Autumn Statement Analysis: All on Black
3 December 2014, Blog
The Chancellor has put all his chips on Black. “Out of the red and into the black” he said, well by 2019 at least.
If you cast your mind back to 2010 the Chancellor of the Exchequer, George Osborne, cast a very different shadow. More hair and more Chancellor all round, he had a nervous cough, a glass of water, and a budget full of bad news.
Not today. A 5.2 diet and a confidence boost he addressed the Labour benches opposite as a man vindicated. This will have come as a surprise to many Westminster watchers who might have expected he was in for a rough ride, given many of the deficit indications that were being forecast in the run up to today’s Autumn Statement were ‘less than good.’
Instead he was able to confirm that the Office of Budget Responsibility (OBR) figures were largely in line with the Government’s own, i.e. the deficit was continuing to fall with a budget surplus by 2019. In fact he was able to say that the OBR predicted a larger surplus than the Government had originally expected. To put it in context, borrowing was forecast to be £91.3bn this year, down from the £97.5bn some had predicted; then it will be £75bn, then £40.9bn, then £14.5bn, culminating in 2019-20 with a £23bn surplus (rather than the 4bn George had predicted).
Mr Osborne rightly pointed out that the “public will want to know” why the figures were better than “many had predicted.” A reasonable question since it was becoming increasingly clear that the Government was not pulling in the tax receipts its economic plans had been based on, not to mention the Coalition has lifted many people out of paying tax altogether.
The answer, according to Mr Osborne, was that the forecast figures had not properly accounted for reductions in welfare spending. Half a million more people were in work this year, he crowed. Those claiming unemployment benefit fell by 24% he added, and 85% of new jobs were full time.
In summary, George Osborne was able to say that though the timetable may have slipped somewhat since 2010, the trajectory was reduced spending, reduced borrowing, and reduced deficit – with more jobs than ever as a bonus.
However where he came unstuck was growth. Government predictions were slightly more ambitious than the OBR’s it would seem:
- Growth in 2016 down to 2.2%, from 2.6%.
- Growth in 2017 down to 2.4%, from 2.6%
- And growth in 2018 down to 2.3%, from 2.5%
This figures will, at least to some extent, be as a result of a stagnating Eurozone and lacklustre exports. Ed Balls was quick to point out in his rebuttal that the UK was 22 out of 28 EU countries in terms of exports.
In what was nearly a budget’s worth of measures the Chancellor announced a few election focussed ‘goodies.’ Many, if not most, had been pre-run in the past few days – namely 2bn more to NHS spending, no air duty for children, a further fuel duty freeze, etc.
What was new was another piece of ‘banker bashing’ meaning banks will no longer able to offset profits against losses made during the financial crisis – a 4bn bonus for the Treasury over the next 5 years; 1.2bn for GPs services; tax breaks for orchestras and children’s TV; possible devolved corporation tax rates for Northern Ireland and devolved business rates for Wales; and of course a further raising of the personal tax allowance to £10,600.
Today’s sugar pill came in the form of Stamp duty. Given the current housing market in the southeast, the new rates will come as welcome news to first time buyers (0% on properties up to £125,000); and the new top rate will go some way in ‘shooting Labour’s fox’ in terms of the “Mansion Tax” with 12% to be paid on properties worth £1,500,000 or more.
Simply put, the Chancellor managed to turn what could have been a very difficult day in terms of deficit reduction into a mini-election budget. Will his message of steady as she goes cut through to the voters though?