Boosterish Britain must now face harsh economic reality

The UK chancellor’s Autumn Statement reveals a country seeking to balance its desire to be a major international power with a fragile and diminishing economy.

Expert comment Updated 25 November 2022 2 minute READ

John Kampfner

Former Executive Director, UK in the World Initiative

With classic understatement, Rishi Sunak admitted at the G20 summit that the UK’s reputation had taken ‘a bit of a knock’. The events of the past week have seen two significant moves by the new prime minister – the UK’s third since the summer – to stake the claim the UK has returned to being a reliable diplomatic and economic partner.

All manifestations of the brief and ill-fated era of Liz Truss have now been blown away. On the diplomatic circuit, there is no more talk of ‘disruption’; instead, the focus is back on formal engagement through multilateral organizations.

On his return from Bali, Sunak sat in the House of Commons next to his chancellor Jeremy Hunt as he announced in his Autumn Statement a raft of tax rises and spending cuts – a belated attempt to stabilize Britain’s dire fiscal position.

The key to all of this is delivery rather than announcements. Hunt insisted security at home depends on security overseas, and therein arguably lies the biggest foreign policy conundrum

While most of the political focus was inevitably on domestic living standards, the test for global markets and governments is whether this statement can successfully restore the wider credibility of the UK. And for Sunak and Hunt, it was vital to provide quiet reassurance to their audiences both at home and abroad.

Science superpower and Brexit freedoms

Scattered among the gloomy statistics, Hunt did provide the ritualistic smattering of British boosterism. Hailing the UK as a science ‘superpower’, he pledged to use ‘Brexit freedoms’ to change regulation to enable growth in five priority sectors – digital technology, green technology, life sciences, advanced manufacturing, and financial services.

But the key to all of this is delivery rather than announcements. Hunt insisted security at home depends on security overseas, and therein arguably lies the biggest foreign policy conundrum.

Ministers insist on using the term ‘Global Britain’ but the ambition of being a truly international power is confronted, now more than ever, by the reality of a fragile and diminishing economy.

The chancellor sidestepped the vexed question of defence spending – or more specifically the inherited pledge to increase it to three per cent of GDP. The original plan was to reach 2.5 per cent by 2026 and then the higher target by 2030, in what would equate to around an eye-watering extra £157 billion over eight years.

By linking this decision to the update of the government’s Integrated Review of defence and security and to the next UK budget – both due in spring 2023 – the government has bought itself more time to reassure the Americans and Ukrainians and to square off the UK defence secretary Ben Wallace who had threatened to resign if the target was watered down.

Defence spending and international development may not be major concerns on voters’ minds. But when it comes to the UK’s role in the world, they do matter considerably

A similar delay tactic was deployed for international aid. Sunak has brought Andrew Mitchell back into the cabinet, who has been vocally demanding the development budget be restored back to 0.7 per cent of GDP. The total is currently hovering around 0.5% per cent but that includes a sizeable chunk being allocated to the management of the asylum crisis within the UK.

Energy and climate pledges are top priorities

This chancellor is by no means the first minister to commit the government to spending £20 billion on building a new nuclear plant at Sizewell C. But perhaps the urgent necessity to secure greater energy self-sufficiency following the Russian invasion of Ukraine means it might happen this time. EDF, the company charged with the project, says it will eventually generate seven per cent of UK electricity needs.

Alongside energy resilience is the additional requirement of tackling the climate emergency. Sunak was heavily criticized for initially declining an invitation to attend the start of COP27 in Sharm-el-Sheikh so it will be a relief to many that – after Truss’s grandiose wobble – he and Hunt have recommitted Britain to a 68 per cent reduction in emissions by 2030.

Defence spending and international development may not be major concerns on voters’ minds. But when it comes to the UK’s role in the world, they do matter considerably and will have to be addressed before too long, particularly if Britain still wants to be seen as a global player.