We know most of what's going to be in the Autumn Statement. But here's what the chancellor won't tell you today.
We know most of what’s going to be in the Autumn Statement. But here’s what the chancellor won’t tell you today
George Osborne will take to the dispatch box shortly to trumpet the coalition’s so-called economic success story.
The chancellor will predictably highlight the fact that the economy is growing strongly and unemployment is at a record low level. But will he tell the whole story?
Of course he won’t. He is, after all, a politician. But that’s what we’re here for. With that in mind, we’ve had a look at five things the chancellor ought to make clear in his speech today but almost certainly won’t.
The national debt is rising
Despite making a great deal of noise during the 2010 election about ‘dealing with the country’s debts’, George Osborne has singularly failed when it comes to reducing the national debt. The national debt has risen from £811.3bn to £1.11trn since the coalition entered office in May 2010.
Back then it was predicted by the Office for Budget Responsibility (OBR) to fall by now to 69 per cent of GDP. Instead the national debt is rising, and according to the OBR will hit 74.5 per cent of GDP this year. Things don’t look good in the short-term, either. Borrowing for this September was £11.8bn, £1.6bn higher than in September 2013 and £1bn higher than City economists had forecast. Britain’s debt is now estimated to be increasing by about £3,000 per second and spending is still outstripping income by around £90 billion.
Welfare spending is up and tax receipts are weak
Tax receipts are weak and welfare spending is up because lots of the jobs that have been created by the recovery are poorly paying and insecure. Taking low-earners out of income tax completely hasn’t helped matters. While the Office for Budget Responsibility (OBR) is likely to add between 0.25 or 0.50 per cent to its forecast for GDP growth in 2014, combined revenues from income tax, national insurance contributions and capital gains tax are expected to fall £8 billion short of the OBR’s March forecast in 2014/15, according to the EY ITEM Club.
Disappointing tax receipts are one of the reasons the chancellor can’t afford many big giveaways in today’s Autumn Statement – instead expect lots of ‘new spending’ to actually be already existing money being moved around.
Meanwhile there has been a 60 per cent increase in the number of working people claiming housing benefit since the coalition came to power in 2010, according to figures released over the summer – despite government rhetoric about being ‘tough’ on benefits. Research for the House of Commons Library, commissioned by Labour, shows that the proportion of working people in receipt of housing benefit has jumped since 2010 from 2.3 per cent to 3.6 per cent.
There has also been a 5 per cent increase in the total number of housing benefit claimants (in and out of work) since 2010.
In terms of deficit reduction, this parliament has been largely wasted
One of the reasons we’re hearing more and more about austerity stretching further into the future is because for the first few years of this parliament the economy was flatlining. As a result, tax receipts were poor and the chancellor’s deficit reduction plan fell by the wayside.
As the graph demonstrates, the chancellor is way off course with respect to ‘balancing the books’; and let’s not forget that Osborne originally planned to eliminate the deficit by the end of this parliament. As a result of the economy flatlining in the early years of this parliament austerity is likely to stretch well into the next one.
When George Osborne came to office he asked voters to judge him on deficit reduction. Were voters to hold him to this he would now be looking for another job.
And so the deficit may not be as important as it was made out to be back in 2010
Fours years on from the 2010 election, where deficit reduction was perhaps the biggest single debating point, Britain still has a large budget deficit and, despite the warnings of chancellor George Osborne, the sky still hasn’t fallen in. Ever get the feeling you’ve been cheated?
For all the doom-mongering back in 2010 about Britain facing imminent catastrophe if the deficit was not eliminated, the deficit is still there and the country has not sunk into the mire.
In fact, some might even say that the obsession with deficit reduction during the early years of this parliament (to the detriment of investment) has actually harmed Britain’s prospects of a sustainable recovery. In other words, if the economy had continued to grow in the manner it had when the coalition took office (instead of flatlining for 24 months, arguably because of the savage cuts) then tax receipts, and therefore the deficit, would be in a much healthier position today than it currently is (assuming of course that the deficit matters as much as it is supposed).
The ‘export-led’ recovery has failed to materialise
Once upon a time George Osborne promised to “raise from the ruins of an economy built on debt a new, balanced economy where we save, invest and export“. Not satisfied with a grandiose pledge like this, Osborne also promised to double British exports to £1 trillion by the end of the decade.
So how’s that going?
Well, according to the OBR exports have “fallen well short of our June 2010 forecast” and remain “very weak”. The graph makes the same point another way – just look at the distance between the 2010 forecasts and the 2014 reality:
Perhaps you don’t want to take the word of a lefty on it? Fine. So instead listen to the British Chamber of Commerce, who predict that George Osborne will miss his target of doubling UK exports to £1tn by 2020 because the government is “not putting its money where its mouth is”.
James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter
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