THERE remains huge uncertainty about the cyclical and structural outlook for the economy. But although it is easy these days for us all to identify obvious specific factors, this should not disguise the fact that the outlook is always uncertain.
It seems now that the situation is more uncertain than usual, but I suspect that is probably not the case. I say this partly because the OBR was less pessimistic than it has sometimes chosen to be, but it is also important that the economy has actually performed notably better since the EU referendum outcome than many expected, myself included.
As we have been told, there are widespread expectations that this is unlikely to last, but it is just possible that the economy could continue to surprise.
Although the shift to a less tight cyclical fiscal stance is an obvious move given the possible downside risks, that might need some tinkering in the opposite direction in that event. I have confidence that were that to be the case, the Chancellor would act accordingly.
Next, I turn to the issue of inequality. As has become apparent in so many other walks of life, separating fact from fiction sometimes seems beyond many people.
During the past 20 years, and indeed beyond that, there has actually been a massive decline in global inequality, as hundreds of millions of people have been – and continue to be – taken out of poverty, primarily in the so-called emerging world.
The fact is that the UN’s declared millennium goal of halving poverty by 2015 was actually achieved by 2010 – perhaps one of the very few times the UN has been so successful. Many people seem to be unaware of, or choose to ignore or deny, this remarkable achievement.
Although the UK undoubtedly has a high level of income inequality compared to other developed countries, it is also a widely unappreciated and frequently ignored fact that UK income inequality is a bit lower today than about 20 years ago.
You would not know this from the general media or from political debates on the topic. In my view, focusing on the younger generation, and more concerted efforts to rebalance economic opportunity around the UK – both to help accelerate a reduction in national inequality and to benefit those more truly hurt in recent decades – should be a priority for policy-makers in this regard.
Something that has received some, albeit modest, attention from the latest OBR forecasts is the startling deviation of the income performance of younger people compared to those over 60, and the remarkable generosity of policy towards the latter relative to the former. Surely policy-makers must address this startling gap, especially with the likely challenging productivity issues related to Brexit? We need to do more to create productive opportunities for those starting their working lives.
That brings me to the Northern Powerhouse and devolution. It was heartening to see the Treasury publish specific documents on the Powerhouse along with the Autumn Statement, but that did not entirely compensate for the lack of new or additional initiatives.
Of course, the Government has provided commendable support for the much-needed improvements in Northern road and rail infrastructure, but the importance of east-west train and road links to enable consumers and producers to behave almost as one in what I have often referred to as the ManSheffLeedsPool –Manchester, Sheffield, Leeds, Liverpool – corridor cannot be overstated.
This would be likely to do much more for productivity in the country, and therefore for living standards, than many other transport infrastructure projects.
State-of-the-art transport infrastructure is necessary but not sufficient. The same is true with respect to devolution, especially to urban areas that have not yet started on this journey. It is disappointing to see no further progress in the Autumn Statement following that initiated with Greater Manchester, now commendably followed by Liverpool and the West Midlands.
There remain key urban areas within the Northern Powerhouse and elsewhere that, in addition to requiring more local ambition, need not to allow our frequently petty national party politics to hold back what is necessary to unleash more of the local bottom-up-driven vitality that is needed to boost their, and national, productivity.
This would help all the UK to compete better with the challenges that lie ahead and, of course, to have a much more meaningful impact towards further narrowing inequality. I hope the Government will put political-party rivalries aside in this regard and make a renewed push in the area, as it is central to their appropriate mission to raise national productivity.
Lord O’Neill of Gatley is a cross-bench peer. Former chairman of Goldman Sachs, he was Commercial Secretary to the Treasury, responsible for the Northern Powerhouse, from May 2015 to September 2016. He spoke in a Lords debate on the economy. This is an edited version.