Thoughts prompted by the Autumn Statement by David Allen

by Heather Dandridge  yesterday at 12:42

Thoughts prompted by the Autumn Statement by David Allen

We should not have been surprised but we were. The political and economic establishment, we came to realise in 2016, are addicted to continuity.

Ahead of the vote on the UK's referendum on membership of the European Union, for example, not only the Government and the Bank of England, but also the Organisation for Economic Co-operation and Development and the International Monetary Fund came together to predict that a vote to leave would create such uncertainty as to cause an immediate and substantial recession. They were all wrong, because they all relied on the same, flawed, models. The public voted for the deep blue sea, rather than the devil they knew.

The flaw in the model, and in political attitudes, is to assume that discontinuity has only a downside. This was apparent again in the UK's Autumn Statement, which was devoid of radical ideas - if you exclude the plan to switch the content between spring and autumn statements!

The government is addicted not just to borrowing per se, but to increased borrowing as the way to deal with the problems brought about by excessive borrowing. No, I don't follow the logic either, but we now have a projection of an accumulated government deficit of £1.5 trillion (that's an eye-watering £50,000 per family across the country). Again, the argument is that any attempt to keep spending below income would create such uncertainty as to induce a recession.

However, anyone with experience in business will know that great success can come from the opportunities which arise from uncertainty. A bit of experimentation might be necessary, along with a flexible stance (in terms of investment and costs) but remember: this country's greatest achievements came when entrepreneurs strode out into the unknown.

On launching the current £50 note in 2010, which pictures Matthew Boulton and James Watt, Mervyn King commented that, "The partnership of an innovator and an entrepreneur created exactly the kind of commercial success that we will need in this country as we rebalance our economy over the years ahead." Quite!
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