The Chancellor’s Bloomberg Speech – 27th January 2023
The Chancellor’s Speech on Prosperity and Growth
Hot on the heels of Michael Gove’s keynote speech at the Convention of the North, the Chancellor delivered a speech at Bloomberg on 27th January on his vision for long term prosperity and growth across the UK. Clearly this speech has the potential to provide further hints at economic and regional policy.
The speech was largely aimed at overcoming the ‘diclinism’ that the Chancellor sees setting into commentary about the UK economy. However, optimism in the UK economy can be a difficult concept to decipher. While the cost of living crisis has dominated economic and media debate for much of 2022, the economy remained relatively resilient if flat. Now there are predictions for 2023 to be worse than expected at the same time the Bank of England is predicted to increase its growth forecast. The UK economy has always been prone to mixed messages, shooting from boom to bust and in the blink of an eye – all whilst millions of businesses and workers just get on with the job in hand. Perhaps the current difference is we have seen this change in the blink of an eye all too frequently over the last three years.
How do we get beyond diclinism and return to ‘optimism’. The Chancellor has proposed a four pillar approach based around improving innovation Britain’s key ‘growth sectors’. I have no doubt in a quiz every single reader of this article could name all of them without pause or hesitation as they haven’t changed for a generation! Creative Industries, Digital Technology, Life Sciences, Clean Energy and Green Industries, Financial Services and Advanced Manufacturing. All sensible and laudable, if predictable.
The speech was largely driven by soundbites and aspiration, rather than detail and policy – but coming half-way between an Autumn Statement and the Budget it would probably be unfair to expect anything else.
The Chancellor has identified four pillars of a wider plan to boost prosperity, the 4 E’s. Enterprise, Education, Employment and Everywhere (perhaps the new slang for a downgraded ‘Levelling Up’). In my day, if you got 4 E’s it meant you probably weren’t going to University, but perhaps 4 E’s for this generation will have a more positive association.
The plan for stimulating Enterprise is to lower business taxes (that have just been raised significantly), improve attitudes to risk and entrepreneurialism and provide easier access to start-up capital…..roll up UK Shared Prosperity Fund. Education provided a special mention for the 9 million adults with low literacy and numeracy skills….roll up UK Shared Prosperity Fund. Employment, despite the lowest unemployment and highest unemployment rate for a long time, the Chancellor is keen to support some of the over 6m economically inactive back into the labour market to improve productivity…..roll up UK Shared Prosperity Fund…again.
The final and key ‘E’ is everywhere. Everywhere is checked as “ensuring the benefits of economic development are felt not just in London and the South-East but across the whole of the UK.” Again, like Michael Gove before him, there were no hints that the regional growth pot is going to be ramped up any time soon, “whilst government grants can play a galvanising role they are not the whole answer.”
There was virtually no ‘I’ in the speech, being for infrastructure, making competitive Levelling Up projects look like the main game in town for the time being.
There was a hint that Investment Zones will be announced ‘this year’ and were cited as being ‘mini Canary Wharf’s’. As stated in our review of the Convention of the North speech, Canary Wharf was supported by billions of Government Investment including land remediation, the Docklands Light Railway and London City Airport. The supply side stimulus of Investment Zones still seem to focus on fiscal incentives rather than investment. It will be interesting to see how the thinking on this policy has developed during the delays.
Once again, devolution was seen as a key piece of the jigsaw for regional growth and prosperity, which it is – but investment certainly helps as well.
Both speeches also name checked that ‘talent is spread everywhere across the UK’, which to some extent it is, but talent doesn’t tend to stay everywhere and ‘creating opportunities everywhere’ equally depends on the talent staying put. Successful Levelling Up will have to be based on far more than small scale and piecemeal investments, some new trains and a range of tax breaks.
Therefore, the Chancellor’s aspiration to make Britain the next Silicon Valley, if it happens, will unlikely cover Britain in its entirety. There is a real possibility that the focus on current ‘economic strengths and key sectors’ will add most value to those areas where the real focus of these industries are….at the expense of the areas where they largely aren’t. This has broadly been the experience of the last 30 years and does not represent the ‘taking a risk’ that is critical to the Chancellor’s ‘Enterprise’ plans.
Finally, the position in the speech is clear, tackle inflation first, then look at growth. Perhaps the clearest indication that nothing new in our sphere is likely to be announced imminently and the UK Shared Prosperity Fund will have to bear a lot of weight and expectation.