The Autumn Statement, time to prioritise resources
Today, we have published our Autumn Statement submission ahead of the Chancellor's speech next week. The statement is one of the most important for some time and must set out the government's ambition to create a stronger economy based on increased investment and exports. It must then back it by prioritising whatever government resources and spending is available with measures that will help to deliver it.
Despite some encouraging third quarter GDP figures, most recent indicators have been more downbeat and the government risks missing its targets on growth and public sector debt. Much of this weakness is down to the state of the world economy which is outside the government's control but it should take action that would support firms looking to invest, export and grow and send a clear signal to them of its intentions. This means not just setting out measures to boost growth but doing so within a framework in which its overall objectives are clear.
Whilst we still support the fiscal mandate and, the need to reduce the deficit, the best way to enhance its credibility is not through further austerity but through providing greater visibility on future spending totals and by signalling a switch from current to capital spending. This shift would finance much needed investment in our infrastructure and provide an immediate boost to growth and should be achieved in the short-term by making use of departmental underspends and, in the medium-term, by shifting priorities.
Looking specifically at business investment, the government should increase the support provided by the capital allowances system, which is the second least supportive in the OECD and take action to increase competition in the banking sector to ensure that companies looking to invest can access funding at the right cost and the right terms and conditions. Boosting business investment, which is still 15% below its pre-recession peak, is critical to growth, the longer-term health of the economy and meeting the government's £1trillion exports target.
We also need to see increased urgency in efforts to increase competition amongst the banking sector, especially to provide finance for SMEs. This should start with an immediate three month review of efforts to date and what immediate action can be taken to help companies switch banks. There should also be consideration given to the setting up of a so-called 'challenger bank' which would be backed by public money, but not underwritten by it, with the scale and gravitas to challenge the main banks.