The UK would be “into the black” by 2019-20, declared a jubilant George Osborne today.
He got collective “yeahs” for hailing the UK as the fastest growing economy in the G7 and revising 2014’s growth forecast to 3%, up from 2.7% predicted in March.
Osborne also received claps for the 500,000 new jobs created this year and the news that unemployment is set to fall to 5.4% in 2015.
But he also got collective groans for ignoring micro-businesses, online retailers and public transport among other things. (To be fair, it wasn’t all bad news, here are 8 ways the Autumn Statement was good news)
Here are 11 reasons the Autumn Statement disappointed:
1. “Our growth is still largely dependent on asset inflation”
John Mills, founder & chairman, JML Group, said:
“I think that the big problems with the UK economy, which I expect the Autumn Statement has done little to address are that the proportion of GDP which we spend on investment is around 14% compared to a world average of 24% and 46% in China. The proportion of GDP in the UK coming from manufacturing is now barely 10% compared to about a third as late as 1970.
“Mainly as a result of this we have a huge balance of payments problem because we do not have enough to sell to the rest of the world to pay for our imports.Because of this both as a nation and through its government, we are running up unsustainable debts.
“The growth we have is largely dependent on asset inflation which cannot last.
“In my view, until all these problems are tackled, mainly by our having a much lower exchange rate, we are never going to get the UK economy to grow on a sustained basis, with rising living standards.”
2. “£2bn for the NHS is political sticking plaster when surgery required”
Richard Lewis, Health Partner at EY, said:
“The chancellor’s decision to inject an additional £2bn into the NHS is no doubt welcome and needed. It underlines just how close to the line, the service is in terms of sustainability.
“However, we shouldn’t kid ourselves that this investment solves the problem. The funding gap is still large and radical action will be needed to address it.
“The NHS’s 5 Year Forward View sets out a number of credible approaches, many of which have a decent chance of success such as integrated care initiatives between primary and acute care. However, the key will be implementation. Integrated care has been subject to many pilots before so we will need to understand how and why they will be implemented this time.
“For the rest of Whitehall, there will be raised eyebrows. Additional funding for NHS, in an atmosphere of lower than expected tax receipts, will place increased pressure on government departments and the efficiencies that will be asked of them in the next spending review.”
3. “Osborne failed to acknowledge unsustainable rise in house prices”
Green Party member Baroness Jenny Jones said:
“Changes to stamp duty are a welcome but small step, the Chancellor failed to unveil the sorts of measures (like a land value tax) that will stop speculation driving up house prices and land values in London. This means higher wage costs and rents for businesses, and money being diverted from investment in productive businesses.”
4. “It’s not fair to penalise online retailers”
Dan Wagner, eCommerce veteran & founder and CEO of Powa Technologies, said:
“Although some have hailed the plan to review the business rates for 2016, with possibility of increased rates for online businesses, as a lifeline for the UK high street, this will not save retailers in the long term. They need to review their strategy to remain competitive and engage with consumers both in-store and online to meet with the shift in demand.
“I don’t think it’s fair to penalise the online players who don’t have physical locations to the benefit of those that do. Bricks and mortar retailers struggling with the current rates caused by their physical locations should either use them more effectively or vacate them entirely. Retailers are a vital part of our economy, and their ability to adapt and thrive is key if we are to stay on track for the revised growth forecast of 2.4% for 2015. The proposed rate cuts of a further 50% alone are nothing more than plaster over a gaping wound.”
5. “This has emerged as the Osborne & Little Autumn Statement”
Nick Leeming, chairman of estate agents Jackson-Stops & Staff, said:
“This has emerged as the Osborne & Little Autumn Statement – with little incentive for property buyers at the mid to high-end of the market. It is a tax on mansion buyers. This rate of 12% on properties above £5m will penalise the London market and also hit the country house market, which is still struggling to recover from the recession. However, we welcome the changes on stamp duty at the first-time buyer end of the market as this will help to stimulate activity at that level.”
6. “Why isn’t public transport a priority?”
Green Party member Baroness Jenny Jones said:
“Allocating £15bn to road building when fares are still rising faster than wages, and many projects like tram and Tube extensions are stalled due to lack of funds. Businesses repeatedly say in surveys that public transport and maintaining existing roads are their priority, but the Government and the Mayor continue to prioritise self-defeating new road projects that just generate more traffic.”
7. “There was little detail about how Osborne will generate income to deliver a surplus”
Michael Izza, ICAEW chief executive, said:
“With six months to go to the next election, this was clearly a populist Autumn Statement designed to win the hearts and minds of prospective voters in May 2015. Whilst the chancellor has looked at expenditure, with a raft of tax breaks and new spending, there was little detail about how he’s going to generate the income required to achieve his targets to deliver a surplus by 2019.
“The reality that the deficit hasn’t been eliminated during the course of this Parliament is an unwelcome legacy for whoever is Chancellor after the next election. The hard truth is that the deficit cannot be tackled by further spending cuts alone, and the Chancellor’s successor will need to use all the levers available to raise income including raising taxes.”
8. “The Autumn Statement did not support sole traders and micro-businesses”
Jason Stockwood, CEO of Simply Business, said:
“This year’s Autumn Statement was a missed opportunity for government to support the sole traders and microbusinesses that form the bedrock of the UK economy.
“These firms, which make up the silent majority of the country’s small businesses, have been ignored for too long by a coalition that prefers instead to focus almost exclusively on tech firms cloistered away in a small part of East London. These businesses are doing valuable work, but they are not the only show in town. Today’s announcement was a chance for the government to make good on its promise to support the economy by recognising the extraordinary contribution that the very smallest firms make, and to give them some of the support they need in order to fulfil their potential”
9. “No measures for housing rental market”
Thomas Villeneuve, CEO and founder of flatsharing network Weroom, said:
“Although the government has discussed the reform to stamp d
uty – more specifically the increased taxes on 2% of the most expensive homes – there are still a worrying lack of supportive measures for the growing number of flatsharers in the UK. This reform will only serve a small percentage of the UK housing market, and doesn’t take into account the increasing number of potential first time buyers who are still unable to get onto the property ladder.
“The government could do more to help fuel growth in a sector that is quickly the most prominent housing option for young Britons, particularly as house prices increase. They should be trying to help businesses like Weroom grow their communities and boost support for property owners and landlords through the introduction of subsidies and financial support schemes specifically for the rental market.”
10. “Not enough money allocated to flood defences will put businesses at risk”
Green Party member Baroness Jenny Jones said:
“Failing to allocate enough money to flood defences, leaving at least a £500m black hole that will put more businesses at risk. In London it’s not just the Thames and its tributaries, we are also at risk from surface water flooding from rainfall. The Economy Committee which I chair has heard that climate change is increasing this risk for businesses, so we need to invest today to protect businesses in coming years.”
11. “More UK business hubs need to be supported”
Kathy McArdle, CEO of Nottingham’s Creative Quarter, an area launched to champion enterprise and business growth, said:
“It was promising to hear the Chancellor speak of creating a ‘Northern Powerhouse’ but we need to make sure we support the rest of the UK to do the same – we need a ‘Midlands Powerhouse’ too. I’m disappointed not to see the announcement of an Independent Commission to assess the readiness of cities for further devolution: control over business rates should be given to local authorities as well as the Welsh Assembly if we want to see sustained national economic growth.”