The Chancellor has signalled restraint ahead of the Autumn Statement, writes Paris Gourtsoyannis
If you’re looking for a place to begin understanding the challenge facing Chancellor Philip Hammond in tomorrow’s Autumn Statement, consider the community of Shirebrook in northeast Derbyshire.
The government made the focus of its first major fiscal announcement since the EU referendum the JAMs - families that are Just About Managing, working in jobs that pay rock-bottom to middling salaries and offer little security.
It will find plenty of them in the former colliery town of Shirebrook, where the transformation in the UK economy over the past half-century is manifest.
Where once thousands of men toiled to fuel British industry, the largest private employer is now Sports Direct. In a potent political allegory, its 800,000 distribution centre stands exactly where the colliery once did.
A few weeks after the EU referendum, a report by a committee of MPs laid bare what life was like for staff working at Shirebrook for Sports Direct, owned by the billionaire Mike Ashley.
Describing working conditions as “Victorian”, the report catalogued a range of abuses: penalties for drinking water or visiting the toilet, claims that contracts were offered for sexual favours, pregnant women too afraid to take time off work and going into labour on their feet.
While the most appalling stories ensured Shirebook’s infamy, it was the more mundane details of how the site operates that make it a study in the problems affecting the modern UK economy.
Sports Direct failed to pay its staff the minimum wage, MPs found. It used large numbers of contract staff who were guaranteed only a handful of weeks’ work, but were kept on call for the rest of the year, stopping them from taking on other jobs elsewhere.
And despite promises that the creation of the warehouse would provide jobs for people living in Shirebrook, large numbers of workers were shipped in from the EU.
Sports Direct even provided foreign workers with their own pre-paid payment cards, at a cost of £10 a month and 75p per withdrawal - a detail that suggests it was seeking employees with little knowledge of their rights in the UK labour market.
Shirebrook is in the UK parliamentary constituency of Bolsover, and in June, three weeks before the report was published, it predictably voted to leave the EU by 71 per cent. Mr Hammond, who cuts an increasingly isolated and forlorn figure in government as the voice of post-Brexit realism, is well aware of the problems that the Shirebrook story represents.
Chronic under investment in the skills, research and infrastructure mean a significant stimulus is needed to replace the industry that used to sustain similar communities across the UK, and in many cases has been replaced with precarious, low-paid employment.
Failure to do so has political consequences. Appearing on the Andrew Marr Show at the weekend, Mr Hammond gave his own description of JAMs: “They are the people who work hard and don’t feel they are sharing in the prosperity that economic growth is bringing to the country,” he said.
In other words, Brexit voters - those who now expect their leaders to use the country’s exit from the EU to transform their circumstances. Their decision in June, however, may be what leads to disappointment tomorrow. The most cataclysmic predictions made before the EU referendum have been exposed, but some of them were too modest. The Treasury’s short term analysis of the impact of Brexit suggested inflation could rise 2.3 per cent, but the IPPR has warned it could hit 4 per cent by the end of 2017, eating into wages and eroding quality of life for thousands of families.
Overall, high inflation and slower-than-expected growth mean the public finances could be as much as £100bn worse off by 2020 compared with pre-referendum forecasts. The next batch of MPs could be in their seats before the UK’s debt begins to fall.
Mr Hammond’s response to the eroding outlook is likely to only increase the pain for JAMs. Opposition parties, think-tanks such as the Resolution Foundation, and even backbench Tories have called on the Chancellor to reverse planned cuts to Universal Credit and abandon new restrictions on child tax credit that will hit families with more than two children. In both cases, it is the JAMs in the firing line.
But at the weekend Mr Hammond spoke of needing “headroom” on the UK’s balance sheet to ensure the economy is “match-fit” in the face of “eye-wateringly” large debt. The government would ensure that “everything we do is compatible with building resilience in our economy as we go into a period where there will be some uncertainty around the negotiation over our exit from the EU,” Mr Hammond said.
While one Labour MP expressed hope last week that the Autumn Statement would bring a “crumb” from the government on some aspect of welfare and tax credits, it seems unlikely that the government will abandon the squeeze it inherited from the previous government wholesale.
In the wake of the referendum, the Chancellor announced a fiscal “re-set”, signalling that he wanted to work to different benchmarks from his predecessor. The government has unveiled a £1.3bn investment in new road building in England, and a £2bn package of support for research and development, but further evidence of that re-set has yet to emerge.
Tomorrow we’ll see what, if anything, the government can offer JAMs up and down the country. Judging by Mr Hammond’s comments in the run up to his first major foray at the despatch box, that may be very little.
That leaves the workers of Shirebrook and others who have failed to benefit from a globalised, disrupted economy with little to look forward to in the short term, hoping only for the cut in immigration that is the other side of the Brexit coin.