Despite economic growth returning, the chancellor's record is less rosy than he makes out.
Despite economic growth returning, the chancellor’s record is less rosy than he makes out
The chancellor George Osborne will this morning deliver his speech to Conservative Party conference in Birmingham.
He will talk about pensions, welfare and much else, hoping no doubt to take the heat off the Tory party over Mark Reckless’s defection to UKIP and to put the emphasis back onto economic policy – where the Tories enjoy a lead over Labour in the opinion polls.
Expect a degree of triumphalism from the chancellor, who will likely drum on about how the coalition’s economic plan is delivering for Britain.
Yet despite economic growth returning of late, the chancellor’s record is far less rosy than he will undoubtedly make out today. Indeed, on closer inspection it’s actually quite shabby. Let’s take a look.
He is way off track on his target to double exports to £1 trillion
Last month the British Chambers of Commerce (BCC) claimed that exports would have to grow by 10 per cent a year to meet the target set by George Osborne in 2012. As John Longworth, director general of the BCC, put it: “As it stands at the moment we will not hit that target. We’ve got a government that is not putting its money where its mouth is and we need to do something radically different in support for exports.”
His deficit reduction plan is failing
In 2013, the overall current-account deficit hit £71.1 billion – equivalent to 4.4 per cent of GDP and the highest share since the late 1980s. Even now the current account deficit is at the highest levels since 1955.
And this is what Fraser Nelson, the editor of the Conservative-supporting Spectator, thinks of Osborne’s progress on debt reduction:
The recovery came after three years of stagnation
When George Osborne announced his emergency budget in October 2010, the economy had been growing for five successive quarters. On Osborne’s watch, the economy then stagnated for three years from his ’emergency budget’ in 2010 until summer 2013. Celebrating the economic recovery as a victory for the chancellor would be a like praising the punctuality of the chauffeur who arrives at his destination three hours after the party has finished.
And then there’s the government’s record on wage growth (or the lack of it). Despite more people being in work, inflation continues to outstrip weekly earnings. Indeed, the headline rate for average weekly earnings was 0.6 per cent in July – the last set of labour market stats we have. Average weekly earnings growth has only twice been lower – very briefly in 1967 and in 2009, when the financial sector bonuses taken at the beginning of the crash were working out of the figures.
Remember, too, the ‘Omnishambles Budget’ which included U-turns on the pasty tax and the charity tax?
His record is mixed on tax collection
As Richard Murphy of Tax Research UK told me:
“Osborne has superficially done some useful stuff on tax avoidance, including the General Anti-Abuse Rule and measures to tackle packaged tax avoidance schemes, but a lot of this is smoke screening. If there has been a fall in tax avoidance it is because Osborne has cut corporation tax and capital gains tax rates heavily, and both are favourites for tax avoidance activity.
“He’s also massively increased opportunities for corporate tax abuse by creating a territorial tax system in the UK which makes us look little short of a tax haven, as recent M&A activity in the City has confirmed, whilst on tax evasion he’s been a disaster. By continuing to cut the number of staff at HMRC he’s been sending out a very clear signal to the tax cheats in this country that he has no real interest in ever tracking them down, precisely because without trained staff at HMRC he has no chance of doing so.
“One should ignore the PR of the G8 and the General Anti-Abuse Rule in that case and look at the underlying realities on tax – and this has been a government dedicated to collecting as little tax as possible so that it has all the excuses it wants to pursue its agenda of attacking the size of the state.”
He has failed to deliver the National Infrastructure Plan
Three years ago George Osborne published his first National Infrastructure Plan. In 2013, however, in was revealed that just seven of the 550 projects had been listed as ‘completed’ or ‘operational’. Consequently, in December last year the government produced its updated ‘infrastructure pipeline’. This included 646 projects, with a price tag of £375bn of investment. And yet by April of this year the government was admitting that that just a third of these would have started by the general election. None of the energy infrastructure projects are due to start in 2014-15.
Lost the UK’s triple-A credit rating
Fuelled climate change
Osborne has exacerbated climate change by handing out £2.7bn of incentives to energy companies to fuel North Sea oil and gas production, according to Friends of the Earth.
Sacrificed tighter emissions standards for cars to save bankers bonuses
Soon after coming to office, George Osborne sought to water down the UK’s carbon targets. Speaking at the 2011 Conservative Party conference, the chancellor accused environmental regulations of “piling costs on the energy bills of households and companies”. He subsequently discouraged the take-up of ultra-low emission vehicles (ULEVs) by changing company car tax rates. Benefit-in-kind tax rates for ULEVS will now increase at a much faster rate over the next five years than for higher emissions cars.
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