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Seetec responds to the Chancellor's Autumn Statement

Announcements Thought Leadership 17 November 2022

The Government’s fiscal consolidation plan must not come at the cost of delivering targeted action to spread prosperity more evenly across the country.

This year’s Autumn Statement delivered by the Chancellor focused on his three priorities – stability, growth and public services.

Jeremy Hunt also introduced two new fiscal rules: that the country’s national debt must fall as a share of GDP by the fifth year of a rolling five-year period; and that public sector borrowing in the same year must be below 3% of GDP.

The Chancellor has announced that the economy will grow overall by 4.2 per cent this year, but will shrink by 1.4 per cent in 2023. It was also confirmed today that the Office for Budget Responsibility now believes the country is in recession. The negative economic outlook was underlined with the expectation that unemployment would increase to 4.9 per cent in 2024. Inflation is expected to peak this year (9.1 per cent) and then fall next year (7.4 per cent).

It has been confirmed that Whitehall departmental budgets set out in the 2021 Spending Review will be kept up to 2025, but will only rise 1 per cent a year in real terms in the following three years. The Government states that overall spending on public services will still increase in real terms over the next five years.

Jeremy Hunt confirmed in his speech that the Government will increase benefits in line with inflation, at a cost of £11 billion.

Increasing labour market participation is important to help move the country out of recession. There are increasing numbers of over-50s becoming economically inactive. The Chancellor announced that the Department for Work and Pensions will review workforce participation, which will conclude in early 2023.

There will also be a targeted package of business rate support worth £13.6 billion over the next five years. The business rates multipliers will be frozen in 2023-to-2024 too. A Government commitment to reform business rates has been confirmed today. The employer’s National Insurance contributions threshold is frozen until April 2028, the employment allowance will be retained at its new, higher level of £5,000 until March 2026.

Ian Porée, employee owner and Chief Executive of Seetec, has responded to the Chancellor’s Autumn Statement by calling on the Government to do more to shield communities from the gloomy economic outlook this winter and press on with its plans to address issues within the country’s labour market:

“The Chancellor has embarked on a major fiscal consolidation plan on a scale not seen since action was taken in response to the financial crisis over a decade ago. A perfect storm has engulfed the economy as a result of the pandemic, conflict in Ukraine, and food and energy cost increases. The cost of living is a real worry for many this winter.

“It is important that the Government focuses on tackling inflation and the cost of living. Reducing the impact of, as the Bank of England recently predicted, a prolonged recession, is critical. It is the Office for Budget Responsibility’s view that the country is now in recession.

“Government restraint alone is not going to reverse the current trend. There still needs to be investment in labour market resilience. It is encouraging that the new Secretary of State for Work and Pensions has already said that one of his early missions is to focus on those who are economically inactive. This has been supported by the Chancellor today as he announced a workforce participation review to be led by the Department for Work and Pensions. This type of targeted work is needed now more than ever to address negative trends in the economy that will increase the likelihood of a protracted recession.

“A continued focus on skills is key to achieving future growth by investing in the current and future national workforce. That is why Seetec supports the Government’s appointment of Sir Michael Barber to advise on the implementation of the current skills reform programme.

“The news that benefits will rise in line with inflation will be welcomed by our participants, many of which are Universal Credit claimants being supported on our employability programmes.

“How this Autumn Statement can arrest the current negative trend in economic outlook remains to be seen. If the Government is going to make more progress in the coming months, it must prioritise support to the most deprived communities first as they will be hardest hit by the recession.”