Autumn Statement - where do we go from here?

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In a few weeks time the Chancellor will be delivering his fourth and penultimate Autumn Statement. It comes on the heels of the Spending Review in the Summer and a mere 18 months before a general election. It will also come against a backdrop of a growing economy and increasing private sector confidence. So what does the Chancellor need to set out in this statement?

What will be the focus in the remainder of this parliament?

The focus on addressing the deficit in the public finances has been a theme of this parliament. Cost cutting and efficiency saving, together with some critical long term investments were the order of the day at June's Spending Review. But the task of rebalancing the economy, getting export growth on a higher trajectory and unlocking business investment is still very much a work in progress. With growth seemingly having turned a corner, now is the time for a big picture economic plan that will drive the actions and priorities of all parts of government. We have set out what EEF believes this should look like many times on this blog. The Autumn statement provide yet another opportune time to pull together the ambitions of this government into a coherent strategy that gives the private sector a clear picture of what will drive government actions and policy decisions in what remains of this parliament.

Transparency on the outcomes from the reform programme so far

In some areas government has set out some goals - the ambitious drive to double UK exports by 2020 is just one. Targets such as this one can drive behaviour across multiple government departments if the aim is clear and the barriers and opportunities to achieving it are understood. However, we must also ensure that there is transparency around where progress is being made and if we are falling short, what more could be done to get the UK back on track. This forthcoming statement should set out how far government has coming in, for example, reducing the regulatory burden, increasing the competitiveness of the business tax system and on the important question of meeting that stretching export goal.

Pressing ahead with challenging reforms

The has been no shortage of difficult decisions and challenging trade-offs to manage in recent years, but we believe the decision to cut spending in some areas while investing more in priorities such as science, innovation and infrastructure were in the UK's long term economic interests. We also need keep momentum beind other areas of reform, such as those around the funding and delivery of skills and training. An employer-driven skills system has long been at the top of manufacturers' priority list and while some promising conclusions have been reached through, for example, the Richard Review of apprenticeships, further action is still necessary to create the functioning market for training that a modern economy demands.

Making headway on lowering the cost of doing business

Now to the meat of EEF's recommendations - ensuring the UK remains a competitive location for all sectors of manufacturing. One key element of this environment in the cost of energy. With government policies on climate change set to add as much as 50 per cent to the electricity prices paid by industry by 2020, it must act now to stop planned rises in energy taxes and set out a long-term commitment to compensate energy intensive industries. Without this, we risk losing out on the investment in new technology and jobs that our economy desperately needs.

EEF has made specific recommendations on energy, including:

  • Extend all the measures in the current Energy Intensive Industry Package up to 2020/21 and exempt these industries from the costs of the Renewables Obligation and small scale Feed in Tariff costs
  • Freeze and then reduce the Carbon Price Floor on a rolling basis, starting in 2016. (The CPF is currently £4.94 per MWh and is set to increase to £18.08 per MWh in 2015/16).
  • Maintain the carbon price within the Carbon Reduction Commitment at £12 per tonne of carbon dioxide and not increase this to £16, as planned for Phase 2, starting in 2014.
  • Freeze planned increases in the Climate Change Levy.

Clarity on investment priorities

The shape of the UK's transport infrastructure has implications for business moving goods around and in and out of the country. There is much to do to reverse the effects of historic underinvestment in parts of the network. While some of this is finally getting underway and there is commitment to more investment beyond this parliament, the action necessary to improve, upgrade and maintain essential infrastructure is an ongoing one. The next phase at this statement must bring progress in these areas:

  • The National Infrastructure Plan should be refreshed, along with a commitment to which specific projects will be funded and a timeline for delivery.
  • Commit to completing studies on the most congested areas of the road network by the end of this Parliament and incorporate these into its five-year Road Investment Strategy.
  • Introduce another round of Local Pinch Point Funding of £200m, funded by reprioritisation and underspends in other departments.

There will be one notable difference between this statement and previous ones is that forecasts for growth, at least, should be up rather than down.

EEF will be publishing its revised forecast for the UK and manufacturing on 2 December.


Chief Economist

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