As many commentators observed, the Autumn Statement delivered last week seemed to come from a Chancellor living on a different planet to most of us. It did little if nothing for nurturing the startup economy or supporting entrepreneurs setting out for the first time with their own venture. Most of the rhetoric took us for idiots, thinking we can’t see behind the headlines. It sounded dangerously like the uncosted guff that Truss and Kwarteng came out with. And we all know how that ended – or rather hasn’t – as the mayhem they created is still with us. The brass neck of Hunt claiming Tories have lifted people out of poverty is breathtaking. Read the Joseph Rowntree Foundation analysis of the state of our society JRF
Jam butties today, nettle sandwiches tomorrow is my overriding thinking. The headlines were closeted in a wrap of warmth and glow, but for me Hunt acted more like a Pantomime villain we’ll soon be seeing, rather than the thoughtful guardian steering our future financial prosperity. If you do the analysis, his pretty charts of shiny Tory ideology mask the hidden skeletons of tomorrow’s reality. He kicked the can of responsibility down the road and hoped he wouldn’t be called out for short termism.
We had to bear witness to Hunt’s misplaced upbeat take on the state of the economy. But his mask crumples when you look underneath. His cheery disposition towards the forecast is pure politics, a bid to bribe voters rather than proper financial management to encourage long term investment and growth. There was a bundle of buzzwords – progress, productivity, prosperity – but no pragmatic, positive, proposals – no viable solutions to address the ongoing stagnation anticipated to roll into 2024 as we continue to navigate the most complex and adverse economic climate of a generation.
This isn’t a political rant from my soap box with a megaphone in central Manchester, but the socio-economic situation is relevant to creating the conditions to energise and sustain startups and entrepreneurship. So, what are the five takeaways for our startup economy from yesterday’s statement?
- Founder earnings. Yesterday’s NICs cuts increase incomes more for higher income households. By putting them together with other policies since 2019 – most importantly the freeze in tax thresholds – they show a decline in income for almost all income groups. This doesn’t help those starting out on their startup venture to ensure they can pay the Tesco bill from the scant early earnings they can afford to take out of their startup venture. The £10bn cut in the NIC rates pales into insignificance alongside the long-term increase in personal tax created by the six-year freeze in allowances and thresholds. Where were the incentives for new founders personally, and the hiring of startup teams, to reduce salaries and take a risk?
- Create the conditions. There isn’t any increase in underlying, real disposable income to stimulate consumer confidence or spending. Personal budgets will be pared back to afford the basics and thus reduce demand side economics for new business whether b2b or b2c. Today’s announcement by Ofgem that the typical annual household energy bill will increase in January from £1,834 to £1,928, 5%, again adds to the fragility. Real household disposable income per person is forecast to be 3.5% lower in 2024-25 than pre-pandemic. Spreadsheets and spin can’t alter this.
- Reckless big bets. How did Hunt afford tax cuts when real economic forecasts got no better? He banked additional revenue from higher inflation and from further harsh cuts to public spending. The Chancellor seems to have made a big bet, spend a large fraction of ‘future windfalls’ when the underlying public finances are still shaky. This policy decision seems to be ridiculously fine-tuned given potential volatile forecasts without due consideration of ‘what if?’ – what goes up could go down. The the risk to future underlying economic sentiment thus gnaws away at the confidence for entrepreneurs on the timing of launching a new venture.
- Capital investment. The announcement that full expensing relief for capital investment in qualifying plant and machinery is to be made permanent, together with confirmation of the new simplified R&D tax credit regime for 2024/25 was encouraging. Hunt sought to set a more positive tone but for me this was lost in the overall sentiment of a ‘last throw of the dice’ to gain political favour ahead of an election. Besides, we are predominantly a knowledge economy, capital investment isn’t a driver for the majority of new businesses creating growth and employment.
- Industrial Strategy. With Sunak now on flirting first name terms with Elon as the UK’s leading AI evangelist and influencer, UK technology needs ongoing support from the Government to keep up with the global race to reach and surpass technology and sustainability goals. We need more Government commitment to long-term industrial strategy and planning. The £960m of funding dedicated to the evolving the green sector will be vital to validating alternative fuel sources to natural gas and oil, such as hydrogen and biogases. This in turn should be a welcome catalyst for startup ventures in these sectors.
I’d expected more nuanced and thoughtfulness to support acceleration of economic drivers to stimulate growth, supporting current and future business entrepreneurs. The Government makes sound-bite commitment to future R&D, science, and technology, but we know the underlying reality that there’s no secret to economic growth: societal well-being is created from smart, long-term investments that boost business activity, and startups in particular in terms of innovation. Instead, we got short-term headline grabbing soundbites.
Whilst some of the measures outlined will help offset some cost-of-living pressures – the 9.8% uplift in the national minimum wage, the 8.5% increase to state pensions – all require additional spending, and with national debt currently at an eye watering 94% of GDP, the maths simply doesn’t add up, so let’s not pretend it does.
Amid the frenzy of numbers and blizzard of breezy words about tax cuts flagged prominently by Hunt, I accept his political inheritance is challenging regarding the colossal state intervention of the pandemic and supporting Ukraine. But he had choices, and he didn’t make the right ones for me. I just didn’t see any pragmatic or encouraging support for building our economy of tomorrow, rather we got dogma, bogged down in massaging messages for political and not economic reasons.
We need a government that enables and supports long-term entrepreneurial swagger and confidence. Instead, we got short-term fixes that don’t go anywhere near creating a step change opportunity to move us away from the current economic sluggishness, no matter how you try to spin it.
