Today we witnessed a government and a chancellor with a lack of wiggle room writhing around to the best of their ability. George Osborne was on surprisingly good form compared to the blundered budget, and Ed Balls was insipid in a response that seemed to ignore the forecasts and measures just outlined before him. Nevertheless, even with the chancellor on song and his opposite number off-key, it will be difficult for the coalition to use the statement as much of a turning point in the narrative of this government.
Whilst both parties would like the press and the public to be wowed by the infrastructure projects and minor tax cuts announced today, in reality the coverage will focus in on the extension of austerity, further cuts to welfare and the missing of key government targets. They are right to do so; extending the timeline to eliminate the deficit is fiscally prudent but also an admission that the coalition has failed in its central task of fixing the public finances in five years. Low to no growth – accepting the mitigating factor of the eurozone crisis – is now the coalition’s burden, and has forced onto them difficult choices such as the extra cuts to benefits announced today.
The measures in the statement aimed at boosting the economy are mostly welcome: few would deny that the UK’s creaking infrastructure needs an overhaul, or that a productive use of the state is to invest in projects the private sector would likely avoid. Osborne and the coalition deserve credit for (mostly) avoiding populist boondoggles and instead ploughing leftover money into capital spending. The problem is that the projects announced do not add up to a national infrastructure plan, the measures appear cobbled together and the structure or working of the Business Bank remains as opaque as ever.
For the Lib Dems – in government and outside – the autumn statement must rank as a disappointment. Victory can be claimed on a further personal allowance increase, but David Cameron clearly squelched any hopes of any new taxes on property and wealth – Nick Clegg was reduced to shaking his head as Osborne drove this home in his speech. Instead pensions have been raided for additional revenue, a tactic George Osborne’s predecessor but one in 11 Downing Street liberally employed. The use of the small bit of slack in the public finances to scrap a fuel duty increase suggests the Lib Dems were overridden by a Tory desire to appease some of its core constituencies.
Politically, the real long-term impact of this statement will not be felt from any of today’s measures. Revenue and fiscally neutral autumn statements are not the stuff political folklore is made of. Rather it is in the announcement that austerity will have to continue until 2018. This confirms that the original strategy of both Coalition partners – balance the budget as quickly as possible and then offer more voter-friendly policies before 2015 – is now impossible. The electorate is unlikely to go to the polls in 2015 desperate to vote for three more years of guaranteed austerity, whether tempered by the Liberal Democrats or not.
* Daniel Wright is a Senior Associate at Cicero Group