Autumn Statement (of intent)

We look ahead to Wednesday

The “recovery” since the Global Financial Crisis has not been a recovery for all, and in fact has only really served the owners of significant amount of assets, particularly where funded by cheap debt.  The everyday worker across a range of industries and seniorities, on the other hand, has struggled without significant improvements to their life or lot.  “The economically disenfranchised are now fighting back and overthrowing the elite” appears to be the conclusion drawn from the results of both the Brexit and Presidential votes.  Political rhetoric and media comment has now started to point to Quantitative Easing as a source of this inequality and concluded that its replacement by some sort of fiscal stimulus could start the necessary reversal. 

Rhetoric aside, a test of this notion will come next week in the Autumn Statement.  Mark Carney splurged more QE immediately after the Brexit decision – will the new Chancellor of the Exchequer, Phillip Hammond, signal the start of some sort of stimulus that is non monetary?  The “Haves” and the “Have Nots” will be hoping he does; the “Have Yachts” will likely still be musing as to why democracy has not allowed the status quo to be quite as quo as they desired.

George Osborne’s Budgets and Autumn Statements were defined by a general intent to cut deficits, budgets and taxes on the entrepreneur.  If Hammond is going to stimulate an economy that is entering a period of uncertainty it is unlikely that he will be able to cut all three.  He has already abandoned the prospect of balancing the books and Wednesday 23rd will give us an idea on tax cuts.

In line with Mr Trump’s promises of improved infrastructure (not just walls) to provide growth and jobs, the expectation is that Mr Hammond will similarly spend the windfall of expanded deficits and unbalanced budgets on some sort of infrastructure.  And arguably there is capacity to do so – the lack of investment (ex Olympics) since the Financial Crisis means its share of GDP has been falling steeply (as shown in the chart below).  We await Wednesday with bated breath to see what sort of Autumn Statement the Chancellor is prepared to make.

Source: Factset

By George Palmer

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