HAMISH MCRAE: My take on Chancellor’s Autumn Statement box of tricks

So what did we learn from the Autumn Statement last week? Here are my five main takeaway points.

One, we are at the limits of taxing power. You will have seen the comments about taxation being the highest since 1948 as a proportion of economic activity. Every time the Government of the day bumps taxation up towards 40 per cent of gross domestic product (GDP) it gets pushed back, as has this one.

Two, faced with this, Governments will use stealth to preserve their revenues. Jeremy Hunt’s ruse is a textbook example of that: cut headline rates of National Insurance but allow inflation to suck more people into paying it.

Three, we should expect further apparent tax cuts in the Budget next spring, but no reduction in the revenue that the Government actually hopes to receive.

Four, the coming squeeze on public spending under the next Government, whoever forms it, will be just as severe as the so-called austerity period under the Coalition of 2010. That was in the fine print of the Office for Budget Responsibility’s projections and, for once, I think it is going to be right.

Encouragement: If deployed thoughtfully, an ageing workforce can be a benefit to society rather than a burden

Five, the only safe assumption is that interest rates will remain higher than inflation for the foreseeable future. This Government will remain a big borrower, as indeed will others across the developed world.

Forget about the notion that they should run surpluses and pay back the debt. What they will do is hope that inflation chips away at the real value of debt, so that it edges down as a percentage of GDP.

Savers will require a positive return lending to the Government, something they have received for most of the past 400 years.

That is rather a glum list. So what might we expect to happen in the next couple of years that will, if not lift the spirits, at least make that dismal prospect more palatable? Five thoughts on that.

First, there will be economic growth. The Office for Budget Responsibility thinks that growth next year will be just 0.7 per cent and that it will be at or below 2 per cent right through to 2028. But of course it does not know.

Back in March it thought the economy would shrink this year. Now it acknowledges it has grown, albeit slowly. If it can’t get that right, what credence should anyone give to projections five years into the future?

My guess is that we will see a quite rapid expansion in demand, which, with a restricted labour supply, will put huge pressure on firms to increase productivity.

Second, leading on from that, service industries now have a tool, Artificial Intelligence, that will enable them to do this. We are in the very early stages of learning how to use AI, but already it is helping some activities to be done cheaper, better and faster – including economic analysis.

The public sector has not been good at using technology to cut costs and improve the quality of its services, but it now has the opportunity to do so.

Third, while the pandemic did huge damage to the world economy, that damage has been contained. The financial system is in much better shape than it was after the banking crash of 2008-9, and there have been some lessons learnt that should enable faster growth in the future.

After any period of severe disruption there are usually several years of catch-up. That should happen through the rest of the 2020s, though history suggests we should be prepared for a global recession around 2030. But let’s not meet that trouble half way.

Fourth, many of the long-term pressures on governments’ finances have come from demography – our ageing populations. But the UK is not badly placed on that measure – partly because of immigration – compared with most of Continental Europe and particularly Japan and Korea.

So we can learn from the experience of others. We can encourage people to save more for their old age, and indeed are doing so.

We can find ways to encourage older people to carry on working. Not to sound trite, but if deployed thoughtfully, an ageing workforce can be a benefit to society rather than a burden.

And finally, technology keeps advancing, and it is that progress that drives living standards.

There is this particular example of AI, which I do think will transform service industries. But even if I am wrong, there are other leaps forward we can’t envisage.

And the UK does not come out too badly over the past generation. Look at the G7 and take 1990 as a base. We have grown more slowly than the US and Canada, but faster than Germany and France, and much faster than Italy and Japan. What’s wrong with that?

This post first appeared on Dailymail.co.uk