The Autumn Statement

We now know the Autumn Statement will come in late November. It will bring us new forecasts from the OBR of how the UK economy may pan out for the last couple of months of 2016 and throughout 2017. These forecasts will have a substantial impact on how much money the estimators think the government will have to spend and how much it will collect in taxes. If they take too pessimistic a view of next year’s growth then the Chancellor will be told he faces higher borrowing than he might like.

My first advice to him is if the forecasts are for slow or no growth next year in line with the pessimism of the Bank of England and some private sector forecasters, he should be very suspicious of the numbers. He certainly need not raise more taxes or cut spending to try to get the alleged deficit back under control, as in all probability this will be a bogus problem brought on by inaccurate forecasts.

I was going to advise him instead to spend or provide tax cuts to the tune of £10bn a year of extra spending and less revenue, the very annual sum we will save each year as soon as we are out of the EU. This will provide a welcome boost, and the deficit will contract again as soon as we cancel the contributions. It would be a spur for the Treasury to be one of those who push for an early exit. You do not have to take 2 years from sending a letter to get out. If you reach an agreement earlier or get to breakdown in talks earlier then you can cancel the contributions earlier.

I think I am still of that view. I would like to see more spent on the NHS and on immediate road, housing and energy schemes as we are short of capacity in those areas. I want to see him scrap VAT on domestic fuel, tampons and green products, though Parliament will have to date the end of these taxes to the exit date from the EU. He needs to cut Stamp duty further, as the last Chancellor’s large hikes have done damage to the housing market and stand in the way of more supply coming on from people who might otherwise like to downsize or change their accommodation.

However, I am also worried by the size of the recent monetary stimulus. Money and credit growth were accelerating before the recent fall in the pound, which in itself is another stimulus. This was then followed by a grave misjudgement by the Bank of England in cutting rates and making available up to £170 bn of created money on top of the money expansion underway. If the money figures remain as fast and alarming as the most recent in the run up to the Autummn Statement then a net fiscal stimulus would not be a good idea. The government should consider removing HS2 from the spending side, as this is a poor value project which could be replaced by better transport investments for the North at lower costs.

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47 Comments

  1. Lifelogic
    Posted September 20, 2016 at 5:17 am | Permalink

    I agree fully. But to describe HS2 as “a poor value project” is a bit like describing the Pacific Ocean as a little water.

    Hinkley C was hardly any better either, that too needs abandoning.

    • Lifelogic
      Posted September 20, 2016 at 6:14 am | Permalink

      The other huge waste of money is all the tax payer grants for wind, pv, lagoons and other absurdly expensive, pointless “unreliables”. They further need to cut all the payments that endlessly encourage & augment the feckless. Payments that so discourage many people for ever getting a job and often lead their children to copy this approach to life.

      • fedupsoutherner
        Posted September 20, 2016 at 4:31 pm | Permalink

        OMG you are not kidding Lifelogic. What a waste of money. I might have known Clegg and Davey would be in it somewhere. The Lib dims never fail to amaze me with their stupid ideas. Listening to Tim Fallon today I had to pull over and stop driving as my eyes glazed over.

        • lifelogic
          Posted September 20, 2016 at 9:14 pm | Permalink

          Sir Edward Jonathan Davey FRSA now, yet another dubious Oxford PPE graduate and pusher of absurd greencrap “science”, quite rightly thrown out by his constituents but then knighted for incompetence I assume?

          • Hope
            Posted September 21, 2016 at 8:05 am | Permalink

            May has scrapped balancing the structural deficit The Tory party promised us last year and in its manifesto. In fact Guido ran a story on the 15 or so key broken manifesto pledges. Child allowance continues for children who have never set foot in the country! All the failed promises for the alleged EU negotiation not even discussed let alone acted upon and we are leaving!

          • Mitchel
            Posted September 21, 2016 at 9:00 am | Permalink

            Knighted for dedication to the “cause”.Short of a revolution,you are not going to get rid of these people.It’s like playing whack-a-mole with the current powers that be.

    • Anonymous
      Posted September 20, 2016 at 1:04 pm | Permalink

      10 Hinckleys could be built for the price of HS2.

      • fedupsoutherner
        Posted September 20, 2016 at 4:32 pm | Permalink

        Anonymous. 20 Hinckleys could be bought for the price of renewables which are going to plunge us into darkness before long.

        • hefner
          Posted September 20, 2016 at 9:42 pm | Permalink

          Anonymous, FuS,
          How do you get those numbers?

      • Juno
        Posted September 20, 2016 at 5:39 pm | Permalink

        HS2 will cause another shortage of train drivers. Contrary to popular opinion new rail projects cannot be started with novice train drivers. It is actually a complex business.

        Heathrow Express thought that they could do this but had to hire in spare Eurostar drivers to commission new trains and train new staff.

        Heathrow Express also had to recruit qualified driver managers from the existing rail network.

        Once HS2 is started they will be recruiting drivers like mad from surrounding TOCs and this will empower Aslef and drive up pay even further than it is now.

        For this reason alone Tory voters should hate the project.

      • Lifelogic
        Posted September 20, 2016 at 5:52 pm | Permalink

        And something producing the same power as hinckley for less than half the price could be built for less than 5% of the cost of Hinkley.

        • hefner
          Posted September 20, 2016 at 9:56 pm | Permalink

          “something producing … 5% of the cost of Hinkley”: references justifying such a statement, please.

          • Lifelogic
            Posted September 21, 2016 at 6:53 am | Permalink

            http://www.platts.com/latest-news/electric-power/boston/combined-cycle-gas-fired-unit-costs-coming-in-21948694

            Circa £600 per KHW of capacity (capital costs) and electricity would be 40% of the Hinkley price and is fully on demand electricity too as is needed give all the unreliables we now have. With economies of scale you could get the same capacity for circa £1.5 billion. It could be done in about 20% of the time too saving more money and produce far cheaper energy.

          • Ian Wragg
            Posted September 21, 2016 at 7:30 am | Permalink

            CCGT plant 4 gw approx £2 billion.
            Frame 9 Frank Gt X 2 plus steam turbine 6 units.
            Check price per megawatt construct costs.

  2. Lifelogic
    Posted September 20, 2016 at 5:41 am | Permalink

    Turnover taxes on houses, of up to 15%, are totally absurd. How on earth could the Osborne be such a dope at to bring these in. Taxes should be neutral, this tax stops people moving, pushed rents up unfairly (relative to buying) and makes buying a house (for less than several years) a loss making exercise.

    Then again almost everything Osborne did was bonkers, often even shooting government revenues in the foot as well as harming the public, jobs and businesses. His job destroying national minimum wage is also bonkers. What does he know about what different business can afford all over the country? His IHT ratting, pension mugging, the non allowance of interest for landlords, the emergency budget threats, his monetary policy. The man was as daft as a brush how could Cameron appoint such a man to such a serious position? He simply did not understand numbers, logic, reason or basic economics.

    up to 28% CGT and 45% income tax are far to high too.

    Hammond should abolish IHT or at least put the £1M each threshold in place as promised. This would show a sensible direction of travel an anti Osborne one.

    • Lifelogic
      Posted September 20, 2016 at 6:19 am | Permalink

      Taxes need to be simple, as low as possible and fiscally neutral (unless there are some very, very good reasons). In short undo everything Osborne did. People invest far more wisely than governments every do (at least 99 times out of 100 they do).

  3. Mark B
    Posted September 20, 2016 at 6:07 am | Permalink

    Good morning.

    Alleged deficit ? Is that the same as the mythical, Elephant in the room called, TheNational Debt ? Really ! And just when I was beginning to say nice things about our kind host 😉

    Sadly little of what you write today will come true. They are simply not listening and never will. Now that they do not have another GE to fight for some 4 years.

    Would never happenunder Direct Democracy.

  4. alan jutson
    Posted September 20, 2016 at 6:45 am | Permalink

    After the rather shameful forecasts made by all of the experts over the last 12 months I would be worried about acting on any information given to me by such organisations if I were Chancellor.

    Whilst I would agree your suggestions seem like common sense, I think I would suck it and see for a while, then perhaps when we have actually left the EU I would then start making some decisions and taking action.

    Yes leaving should be simple and quick, but I fear it will be slow and unnecessarily complicated, simply because politicians are involved.

  5. Prigger
    Posted September 20, 2016 at 6:56 am | Permalink

    I guess the Autumn Statement will come after the US Election November 8.
    A big difference if Trump wins.

    A tax cut would counter Labour’s attacks on success. The Labour PLP have done a good job in making their party unelectable. However, they cannot be counted upon after the leadership ballot result September 24. Many of them will be stilled. Deselection and/or the fear of it.

  6. old salt
    Posted September 20, 2016 at 7:21 am | Permalink

    As you call for VAT to be scrapped across a range of areas and as I understand 75% of VAT collected goes to the EU is it not time to revisit the whole VAT regime?

  7. brian
    Posted September 20, 2016 at 7:49 am | Permalink

    The Chancellor surely will use forecasts from the OBR using model(s) based on traditional Treasurer models. I don’t think there is any need to be suspicious.

  8. Bert Young
    Posted September 20, 2016 at 7:56 am | Permalink

    Every detail in John’s blog today I support and agree with 100% . There should be no significant difference between what the Chancellor has to offer and what view the Bank of England takes ; Carney cannot be trusted – his predictions have been off beam . Stimulus is the key word for the Autumn Statement ; the light has been shone on a brighter future , so , the sooner the public are aware of it the better .

    The property sector has been knocked badly following Osborne’s foolish tax rise and needs to re-invigorate itself . This is true throughout all the property values effecting First Time and the Richer buyers . Past evidence has shown the value of reducing taxes ; revenues actually increase and the average person in the street is more confident .

  9. oldtimer
    Posted September 20, 2016 at 9:01 am | Permalink

    The Bank of England does appear to have been too quick on the draw. But I do not expect Mr Carney to admit to making a mistake. Many policy areas now depend on triggering Article 50 and the rate of progress in negotiating Brexit. Let us hope that the time taken to complete the wide ranging consultations with all interested parties has been well spent and that the UK government has a clear set of negotiating objectives and positions. The critical issues should by now becoming ever more clear. I thought Peter Pulley’s contribution yesterday was helpful in this respect:
    http://www.conservativehome.com/platform/2016/09/peter-lilley-brexit-should-be-swift-heres-how-to-do-it.html

  10. Ian Wragg
    Posted September 20, 2016 at 9:07 am | Permalink

    I hope he gets rid of that ruinous living wage. The most economically illiterate thing Gideon ever did.
    It would be a waste pumping more money into the NHS until there has been a cull of ineffective management.
    Listening to Mike Ashley this morning I couldn’t help thinking how government policy of mass immigration has brought about (low wages ?)
    Endless supply of willing labour subsidised by the taxpayers. A drain on the economy but an increase in GDP. Another of Gideons fairy economics.

    • Lifelogic
      Posted September 21, 2016 at 5:06 am | Permalink

      Indeed.

      “I hope he gets rid of that ruinous living wage. The most economically illiterate thing Gideon ever did.”

      There is rather a lot of competition in this field.

  11. English Pensioner
    Posted September 20, 2016 at 10:34 am | Permalink

    I’m all for spending more on the NHS, subject to some provisos:
    1. We need to get the top level administration under control; all jobs should be properly advertised and open to competition.
    2. We need to get NHS administration costs under control, in line with best practice both at home and abroad.
    3. We should spend more money on training doctors and nurses so that the numbers being trained meet our projected needs and we no longer have to rely on foreign trained staff. I consider it morally indefensible to attract doctors and nurses from poorer countries where they are badly needed.
    4. We need to get the NHS purchasing costs under control, not only the drugs, but also all the other disposable items.
    I suspect that if this was done properly, the NHS might not need much more money!

  12. behindthefrogs
    Posted September 20, 2016 at 11:02 am | Permalink

    I would like to see him implement a number of tax raising initiatives that also have a positive effect on the nations health and reduce the costs of the NHS and the police even if this effect is seen as minimal. These initiatives would include things like:

    minimum alcohol pricing
    a wider sugar tax
    etc.

    • fedupsoutherner
      Posted September 20, 2016 at 4:34 pm | Permalink

      Behindthefrogs. Yes, and a tax on the subsidies earned from renewables and that include the land owners. I say about 75%. That would rake in a fair penny or two.

  13. bigneil
    Posted September 20, 2016 at 11:06 am | Permalink

    Off topic
    Anyone else finding Angela getting her come uppance (in the elections ) funny?

    • fedupsoutherner
      Posted September 20, 2016 at 4:34 pm | Permalink

      Hilarious. I hope it gets worse.

    • fedupsoutherner
      Posted September 20, 2016 at 4:36 pm | Permalink

      Ha,ha,ha. She says that had she known the impact she would have been better prepared. Funny that, because I foresaw this outcome a long time ago. I cannot believe that politicians of any nationality cannot see the obvious before it hits them like an express train.

    • Juno
      Posted September 20, 2016 at 5:47 pm | Permalink

      She says she only regrets not preparing her people better.

      Otherwise Merkel does not give a s***.

      • hefner
        Posted September 20, 2016 at 9:47 pm | Permalink

        At least Mrs Merkel offers some excuses for the situation she created. How many British politicians have ever done such a thing?

  14. Denis Cooper
    Posted September 20, 2016 at 12:02 pm | Permalink

    Off-topic, this has just come my way, from Martin Wolf at the FT:

    https://www.ft.com/content/3328547a-7e3d-11e6-bc52-0c7211ef3198

    “No halfway house will do: Theresa May will go for a hard Brexit”

    “Britain will be meaner and poorer but no middle way exists between EU membership and a tough exit”

    And what is the most important statement in all the doom-laden verbiage?

    I would say is this: “Do I like this outcome? No. I would like a government prepared to overturn the referendum.”

    Some people don’t deserve to live in a democracy.

    • Lifelogic
      Posted September 21, 2016 at 5:09 am | Permalink

      What I am expected to pay! I am not sure I can bring myself to pay for the FT after their appalling bias for many year over the EU issue.

  15. ian
    Posted September 20, 2016 at 12:41 pm | Permalink

    You only have look at how much money the treasury has saved on lowering bond interest which is about 40 odd billion pounds and then look at the debt a year which still at 77 billion last year which started at 96 billion 5 or 6 years ago and you can see that they are going nowhere, even if they were paying out no interest on debt they still will have a problem getting the yearly debt under 50 billion a year, as i said three years ago and at other times, they will never get the yearly debt under 30 billion a year and like i tell you they will still be talking about it in 2024 that because they are corporate and companies country and wont do anything that up set there bubble and investment tax break are for the top 10% of people because rest cannot afford them, most people cannot afford a pension.

    There so many zombie companies now that need to be shut down so there work can be shared out to small business and self employed who can make more profits out of the same work and employ more people and pay taxes, that why you have nirp 0 interest rates to keep them going when should of went 7 years ago, now you have to wait for next crash to get rid of them to have a proper recovery in the economy that if they do not try to save them again on your money.

    Accountant tell companies to take on more debt even if they do not need it so they can pay no tax or if they export leave the money outside the country and other thing so they pay no tax, a lot companies have been getting tax rebates for years.

  16. Richard Butler
    Posted September 20, 2016 at 12:41 pm | Permalink

    Guardian and Independent comments match the profound negativity of their spiritual guides, Toynbe and Zoe Williams, both of whom have appeared on The Daily Politics this week, both stating the UK is impotent and thus will be handed down an immovable deal from the mighty EU.

    Their relentless gloom is predicated on this bizarre notion the EU wants nothing from Britain, indeed Zoe Williams on The DP said British people will accept paying more for German goods, but Germans need nothing from us and so have no need to pay more for our goods, thus tariffs would harm only us!!

    We hold many aces in the negotiation such as access to our rich fishing grounds and our considerable military projection, and in addition the critical point the Chicken Lickens miss is that any hampering of trade will badly affect the core exporting nations with knock-on effects to unemployment and borrowing rates.

    Comments in those Newspapers one after another take it as red Banks will re-locate into the EU.
    1) Moody’s yesterday said Banks will cope perfectly well even if we get no deal
    2) Banks can establish a brass plate on a desk in Dublin, simple
    3) The City relies on each players own personal social network, face to face socialising over many years, and information harvested gives one the edge. You just cannot up-sticks to windy Frankfurt and talk to a lamp post. Furthermore the City a hive of synergy with all the specialists in one place.
    4) Equivalence is as good as agreed and will apply to the likes of Japan, and will obviously apply to British FS institutions, already aligned with the EU

  17. Prigger
    Posted September 20, 2016 at 2:12 pm | Permalink

    This nicely anniversary’s with Osborne’s historic offer on November 26 2012 to appoint Mark Carney as Governor to the Bank of England. Start date was July 1, 2013. A five year term. Mr Carney has until July 1, 2018 to restore the Pound to the level when he started. But how can he manage without the large shoulders of Osborne to help him?

  18. Pete Stroud
    Posted September 20, 2016 at 2:15 pm | Permalink

    HS2 certainly has the potential of being this government’s Ground Nut Scheme and should be abandoned now.

  19. ian
    Posted September 20, 2016 at 2:52 pm | Permalink

    The last time the fed put interest rates up last dec 2015, bond interest rates went down and stock went up.

  20. acorn
    Posted September 20, 2016 at 4:33 pm | Permalink

    There is something weird going on! I recently bought some garden furniture, from a well known online Garden Centre (GC) company. It was advertised at circa a third off the normal/ RRP price. It turns out that the GC, does not have it in stock and has ordered it from his supplier. Delivery date not yet determined.

    Also, as part of the same garden project, my wife has ordered two Planters from an online company offering the best price for these branded items. They also are not carrying stock and have ordered from their suppliers. Delivery date not yet determined.

    Could it be that bricks and mortar high street shops, are becoming “display only” venues, for online wholesalers? Is the concept of a “Retailer” disappearing?

    Or, as some here will have surmised already; is it a sign of companies that have cash flow problems. Make sure you have a credit card that insures your purchases. 😉

  21. lojolondon
    Posted September 20, 2016 at 5:42 pm | Permalink

    Dear John, I remain convinced that the Chancellor, completely out of the blue, intentionally raised taxation on buy-to-let in order to damage house prices and to claim that this was caused by ‘the market’s fear of Brexit’. I think the new chancellor should immediately reverse the situation to bring the house market back to the previous status quo.

  22. acorn
    Posted September 20, 2016 at 6:47 pm | Permalink

    Mr Osborne arranged for private sector debt to replace public sector debt, as a primary tool of austerity. It is looking like private sector credit (debt), will exceed pre-2008 crash levels by 2020. That could hit a brick wall, out of the blue, in the near future.

    It is now becoming obvious where QE monetary stimulus, BoE style, is ending up. Corporations are using it to pay dividends and part fund share buy backs. It looks like some corporations are taking the opportunity to borrow at low interest rates, to further fund share buy backs. Share price is a large component of executives (the new 1% elite) pay calculation.

    Mr Hammond should tread water till next March when the Brexit fog clears; cancel his autumn statement, it will just cause unnecessary confusion.

  23. Prigger
    Posted September 20, 2016 at 9:10 pm | Permalink

    I have seen Heidi Allen Conservative MP for South Cambridgeshire in action on TV. She rebuffed, resolutely, that Hillary Clinton was not fit and healthy for being President of the Greatest Power on Earth and Leader of the Free World because shes keeps collapsing and has ongoing pneumonia by stating ” I myself had a sore throat when I was canvassing for MP.”
    We should all wish an MP the like of Heidi Allen,a graduate in Astro-Physics.

  24. Iain Gill
    Posted September 20, 2016 at 9:41 pm | Permalink

    Personally I worry more about the intellectual property balance of payments, we seem to be letting our best slip to our competitor nations. We also seem to be allowing far too many work visas particularly intra company transfer visas to be issued. These will both lead to crisis for us long before the financial balance of payments does.

  25. am
    Posted September 21, 2016 at 4:57 am | Permalink

    I would like to see some strategic thinking in the statement particularly aiming at UK industrial regeneration. A short term boost to support or increase demand can be easily achieved by what oxfordeconomics have called a less populist but more investment led statement. But longer term thinking should be very prominent. Large scale infrastructure invest is part of it, such as building the UK crude oil reserve plants, but it should focus on key industries such as power generation and crude oil refining.

  26. Lindsay McDougall
    Posted September 23, 2016 at 2:53 pm | Permalink

    State debt is between 80% and 90% of GDP. We need to continue to reduce the annual fiscal deficit so that State debt is restrained. We won’t stop paying £14 billion net to the EC until 2020 at the earliest because your Prime Minister won’t apply to leave the EU until the New Year. And interest rates will not stay ultra-low for ever.

    I cannot agree with you that we can relax fiscal policy. Put it another way, what are your proposals for our fiscal deficits in 2017/8 and 2018/9?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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