This statement had to deliver two things - a bit more clarity on where the government's deficit reduction goes beyond the end of this spending review and a clear signal to business that real action to support economic rebalancing is as important as everyone's been talking about.
More on the deficit later...
Some positive actions to support more growth from investment and exports
- A ten-fold increase in the Annual Investment Allowance to £250,000
- £70m more for UKTI to support exporters and inward investment
- A further 1p cut in the headline rate of corporation tax, which will bring the rate down to 21% in 2014/15
- An extension of small business rate relief
- A further £120m for the Advance Manufacturing Supply Chain initiative
- Confirmation that the R&D tax credit will be moved 'above the line', with further details to follow
- £350m more for the Regional Growth Fund
- Additional funding for some catapult centres
- Simplification of the CRC Energy Efficiency Scheme
Support for business investment was one of the key recommendation in EEF's Autumn Statement submission
There are still some issues left on government's growth to-do list. In particular we'll be hearing more about the Business Secretary's Business Bank in the coming weeks. The plans to pull government's finance interventions under one umbrella and plug gaps in non-bank lending to SMEs is positive. But the ultimate gauge will be whether the fleshed out plans will have an impact on competition in SME banking.
What happens next?
Many of today's announcement's stack up well against EEF's Industrial Strategy ambitions of delivering more innovation, investment and export focused growth; a lower cost of doing business and a more productive workforce. We need to see the same degree of emphasis on these priorities in every subsequent Budget and Autumn statement up to the end of this parliament.
But what's still missing is the big picture economic vision that will both ensure that this relentless focus on better balanced growth continues and also provides the framework for another round of tough decisions in the next Spending Review, that will kick off next Spring.
... and some thoughts on the public finances
Against expectations the fiscal outlook has improved slightly with Public Sector Net Borrowing (PSNB) now forecast to be £80.5 billion in 2012/13. This is £11 billion less than the March forecast and primarily reflects the decision to transfer balances from the Bank of England's Asset Purchase Facility to the Exchequer. However, over the forecast period borrowing is expected to fall at a slower pace, with PSNB expected to be £49 billion in 2016/17 or £28 billion higher than the level forecast in March.
Public Sector Net Debt (PSND) is now expected to peak one year later at 79.9% of GDP in 2015-16. The rise in PSND as a share of GDP has been driven by weaker nominal GDP growth, higher net borrowing, and a reclassification of Bradford and Bingley plc and Northern Rock (Asset Management) into central government.