David Davis is a former Secretary of State for Exiting the European Union, and is MP for Haltemprice and Howden.
We are currently facing some of the most challenging circumstances in my memory in which an Autumn Statement has been delivered. Against a backdrop of Vladimir Putin’s illegal invasion of Ukraine and the aftermath of the Covid pandemic, countries around the world are experiencing soaring inflation and energy prices.
Inflation is the enemy that makes everyone poorer; we need to tackle it now, and ensure that we are reducing debt as a share of GDP. But because uniquely amongst modern nations the British government is scrutinised by the Office of Budget Responsibility, we are facing up to the policy implications before anybody else.
Against that backdrop, the statement delivered by the Chancellor last week was remarkably skilful. Whilst ensuring fiscal responsibility, the Chancellor has also set out the beginnings of a radical new agenda for growth. I hope and expect that the Budget that will follow in the Spring reinforces that agenda, as stabilising energy prices, reducing global supply difficulties in items like electronic components, and a less hypersensitive financial market gives him room to manoeuvre.
In particular, it is good to see the focus on small businesses, investment and innovation. The United Kingdom is a research and innovation superpower. We have many of the best scientists in the world. But, as the Chancellor said, we need to be better at turning world class innovation into world class companies. By combining our technology and science with our world-leading financial services, we have an opportunity to turn the UK into the world’s next Silicon Valley.
As a former Brexit Secretary, I know that we can use our Brexit freedoms to achieve incredible things. Changes to EU regulations in our five growth industries – digital technology, life sciences, green industries, financial services and advanced manufacturing – will mean that we can deliver the very best for our great country, creating high paid jobs and opportunities up and down the UK. Solvency II reforms will unlock tens of billions of pounds of investment for these industries, and we can truly become the most innovative and competitive financial centre in the world.
We will also be supporting small businesses, the very backbone of our economy. A £14 billion business rates package will support the high street, and we will support small businesses with their energy bills beyond April 2023.
It is inevitable that balancing the books is going to be tremendously difficult, but it has to be done. The primary test of the Autrum Statement that I looked for was the reaction from the financial markets, not the political commentators. As I write the pound is up on its pre-Budget value, and the gilt markets are much healthier than they have been since before the Kwarteng “mini-budget”.
The Chancellor has done what is necessary to create the stable basis for future action, but in doing so is being fair by taking measures like increasing the national living wage and protecting the pensions triple lock. He has also demonstrated that we can do so whilst still supporting growth and our public services. The NHS is facing significant backlogs as we head into winter, so I am pleased to see that extra investment is being prioritised.
Of course, difficult decisions have been taken; spending will grow in real terms more slowly than previously planned and some taxes will have to rise. As a Conservative, I want to see low taxes but we must first address the challenges of the moment, restore our economic credibility and get inflation down. Only then can we reduce the tax burden – and rest assured, it is the Conservative Party that is wholly committed to doing that.
The simple truth is that when facing a choice between sound money and tax cuts, sound money must come first. I am confident that this Chancellor is determined to deliver that new growth agenda, including lighter regulation, appropriately lower taxes, and a range of measures to encourage our nation to exploit it’s brilliant technological base in the interests of everybody.
In an unprecedented set of tricky circumstances, the Statement will finally allow our country to move forwards. It will restore the public finances to a sustainable position, help reduce inflation and ensure that we can face the storm ahead with renewed confidence. The Government has been honest about the challenges ahead and fair in the solutions, which will lead to a shallower downturn, higher long-term growth and stronger public services.