Philip Hammond has recently released the Autumn statement as Chancellor of the Exchequer. In it he has outlined government expenditure and revenue in various sectors over the coming years. In the midst of a sluggish recovery and a harsh vote on Brexit, analysts were expecting the Chancellor to try and kindle confidence so as to attract investment into the United Kingdom – a difficult task no doubt in an anaemic post crisis economy.
The Chancellor tried to appease the wider public by announcing a positive albeit minute change to the income tax threshold and a rise in the National Living Wage – this however was balanced with a negative rise in insurance premium tax from 10% to 12% (the third increase in two years). In fact, Philip Hammond clearly favoured businesses by giving tax breaks to corporations (from 20% to 17%), making it much easier for them to invest and profit from the British economy.
With higher levels of investment in public infrastructure, housing and transport, it quickly became clear that the Conservatives were completely ditching their previous commitment to a surplus by 2019-20. Indeed, although he gave with one hand in terms of public expenditure (albeit down from 45% to 40% in 2010), he was forced to take with the other in the form of higher public debt; the government’s finances are forecasted to be £122 billion worse off over the next five year, with public debt to GDP rising from 84.2% to 87.3% this year, peaking at a shocking 90.2% in 2017-18.
In fact, British net debt is expected to hit the 1.9 trillion mark once it rises by £220 billion at the end of this parliament. Even with higher levels of public borrowing, the Chancellor failed to downplay the underwhelming state of the post-crisis economy. The Office for Budget Responsibility (OBR) growth forecasted a fall in GDP from 2.1% in 2016, to a negligible 1.4% in 2017. These shocking statistics prove not only the severity of the financial crisis and the vote for Brexit, but that the UK government has been unable to facilitate an economic recovery over the past decade.
We should not be deceived by some of the small positives of this Autumn statement; whilst the fine details are yet to be revealed, it is clear that the distributional impact of the post-2015 changes are heavily skewed towards the wealthiest half of the population, who have (relative to the poor) gained the most. In fact, with productivity and wages expected to fall even further in the future, the lower strata of society will undoubtedly feel the great pressure of inflation if the Consumer Price Index (CPI) peaks at its expected 2.6% in 2018.
Perhaps the greatest point to this budget is that the last six years of fiscal planning have been utterly futile in pushing the economy beyond pre-crisis levels. Moreover, the Autumn statement is a clear indication of the severity of the referendum, which will (according to the OBR), cost the British economy roughly £58.7 billion over the next five years. Indeed, it certainly accounts for a lot of the rise in borrowing forecasts and has severely hindered financial confidence.
Overall, it is clear that the Conservative government has failed miserably at managing the post crisis situation, and with Brexit looming over the British economy, the future will continue to be marred by uncertainty and anaemic growth. What fiscal tinkering they have done over the past few years has done very little to alleviate the recessionary malaise left behind by the financial crisis, nor is it expected to improve the future of this economy in any significant way.
These issues are clearly not a result of the political party in power but rather the system they are in charge of. The British public have been sold the same lie time and time again, but have seen very little change. At present, we are still witnessing rising levels of debt, deteriorating levels of poverty, increasing levels of inequality, volatility within the financial sector, anaemic growth, economic uncertainty, et cetera. Despite these damming shortages, Capitalism still remains an international system that continues to produce the same damaging effects purely on the belief that there is no viable alternative. It is high time the world realised its inability to deliver on its promises; so that they may turn to a more efficient system (Islam) that is certainly more efficient in resolving their fundamental economic problems.
