“A lot done, a lot left to do.” It’s the slogan that adorns many re-election campaigns and it’s the one George Osborne adopted in his autumn statement today. He was cautiously jubilant. Growth has returned with the OBR seemingly struggling to get its forecasts to keep up. Borrowing will fall – slower than the Chancellor forecast, true, but a cash surplus is expected within five years.
This gave the Coalition the wriggle room it needed for an assortment of giveaways… Free school meals for 5-7 year-olds, the personal income tax allowance to rise to £10k then be pegged to inflation, petrol taxes frozen, employer National Insurance contributions to be scrapped on 1.5 million jobs for young people, a boost in the business start-up loans scheme, £1bn in loans to boost housing developments in the north of England. Oh, and the £700m a year Tory marriage tax allowance that benefits only one-third of married couples.
But it’s not all giveaways… Government departmental budgets (excluding hospitals and schools) will be cut by c.£1bn for the next two years, overall welfare spending (excluding the triple-locked state pension) will be capped, ‘earn or learn’ restrictions on unemployed 18-21 year-olds wanting to claim benefits. The tough times are far from over.
The Coalition will hope this autumn statement marks a turning point, that they will be able to claim the economy is recovering only thanks to the government sticking to its economic strategy. As I pointed out this morning, that’s a distorted narrative. But it’s one that may stick.
If Tory MPs were jubilant (none of their Chancellor’s feigned caution) then Labour were subdued. Against a deafening wall of Tory barracking, shadow chancellor Ed Balls struggled to be heard. But it’s perhaps as well he couldn’t be: his response was not just falteringly, blusteringly delivered it was also desperately thin. His first sentence – accusing the Coalition of being in denial – rebounded on him given the news we’d just heard that GDP declined by a massive 7.2% in 2008-09, not 6.3% as previously thought. He managed one good joke – IDS stands for “In deep… shambles” – but the silent, strained faces of Labour MPs told their own story.
Overall, Lib Dem MPs seemed happy enough. As Danny Alexander remarked in his letter to supporters, “setting the Tory Marriage Tax break to one side, the Autumn Statement is packed full of Liberal Democrat ideas”. Our party has a fair claim to some measure of credit for the economic recovery. First, by ensuring stable government for five years at a time of great uncertainty – such as the Eurozone crisis and steep commodities price rises – and then by ensuring ‘Plan A’ was amended when it was clearly failing. We’ve also made mistakes: notably letting George Osborne follow Alistair Darling’s plans to slash capital spending in 2010. We’ll have to hope voters give us credit for the successes and not just blame for the blunders.
* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.
Follow @LibDemVoice on Twitter
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
US outperformance isn't *all* about Tech
The Joy of Six 1298
Last West End Christmas Fortnight events today! #dundeewestend
How national insurance increase will undermine homeless services
North London's expanse
Adam
Jonathan Brown
Joseph Bourke
Nonconformistradical
9 Comments
Run that past me again – we joined the coalition because the defict was a crisis. Labours plan to reduce it to £85 billion by 2013/14 was a reckless gamble and George Osborne instead set out to reduce it to £60 billion by 2013-14, ie by now. Instead it will finish the 2013/14 financial year at around £120 billion.
No wonder Ed Balls strugles with saying the coalition are cutting too far too fast. To little to slow would be nearer the mark. Yet Osborne has money to waste on a tax cut for some married couples and the Lib Dems have given free school meals to those quite capable of providing their own meals. Yes I know there are arguments for it, prety feeble ones and often the same one Clegg rejects about other universal benefits. No wonder people are protest voting UKIP.
some good things – cutting national insurance balances by the usual tory hatred of unemployed young people. The Conseravtive party nasty since 1834.
Caracatus,
£111 billion to be borrowed in 2013/14, not £120 billion.
I disagree on school meals, in that hungry children perform less well educationally, and it does ensure that the poorest and most vulnerable are supported. The transferable tax allowance for married couples is questionable though.
“The tough times are far from over.”
In a nutshell, the tough times are far from over for the working class, but there’s money for handouts to the middle class.
There is a difference between being in deep shit and being in deep shambles. The labour party seems to be in deep shambles, particularly Ed Balls. The crash in 2008/9 and the Labour response to it put the country in deep shit, and of course it is the LibDems who have managed to turn George Osborne’s shambolic head away from that mesmerizing spectacle and towards a way up and out to the beautifully aromatic externality of oxygen.
The OBR’s December report here http://cdn.budgetresponsibility.independent.gov.uk/Economic-and-fiscal-outlook-December-2013.pdf
It ventures a figure for the level of destruction done to the UK economy from 2008:
“We judge that the level of potential output in the third quarter of 2013 is around 12 per cent below the level consistent with the Treasury’s March 2008 Budget forecast – the last before the recession – with the difference widening to over 15 per cent by the first quarter of 2019”
And they used to quip that Margaret Thatcher did more damage to the UK economy that the Nazis.
Stephen is right to highlight 2008. That year The Bank of England allowed NGDP (over which it has total control) to plunge 8% before taking drastic action to lower interest rates and boost the money supply.
In 2010, under the same leadership, Mervyn King, the Bank promised the coalition that it would provide the necessary monetary offset to compensate for the fiscal consolidation begun in the 2010 budget – and failed to deliver. They were even close to putting rates up in 2011 ! (though to give King credit, he consistently voted against this.
The present ‘recovery’ began, almost to the day of the announcement a year ago that Mark Carney would be the next Governor (with a record of good monetary policy in a crisis and a commitment to forward guidance – if not immediately NGDP targeting).
From memory he costs the UK tax payer £850,000 in salary and £500,000 in accommodation costs each year (and for the first 8 months of his benign effect on confidence) he wasn’t even in post and therefore we weren’t even paying him. What great value ! (The OBR confirms that the turn round is a turn round in demand, not supply.)
Just calculate it: the OBR has raised its prediction for growth this year alone since March from 0.6% to 1.4% which if my maths is right is worth £128 billion … what’s that in tax take … £60 billion?
The guy who led the Bank in 2008 has cost this country around £1 trillion if you add up the value of the potential output lost each year since then … and he is about to be raised to the peerage!
Independence of the Bank without intelligent Parliamentary scrutiny has cost us dearly.
It may yet cost the Party continuing influence after 2015 if we don’t ensure the Bank maintains the present level of NGDP growth and assists in increasing the efficiency with which the economy is able to combine labour and capital to boost output.
Osborne may be cautiously jubilant and Tory MPs outright jubilant but are they right to be?
Remember we got into this mess because of an orgy of irresponsible consumer and mortgage lending which, while the funds were being drawn down and spent, added powerfully to the economy. It was equivalent to a significant average pay increase for the nation; you could even argue that the Labour government has discovered how to privatise a Keynesian boom that, had it been done by public sector spending, would have enraged the Tories. The boost to GDP was supercharged because so because much of the retail sector enjoys sky-high margins which flattered statistical measures of how the economy was doing although one would think that the unsustainable nature of this as an economic strategy was obvious. But apparently not as the Labour government drove straight into the ditch. The Tories certainly didn’t sound any alarms which makes me wonder how much they really understand (or perhaps want to understand) about what’s under the economy’s bonnet.
So this time around it’s different precisely how?
Well, Linda Yueh, reporting work by the OBR, says that it’s driven primarily by “stronger consumption growth and residential investment” (ooh, err!) and that it’s being funded largely by households saving less (double ooh, err!). Meanwhile potential ‘virtuous’ drivers of the economy – investment (which fell by 25% in the recession) and export growth – “have continued to disappoint”.
http://www.bbc.co.uk/news/business-25240521
Saving less may sound comfortingly anodyne compared with running up debt but arithmetically it’s the same thing and it’s just as unsustainable. And this time when TSHTF the country will be in a much weaker position than 5 years ago. So why exactly are the Tories (and some others) so cheerful about this?
There has been a lot of rubbish hype trotted out about the economy. The truth is that it is turning around very slowly, probably somewhat slower than it should have done and it probably would have done this under any management on offer to the British people. The only thing I could sustain any interest in this afternoon was the pathetic competition between Cameron and Osborne to do amazingly strange things to try to camoflage the ravages of male pattern baldness. They might as well have both been sat on the beach at Yarmouth telling the sea to go back.
All Osborne has done is create a mini property bubble. and the only reason growth looks impressive compared to europe is because it has higher to climb. And lets not forget that this staggering stratosphere scraping .8% is l less than he inherited from Darling in the first place. And no one ise ntirely convinced anyway. Bah Humbu, a big song and dance routine about standing still.
@Mark Valladares – Well lets wait and see whether the outturn for government borrowing is £111 billlion or £120 billion but it is certainly not going to be £60 billion. Mark, I know you know enough about economics to accept that some of the deficit reduction is ‘one off’ money and not really a ongoing reduction at all.
A couple of pilot schemes on free school meals – am i entirely convinced this is a sound basis for the change proposed, not really – is it the kind of nanny state micro managing Nick Clegg moans about in other contexts, seems so to me.