All eyes turn to Philip Hammond this week who, in perhaps the most important moment for the government since the EU referendum, will set out the broad shape of the new government’s economic plans in Wednesday's Autumn Statement.
George Osborne had staked his economic credentials on achieving two targets: eliminating the structural deficit by the end of the current Parliament and reducing public borrowing every year. But since taking the reigns of power, both Theresa May and Philip Hammond have made it clear that following the referendum, those targets have been dropped and that there will be a change in focus of monetary policy, fiscal policy, and industrial strategy. We may also see a change in style from the Osborne years - Phillip Hammond is reportedly less keen on using these set piece moments for such drama and spectacle, and Theresa May also appears to be pre-announcing much of the 'meat' in her speech to the CBI today and in the media.
The industrial strategy will be of particular interest to universities. We were expecting a full Industrial Strategy Green Paper on Wednesday alongside the Autumn Statement, but this is now likely to be pushed back and possibly even downgraded in status. However, it's clear that we will be seeing more detail about this crucial strand this week.
Last night, the first bits of briefing began with the Prime Minister writing in the FT that the government "will invest an extra £2bn a year in R&D by the end of this parliament; set up an Industrial Strategy Challenge fund to back scientific research and development of technologies such as robotics, artificial intelligence and industrial biotechnology; and review our tax regime to encourage and support innovation." Much of this will be welcomed by the sector, although the detail will be crucial, particularly about whether this represents new money injected into the sector, or simply pieces moved around the chess board.
The big problem, as the new Chancellor is finding out is that he just doesn't have a lot of cash to play with. His room for manoeuvre, both politically and economically, is minimal at best. "We are highly constrained" said Hammond on Peston yesterday. Abandoning the surplus target has broadly given the government wiggle room to just about stand still.
So it's likely that the '£2bn' offer for science, research and development will ultimately amount to measures on the demand side e.g. tax credits and incentives for firms to exploit science and technology rather than an injection of new funding. As Andy Westwood argues below, the diagnosis of market failure is not in the laboratories, buildings or university departments, but in the lack of economic growth that should follow them. The Treasury's need to deal with the economic situation in the short to medium term may trump most other concerns. That's why if Hammond takes anything from the recent Science & Technology audits, it will most likely be the things that deliver more applied research, skills, jobs and regional growth. Anything beyond that probably looks too abstract, long-term and unaffordable.
Also accompanying the Autumn Statement will be the Office for Budget Responsibility’s biannual economic and fiscal outlook - the first since the referendum. The OBR’s forecasts were the foundations for Treasury decision making in the Osborne years, determining how the government would keep to its austerity plans. However, they were often proved incorrect, and government economic forecasts have become increasingly politicised.
This week's forecast will tell us what OBR thinks about our prospects for growth - its 2017 forecast is expected to go down to about 1.3 per cent, from a projection of 2.2 per cent in the budget. And away from the headlines but critically important for universities, the OBR will publish the RPI-X inflation forecast, the figure to which TEF-tied tuition fee increases will be based. Wednesday’s release will tell us whether 2.8% for next year (the figure suggested from its March forecast and used by the DfE in TEF policy) looks likely to fall short or beat the actual RPI-X rate. This will give us a clue about the rate of tuition fee increases into 2018-19 and beyond. Any serious fluctuations of RIP-X could have a big impact on the value of fees to universities over the coming years for better or for worse. But if most other indicators point to a bleak and uncertain period for the UK economy as a whole, universities are likely to feel the chill of the coming winds in many other ways.
Read more on Wonkhe:
1. A time for governing in prose (and spreadsheets) - Previewing the Autumn Statement and the tough choices the government now faces, Andy Westwood takes us on the walk down Hammond's Passage. It's dark, narrow and full political and economic dangers of all kinds.
2. Lessons from the front line of industrial strategy policy - Maddaliane Ansell of University Alliance used to lead the government's industrial strategy work as a civil servant, and here she discusses what works and what to look out for as the new government tries to square a great many circles.