future meeting would likely be appropriate. At the meeting last week, the decision was made to leave the policy interest rate unchanged. This despite strong economic growth, a strong labour market and fears headline inflation may be ticking up again.
The FOMC believes, the stance of policy is considered to be restrictive. Tight monetary policy is putting downward pressure on economic activity and inflation. The full effects of tightening to date have yet to be felt. It was time to hold and pause to monitor future developments.
The suspicion also is the Fed seeks to bring stability to the bond market, especially at the long end of the curve. Ten year and thirty year bond yields peaked at 5% in October, reviving fears the Bond Market Vigilantes were saddling up once again.
This morning ten years trade at 4.6%. Thirty year rates trade at 4.8%. Hardly a decisive move down but enough to steady nerves in a difficult market.
"We will continue to make our decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks.
In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-potential growth and some softening of labor market conditions. We at the Fed will do everything we can to achieve our maximum employment and price stability goals.
Markets now assume no further interest rate hikes. Rates will remain on hold until the second quarter next year. Our CME Fedwatch chart suggests two or possibly three cuts may be invoked by the end of 2024. It all goes to show ... by the end of 2024 ...
If the markets weren't confused before, they are definitely getting there now ....
At the October meeting, the ECB Governing Council decided to keep the three key ECB interest rates unchanged. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility remained unchanged at 4.50%, 4.75% and 4.00% respectively.
According to the policy statement, "The latest information broadly confirmed the previous assessment of the medium-term inflation outlook. Inflation is still expected to stay too high for too long, and domestic price pressures remain strong. At the same time, inflation dropped markedly in September and most measures of underlying inflation have continued to ease. The Governing Council’s past interest rate increases continue to be transmitted into financing conditions. This is increasingly dampening demand and thereby helps push down inflation.
The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. Based on its current assessment, the Governing Council considers the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.
The Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data."
Official figures showed inflation in the Eurozone eased to 4.3 per cent in September from 5.2 per cent in August. Inflation is expected to average 5.6% in 2023, before dropping to 2.9% in 2024 and 2.2% in 2025 according to projections from ECB staff.
EU annual inflation eased to 4.9% in September, down from 5.9% in August, according to latest data from Eurostat, the statistical office of the European Union. The IMF latest forecasts assume growth of 0.7% in 2023 rising to 1.2% in 2024.
So trick or treat? The hold on rates is in line with our expectations. Rates may be on hold for longer as inflation trends unwind.
Fed On The Fence ...
The Fed is more agnostic. In their discussion of monetary policy for the September meeting, members agreed that economic activity had been expanding at a solid pace, the wording changed from "moderate" to "solid." They also concurred job gains had slowed in recent months but remained strong, and the unemployment rate had remained low. Inflation had remained elevated.
A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted.
Now it would appear the Federal Reserve is virtually certain to keep rates on hold at the meeting on November 1st. That’s according to recent statements from Fed policymakers and the expectations of fixed income markets.
According to the CME FedWatch Tool markets attach a 98.6% probability to the rates on hold event, this despite strong economic data in growth and jobs.
Latest growth data for the U.S.A. suggests the economy expanded by 2.7% year on year in the third quarter. Forecasts for the year as a whole will be upgraded to 2.4% for the year, an upward revision from the latest IMF estimate of 2.1%.
The job market continues to run hot. Inflation is steadying. Core PCE inflation in September was 3.4%. in the month and for the third quarter of the year as a whole.
A hold on rates may bring some stability to bond markets. Ten year yields were trading at 4.3% prior to the Fed September meeting. At close this weekend, rates had risen to 4.9%. Thirty year rates were trading at 5.0% up from 4.4%.
Are the bond market vigilantes saddling up?, the theme of our special edition this month Don't miss that. We had expected one further rate rise next week. Now this seems unlikely. Rates on hold trick or treat, more trickery than treat. Rates on hold to steady the bond markets. There will be further rate hikes ahead, to steady growth, wage increases and inflation.
MPC In The Middle ...
The MPC meets on Thursday this week. We had expected a further rate rise of 25 basis points but "rates on hold" is now the more likely outcome, or so it would appear. Speaking in Marrakech earlier this month, Andrew Bailey said “Our last meeting was such a tight one and as my colleague Huw Pill has said, they’re going to go on being tight ones,” he told the Institute of International Finance annual membership meeting.
At its meeting ending on 20 September 2023, the MPC voted by a majority of 5–4 to maintain Bank Rate at 5.25%. Four members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%. Five voted for rates to remain on hold.
Inflation remains "sticky", CPI held at 6.7% in September unchanged from 6.7% in August. Core inflation, eased to 6.1% from 6.2%. Food inflation has eased to 12.3%. Energy costs eased to 5.0% from 23.3% in June. Service sector inflation increased to 6.9% from 6.8%. Goods inflation eased to to 6.2% from 6.3%.
Producer Prices are moving in the right direction. Input prices were at -4.5 % in September. Output prices moved to -0.1% from -0.4% prior month. We expect input and output prices to be negative in Q3 and Q4. Markets expect headline inflation to fall below 5% in the final quarter.
Markets and the MPC have been spooked by the latest data on earnings. Earnings increased by 8.1% in August. Public sector pay increased by 12.5%. Private sector pay increased by 7.1%.
Earnings at such inflated levels are not compatible with an inflation target of 2%. Neither are they compatible with base rates on hold at just over 5%. Ten year gilt rates closed at 4.6% this weekend from 4.5% at the end of September. The UK bond vigilantes not saddling up, just "walking and chewing gum" as the MPC is stuck in the middle between policy makers in Europe and the U.S.
So rates on hold trick or treat? We'll have to keep watching the data on that one ...
The Tories received a bit of a shock this week. Bye election results in Tamworth and Mid Bedforshire delivered wins for Labour with significant reversals of Conservative majorities.
Tamworth Labour tweeted that it was an “absolutely sensational result”. The Tories starting the night with a majority of almost 20,000 but Labour won with a majority of 1,316. Election expert Sir Jon Curtice said that “no government has hitherto lost to the principal opposition party in a by-election a seat as safe as Tamworth.”
Tory Party Chairman Greg Hands said he will not resign despite the losses. "The swing to Labour was clearly disappointing but bye elections are not a good indicator of how the general election will turn out."
"People think Rishi is doing a good job, He is the best leader to take the country forward. We are committed to halving inflation, restoring growth, cutting debt, reducing hospital waiting list and stopping the boats. We are making the right decisions on transport infrastructure, smoking and mathematics." OK don't mention prison overcrowding and popup cells in courtyards.
Greg Hands sought to deflect blame away from Rishi Sunak, saying the defeats, which came on the back of two by-election losses in July, were the result of "legacy issues" that pre-dated Mr Sunak's time in office.
The party's defeats have been criticised by its own MPs, with Dame Andrea Jenkyns saying the Tories needed to make "far-reaching major changes now".
David Frost, the UK's former chief Brexit negotiator, said the results were "extremely bad for my party". I don't think it helps to suggest otherwise, as some party figures have done this morning. The current national polls are dreadful for us but these results are even worse. These results show that the national polls are broadly correct and that a strategy of denial is unlikely to work."
George Osborne said Sunak and chancellor, Jeremy Hunt, have restored a rational, serious approach to politics but he and other Cameroons were offended when Sunak tried to present himself as the radical-change candidate after 13 years of a failed Tory government.
I don't think he's really going to be able to pull that off, Osborne said. You can't say, "All that went before me was pointless or useless, because people will say: Well you were part of that party, you are pointless and useless."
It''s a fair point. The bye elections occurred when Chris Pincher resigned for groping, Nadine Dorries resigned for sulking. There was no swing to Labour. Labour picked up 800 votes in Tamworth but lost 150 votes in Mid Bedfordshire.
The Tories lost 16,000 votes in Bedforshire and 20,000 votes in Tamworth. Tory voters stayed at home. Legacy issues, thirteen years in office, pointless and useless. That's a lot of electoral baggage ... and a clear message to Number Ten ...
It was Liam Byrne Chief Secretary for the outgoing Labour government in 2019, who penned the note for his successor to say "I'm afraid there is no money". Byrne came to regret the comment, which he described as stupid and offensive. Offensive to the millions of people who had made sacrifices to achieve the budget cuts. Stupid because it became easy for Labour opponents to bash the economic mess inherited.
Perhaps the comment was not quite as offensive as that made by the Tory Chancellor Reggie Maudling, who bounced down the steps of the Treasury in 1964 to tell Jim Callaghan, "Sorry to leave it in such a mess, old cock."
Jeremy Hunt has wasted no time in advising there is no money for tax cuts in the forthcoming Autumn statement. Perhaps little chance of tax cuts in the Spring either, which will be the last budget before the 2024 election.
The IFS have made it quite clear, the economy is in a bit of a mess "Old Cock". "We are in a horrible fiscal bind as low growth and high debt interest payments mean there is no room for manoeuvre."
"The UK economy remains stuck between weak growth on the one hand and the risk of persistently high inflation on the other. An ill-timed fiscal loosening, such as an unfunded package of pre-election tax cuts might give a short-term economic sugar rush, but could prove unsustainable. This could lead to a protracted recession as interest rates rise even further to bring inflation back under control.
The state of the public finances also undermines the case for net tax cuts any time soon. The Chancellor is in a terrible bind, as will be whoever is Chancellor after the general election. Poor growth and very high spending on debt interest over the next few years mean that the national debt is stuck at close to 100% of national income.
In the first six months of the year, Public Sector Borrowing was £81.7 billion. That's £15.3 billion up on prior year, an increase of 23%. In the full year, 2022/23, borrowing was £128.3 billion. Pro rata the government is set to borrow over £150 billion this year [in line with OBR forecasts]. Total debt has risen to £2.6 trillion, 97.8% of GDP.
Political pressure are rising, especially following the bye election results this month. Jeremy Hunt may well caution, "I'm afraid there is no money." The response may well be, "Well just print some more then anyway. We can sort the mess out later ...
The Labour Party was in Liverpool this week. "Let's Get Britain's Future Back" the slogan. The Conservative Party was in Manchester last week, "Let's Get Britain's History Behind Us" the objective. For the Labour Party, it was the best of times. For the Tories, it was the worst of times.
News that NHS waiting lists had topped 8 million was bad, but then came news waiting lists would have to be added to prison occupation. Judges were warned sentencing should be delayed, the prison cells were full. But where to put them. Criminals could be handcuffed to trolleys outside A&E or held over in prison delivery vehicles, or put on a flight to Rwanda, the home office favourite option, perhaps.
Rishi Sunak was forced to admit the list of project for infrastructure in the North was "illusory". Although the word used was "illustrative", I guess we knew what he meant. OK, the metro link to Manchester airport was on the list, even though it was completed over seven years ago. A simple mistake by a few SPADs, late at night, over drinks and pizza in the Midland hotel.
Chancellor Jeremy Hunt was in cautious mode. Tens of billions of pounds of higher debt interest payments and a slowing economy suggest the UK's fiscal picture is far worse than it was in the spring. The growth outlook has worsened, ruling out the possibility of tax cuts this Autumn. No excitement ahead of the Autumn statement. So what is the point of an Autumn statement at all?
"Make UK" has urged the Chancellor to drop the concept of an Autumn statement altogether, there really is nothing to add. If the best policy offer from the Prime Minister is a ban on smoking and maths to eighteen, then what can a beleaguered Chancellor offer, in a week in which the IMF downgrades forecasts for growth.
So it was left to Prime Minister in waiting, Sir Kier Starmer to fill the void. Starmer's conference speech was considered to be one of his best yet. It didn't get off to a great start. When he walked on stage, a protester sprang upon him with a handful of glitter before being tackled to the ground by security. "If he thinks that bothers me, he doesn't know me," Starmer quipped. John Prescott would have thumped the intruder. Starmer didn't look bothered. He just took off his sparkly jacket, rolled up his sleeves and carried on. His audience loved him for it.
According to Freddie Hawyard in the New Statesman, his main theme was rebuilding the future through infrastructure investment, planning reform and 1.5 million new homes. Starmer wants to build another generation of new towns, like Clement Attlee before him. He spoke of investment not as a burden on the national debt but as an opportunity to save money, crowd in private finance, create jobs and growth.
"Government must steer the ship on industrial policy. That's a crucial part of any plan for growth," Starmer insisted, he wanted "not state control, not pure free markets, but a genuine partnership between business and government."
It was a speech devoid of detail but offered direction. ‘Never interfere with an enemy while he’s in the process of destroying himself.’ the guideline. Starmer was keen to avoid giving the Tories too much ammunition. Tony Blair had carefully avoided detail in the run-up to the election of 1997. So careful was he, not to go into any detail in that campaign, that Roy Jenkins famously described Tony Blair as being "like a man carrying a Ming vase across a highly polished floor".
"Sir Kier Starmer", according to Philip Johnston in The Telegraph, "is the latest Labour leader tip-toeing towards an election, terrified he will drop the priceless piece of porcelain". "His windy speech at the party conference, was replete with hackneyed generalizations and low on specifics."
The Labour leader said "he wanted the nation to "walk towards a decade of national renewal and face down the age of insecurity". "Contrasting 13 years of things can only get better, with 13 years of things have only got worse".
So what to make of it all? Rishi Sunak's rating has fallen to a record low since the Conservative Party conference, according to polling for The Times. The YouGuv survey found that only 20 per cent of voters believed Sunak would make the best Prime Minister.
Sir Keir Starmer's rating fell by two points, to 32 per cent. Highlighting the uncertainty among voters a year before the possible date of the next election. 43 per cent of voters said they were not sure who would make the best leader.
Matt Hancock in The Times today reports "In our monthly Times Radio focus group we asked a group of undecided voters what they made of it all. Sunak was seen as "quietly confident" "wealthy", "unbelievable", "untrustworthy" and "very, very, very rich". Starmer, by contrast, was "boring", "hopeless', "drab", "rubbish", "wet", "uninspiring" and "vanilla".
It just goes to show, "not all that glitters can be sold." Even so, the latest YouGov/Times voting intention poll, post conference, shows the Conservatives on 24% to Labour's 47% up two points. It promises to be an interesting year ahead.
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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