Wednesday, 5 December 2012

A Kicking Statement from George...

Well, there we have it - the Autumn Statement or, as it now seems to be, Autumn mini-Budget from the Chancellor, George Osborne. Surprises? Not really, the proposed 3p increase in fuel duty has been scrapped - no surprise there given the Conservatives' extremely parlous polling position.

Not good news for those at the very top and the very bottom but the infamous "squeezed middle" of which Mrs Stodge and I are two, come out reasonably ok. Benefit and tax threshhold rises there are but both below ambient inflation so a further real-term squeeze on incomes for all.

I also note the continuing squeeze on local Government with a 2% cut in budgets meaning a 5% cut (after inflation) in 2014. That's going to mean a lot of local pain for a lot of authorities of all stripes and put pressure on Council tax and other charges. There are grandiose announcements on  in frastructure projects but, as with those expounded by Boris Johnson, they are a mixture of known commitments and relaunched delayed projects which won't or shouldn't impress anyone.

Over on, the predictable Tory sympathisers have not so much cheered Osborne to the skies but lambasted the Labour response and the unpalatable truth for those opposed to the Coalition is that Labour has, since 2010, consistently failed to offer a credible alternative policy.

That said, Osborne and the Coalition are as guilty today as the Eurozone when it comes to kicking the metaphorical can down the proverbial road. Just as the Eurozone countries have failed to grasp the nettle on Greece's structural economic problems, so Osborne has really deferred anything significant in terms of cuts or tax increases until 2017-18 when of course he might not be in charge.

Back before the election, Osborne and others are proposing a big immediate cut in benefits coupled with tax rises as a way of addressing the deficit but the truth is that not only is Government borrowing still running at £120 billion per annum but the income side of the balance sheet remains fragile with corporation and income tax receipts well down on where the Government thought they would be. The argument therefore for not pursuing the 3p fuel duty rise is couched more in terms of politics then economics.

All in all, for me, the much-vaunted Autumn Statement is as much a re-statement of Coalition objectives - tackling the disastrous public finance mismanagement of Labour and reducing the State without depriving those who genuinely need help of that help. Will it win the Coalition the next election? No, but if the Chancellor is right and a modicum of growth returns, it will make harder for Labour especially in the South where the signs of economic recovery are evident.

1 comment:

Innocent Abroad said...

The basic problem for the Chancellor (any Chancellor) is that, in meeting spending targets (and so preserving creditworthiness) it is necessary to suppress incomes yet growth depends on a sufficiency of demand. It is an interesting question as to how long growth (both here and in other economies) has simply been a function of spending money that actually wasn't there.

Frankly, it isn't a question of whether we go down the pan like Greece and company, but when.