The missing part of the Chancellor’s Autumn Statement – action on skills gaps

Philip Hammond is right to focus on boosting productivity across the country, but he didn't address the low skill levels holding many cities back.

Building a resilient UK economy that is open for business was the big message from Philip Hammond’s first (and last*) Autumn Statement today, broadly in line with what I predicted last week. Given that all most people want to know about is Brexit, and that’s the one issue which was out of bounds for the Chancellor (barring some OBR estimates that Brexit will cost £58.7 billion), it was unsurprisingly a speech that focused on offering reassurance for businesses and the public.

From an economic growth perspective, it was good to see the Chancellor’s strong emphasis on improving productivity – an area in which the UK is, as he commented at one point, “even” behind France. The new £23 billion Productivity Fund focused on innovation, broadband, transport and housing could make a big difference. Philip Hammond’s focus on place and the different requirements of cities and regions around the country is also important, with announcements including the Northern Powerhouse strategy and £1.8 billion for Local Enterprise Partnerships. Even when it comes to housing, there’s the welcome £2.3 billion Housing Infrastructure Fund that will provide homes in areas where they are less affordable, rather than spreading investment evenly across the country.

But there was a big missing piece in the Chancellor’s productivity plans. The number one thing holding many cities and city regions in the North and Midlands back isn’t infrastructure, it’s skills. However, there was no mention of skills investment in his hour-long speech; this needs to be addressed if we are to achieve the full potential of cities across the country, and to tackle some of the widespread divisions that the Brexit vote so starkly highlighted. The much-anticipated industrial strategy will also need to offer much more detail about how the investment in innovation and infrastructure will work in different places around the country – particularly given that the places with highest demand for infrastructure, and greatest productivity returns on that investment, are in the Greater South East. This creates a tension between boosting and rebalancing growth that the industrial strategy will need to resolve.

Another priority for the industrial strategy should be ensuring that devolution is central to its place-based thinking. Devolution did feature in the Statement, with announcements of deals for all Scottish cities, new borrowing powers for the new mayors, and London gaining powers over adult education and employment support for the hardest to help. This is welcome, but the new mayoral city regions (ideally including Leeds among their number) would benefit from further powers over economic development and influence over the decisions about how the £23 billion Productivity Fund is allocated.

The final big issue for cities and city regions was the Chancellor’s vow to balance his focus on boosting economic growth with continuing to exercise restraint over departmental spending. That means councils will need to wrestle with tight budgets and no easy savings, at a time when health and social care costs are skyrocketing – and there was no mention of additional money for those today. With Revenue Support Grant being phased out and councils increasingly dependent on business rates and their local economy to fund statutory services, it’s possible many places will be forced into spending all their business rates revenue on services rather than boosting economic growth.

The next few years will be challenging for many local areas as the UK seeks to boost economic growth while minimising public expenditure. This last Autumn Statement makes a good start on tackling some of these issues, but there is much more to do if we’re to make the most of UK cities’ potential to help the UK thrive in a post-Brexit world.

 

 

* The Chancellor is not resigning – but did announce changes which will see the Autumn Statement become the Budget, while the spring Budget will become a spring statement in response to OBR forecasts.

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