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Red budget box with green book titled Autumn Statement 2023
November 24, 2023

Reflecting on the Autumn Statement - after Sunak's AI Summit, Hunt should have delivered investment on the ground

The perennial problem of under-investment

The headlines around this week's Autumn Statement have been around cuts to taxes and incentives for businesses to invest in new technologies. What was deafening by its silence was the lack of discussion around the UK’s perennial problem of under-investment.

The OBR had signalled to Jeremy Hunt that there was around £20bn ‘headroom’ for him to work with but, rather than putting money into public investment, his instincts have been to work to reduce the fiscal burden on workers and – through continued zero expensing on investment in machinery – businesses. Though there were announcements on expansion of the fledgling Making Smarter Adoption programme, some more money for apprenticeships, and deductibility of training costs for sole traders and the self-employed to help them ‘maintain pace with technological advances’, there was no parallel incentive for firms to invest in ongoing workforce training.

Hunt has also decided to stick fast to the self-imposed fiscal rule demanding debt as a proportion of GDP has to be falling in the final year of an OBR forecast – a policy, in the opinion of many leading economists, holds back growth and prevents the kind of catalytic investments that are needed to transform our infrastructure and make it future-ready. In March this year, the government had already confirmed its lower-than-expected investment plans and, as the National Infrastructure Commission has recently highlighted - it consistently underspends capital budgets: in recent years one in every six pounds of planned capital expenditure has gone unspent.

Research is clear: incentives are needed for investment in people, as well as machinery

There is widespread expert agreement regarding the need to boost high-quality public investment and for a more consistent, sustainable public investment strategy. We believe that this absence – alongside a lack of balance in incentives for firms to invest in people and machinery – is an error, especially when seen in the context of the recent AI Summit. There, the Prime Minister was keen to trumpet how AI could boost the economy, but our research shows that if this government is serious about these opportunities, then commitments to invest in people and infrastructure must follow.

Research by Professor James Hayton that we published in September as part of our Pissarides Review into the Future of Work and Wellbeing, funded by Nuffield Foundation, analysed a survey of 1000 UK firms, investigating the extent of their adoption of AI and automation technologies, and the impacts this had had on jobs. The extent was large: in the past three years, 80% of firms had adopted tools to perform a physical task, and 80% a cognitive task. But the truly interesting finding was around job numbers and job quality: where ‘regional innovation readiness’ was high and firms had ‘high engagement’ HR practices that involved workers in the design, development and deployment of AI, not only was there a net positive effect on job numbers, but job quality also increased.

Regional Innovation Readiness is an aggregated measure that encompasses indicators such as levels of educational attainment, broadband speed and skill level in a local area. If we are to get the best out of AI, we need boosted public investment in physical infrastructure like school fabric, the national grid and reliable fast broadband. (Interestingly, the Chancellor’s big interview defending his Autumn Statement from a factory in Wales on Thursday morning had to be rescheduled and done over the phone because the internet connection failed.)

History supports this: electrification in the early 20th century was costly – but these public investments over decades built the foundation for the modern economy we now live in. Analysis that we have been doing shows what the equivalent investment in this 21st century needs to build the foundations for a ‘good automation’ AI economy based on good work, one that has a vision and long-term strategy for human flourishing.

Three levels at which investment in people should happen

To achieve this, alongside investment in ‘Regional Innovation Readiness’ we must also have investment in people, and this investment needs to be delivered at three levels.

Firstly, as Professor Philip McCann pointed out at our recent Making the Future Work conference as part of the AI Summit Fringe, we lack in the UK the intermediary collaborative infrastructures that should sit between government and local firms. We have an ‘institutional vacuum’ at this meso-level that means that ‘only a small number of institutions at the top get a hearing’ and we see ‘no engagement from the bottom going upwards’. What we need to see in the Autumn Statement is proper investment in devolved regional institutions that can bring together the firm-level learning around skills and working practices and provide proper direction through technology adoption.

Secondly, we need a fiscal framework that incentivises firms to invest in their human capital, and rewards companies for engaging their workforce in algorithmic impact assessments that have a specific focus on sustaining job quality. Our Good Work Algorithmic Impact Assessment offers a model for this, and Professor James Hayton’s work shows that it is this high-engagement HR philosophy that delivers the best outputs from automation.

Thirdly, the move to AI is going to mean some workers enter a period of transition. The announcements on the Making Smarter Adoption programme and help with training costs for sole-traders and the self-employed are welcome. What is also needed is new funding for organisations to coordinate and deliver help through this transition, starting with the most vulnerable in the workforce. As Professor Sue Black OBE powerfully pointed out at our Making the Future Work conference, this will not only help build people’s skills, but also foster more positive perceptions of technology and build trust among people that their skills and capabilities are valued. The Chancellor announced a Restart programme designed to ‘increase [skills] and improve [employability]’ – but what is problematic is his tying of this to Universal Credit provision, making it much more stick than carrot.

Analysis by our friends at the Resolution Foundation shows how the unequal impact of the cost of living crisis – with food and energy prices hitting poorer households hardest – means that prices have risen by around 14 per cent more for families in the bottom income decile than those in the top. In this context, as they put it, ‘not even having benefits keep pace with inflation is madness.’ Yoking mandatory skills provision with this tightening of benefits – rather than in the more positive light of skills as building capabilities and human flourishing - is, we feel, unhelpful.

An AI Institute focused on the people in the present, not just frontier risks in the future

Finally, supporting all of this work to build an economy of good automation, the new AI Safety Institute much trumpeted at the end of the Bletchley Summit should be given a wider remit. At the recent meeting of the APPG on the Future of Work, a session committed to listening to expert reflection on the way forward, there was clear consensus that this Institute must not have a narrow focus on ‘frontier risk’ systems, but also engage and build the capacity of civil society organisations so that there are open channels of communication about the AI impacts being experienced now by workers and others, and those impacts that are yet to come.

Many years ago, the AI pioneer Marv Minsky was heard talking to the godfather of human-computer interaction, Doug Engelbart.

‘We’re going to make machines intelligent,’ Minsky said. ‘We’re going to make them conscious!’

‘You’re to do that for the machines?’ Engelbart replied. ‘What are you going to do for the people?’

With ‘the greatest tax cut in history’, Hunt has done a huge amount for machines. What have yet to see is what this government proposes to do for the people.

Writing in The Times in September, the Director of the IFS bemoaned the very idea of Autumn Statements. ‘The time and energy spent on these events would be better focused on setting longer-term strategies, consulting on reforms and improving the policymaking process.’ He is right. A long-term strategic direction of ‘good automation’ backed by stepping up investment in the areas highlighted above should have been beginning now. Hunt’s focus on tax cuts has led to another round of under-investment. Perhaps with the launch of the new British Infrastructure Council - chaired on Wednesday by Shadow Chancellor Rachel Reeves and with a remit to consider ways to boost infrastructure investment – and the Digital Information Principles at Work that IFOW has developed in partnership with the Shadow AI team - she and Keir Starmer will see otherwise. It would surely cheer the hearts of many leading economists to hear courage and confidence on public spending for the good of the future workforce.

Anna Thomas is the Director and Co-Founder of IFOW and is a former barrister focusing on employment rights

Professor Sir Christopher Pissarides is the Co-Founder of IFOW and a Nobel Prize-winning economist based at LSE

Naomi Climer CBE is a leading technologist and Co-Founder of IFOW


Anna Thomas MBE, Professor Sir Christopher Pissarides and Naomi Climer CBE


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