Do we really want another stimulus for the housing bubble? Really?
Raising some taxes is good (bankers and Starbucks, though… well, how amazing brave to pick those targets).
But hasn’t Chancellor Osborn sworn he wasn’t going to raise any more taxes? I dectect the hand of Danny Alexander; it’s of a piece with his efforts to tackle tax evasion and reduce opportunities for tax avoidance.
The extra funding for the NHS appears to have come from… underspedning in the NHS. Master Gideon as Baron Munchausen will thus clear the deficit by pulling himself up by his own bootstraps.
And there’s a distinctly Janus-faced feel to some of the Conservative’s pronouncements, crowing over our outpacing of other European economies while simultaneously whining about how this makes us too attractive to those waves and waves of immigrants, coming over here fixing our plumbing and so on.
Equally it seems very off to boast that our GDP is going up but our contributions to the European Union are going down in the same statement where you complain that Amazon’s profits go up but the tax they’re paying go down. Sauce for the Christmas Goose, you would have thought.
Ed Balls has some good questions, but no answers.
Why is it that the tax receipts have fallen short of expectations? Ignore the flashy rabbit-from-hat Stamp Duty give-away; this is the central question of the Autumn Statement. The Chancellor boasted that he’d be reducing the deficit in spite of falling revenue, but that’s not the same as having an explanation. Could it be that Mr Balls is finally right about something, and below inflation wage increases have hammered the Treasury’s income too?
I remain convinced that having more people in work but with lower wages across the board is a fairer way of sharing the pain of economic disaster than the ‘Eighties approach of dumping the bottom three million on the dole; nevertheless, it does point to Balls having a point, and it plays well to crosslink Labour’s “cost of living crisis” narative to the Tories failure on their own terms to cut the deficit.
And while it might be fairer, it might not be good politics to give everyone a resentment against the government instead of just a minority who you can marginalise. Labour have clearly been trying a number of formulae – “squeezed middle”, “one nation Labour” whatever it was Mr Milipede forgot to say this year – to try and saddle this resentment to their political cause.
(It’s ironic that the non-Labour left have largely undermined this by shreiking and carrying on that marginalising a minority is exactly what the government is doing – helped, it must be said, by the Tories’s rhetoric and Iain Drunken Swerve being allowed to continue to exist.)
But low wage inflation isn’t the whole story. The dramatic fall in the oil price – generally welcomed by the Chancellor as a good thing, not least because falling energy prices makes Labour’s energy price freeze policy look rather silly – has a knock-on effect in terms of treasury income as it reduces the fuel duty, VAT, petroleum tax, supplementary charge to corporation tax and even the climate change levy.
(And while we’re at it: building a whole load of new roads is hardly in line with the “greenest government ever” line, and rather more school of Mr Balloon’s “drop the green carp”. And, as Jennie reminded us, probably counter-productive – if you want to improve travelling by road… spend the money on public transport. The number of road users is a function of price and convenience versus the alternative, so you would reduce congestion by making it preferable for people to tavel by train. The government appears to be doing the opposite. I suppose it might drive receipts from petrol taxes back up.)
Plus the UK’s economic growth has not yet translated into a boom in consumer spending, again forestalling a surge in VAT receipts at HMRC. In fact, largely the growth seems to be being directed into the housing bubble, which brings us back to point one.
Even so, granted Mr Balls has some grasp of some of the cause of the government’s income not coming up to scratch, it’s still a bit of a leap from there to “and Labour will fix this by…[insert policy when we think of it]”.
George Osborn has some answers that need questioning
Which leaves us clinging to nurse in fear of something worse. Though what could be worse than nurse being revealed as Master Osborn in a pinafore?
The Chancellor’s promise to clear the deficit by 2018 – although more realistic than Labour’s “sometime” in the next Parliament aspiration – is undermined not so much by his already having failed at this once (seriously, giving the finite nature of British Parliament’s you have to start out with a plan for one term at a time; given the slow reveal of the scale of the problem, the Coalition’s cautious approach balancing cuts with stimulus – again at Danny Alexander’s urging – has trod a fine line that has ended up closer to the Liberal Democrats timescale for cutting the deficit than the Tory’s and seems to be paying off, at least at the moment), but much more by the frankly fantastical idea that almost all the remaining cuts can come from the benefits, largely in-work benefits, paid to working age people.
Employment is already at record high levels. (This is a good thing!) But without some unforeseen huge increases in wages – again, see Mr Balls point – it is difficult to see any substantial ability to cut the support we need to give to keep these jobs viable.
On Sunday, on the Andy Marr show, the Chancellor was challenged on the way that spending cuts have fallen largely on not merely “welfare” but specifically on working age benefits. Pensioners have largely weathered the economic storm protected by the Coalition’s triple lock. The Tory Treasury team have clearly war-gamed this one, as Master Gideon came out with a very convincing-seeming answer: “Oh but I have hit the pensioners – I’ve taken half a trillion out of pensions by raising the retirement age”. Well, that’s quite an impressive hit against your core vote, isn’t it?
But take a moment to think about it: raising the retirement age does not affect existing pensioners; it’s actually another blow to those of us in work saving money by putting off the day when we will be able to claim back some of the fortune we are currently paying in.
And of course these cuts depend largely on the Tories being in power after the next election. Vince Cable – who has been quietly getting on with the business of being business secretary: increasing investment to manufacturing and boosting apprenticeships (notice the National Insurance cut to help more there) – has written to the Office for Budget Responsibility to ask them to point out how the Tories’ “no tax please were the British Tea Party” approach is wildly at odds with the Liberal Democrats’ fairer, balance tax and cut policies.
Overall, this was a typically theatrical financial moment from a Chancellor who has learned all his lessons from Gordon Brown. The splash of largess to catch the headlines; the smoke and mirrors over where the money comes from; some nasty medicine in the details; the hidden hand of the Liberal Chief Secretary trying to steer us a little away from full-throated Thatcherism and a little towards more social justice.
This is the course we are committed to now: from here on it’s full tilt towards the General Election and (subject to Nigel Farage and the Tory suicide-squads on the back benches derailing them onto Europe again) this is the ground that the Chancellor has laid out. It is, as President Clinton used to say, the economy, stupid.
And believe me, George Osborn is the economy… and stupid.