Yesterday’s Autumn Statement was less than the sum of its parts. Looked at individually, most of the measures announced by George Osborne in his mini-Budget could be justified on their merits.
Some demonstrated imagination and good sense on the part of the Treasury. Some will doubtless prove useful in encouraging growth. But taken together they did not amount to a convincing and decisive response to our national economic malady, which the Chancellor himself admits is proving harder than expected to cure.
Many of the individual measures were simply good common sense. It was impossible for the Chancellor to go ahead with the planned increase in fuel duty, for example – that would have been a kick in the teeth for industry at a time when it is struggling to gain economic traction. The proposed cut in corporation tax is a useful signal to industrialists that they can afford to invest for the long term and still have an expectation of profit in the short term.
The switch in spending from current to capital budgets is an acknowledgement that despite the Chancellor’s faith in the private sector’s ability to fill the holes in GDP caused by cuts in public spending, it is still the big-ticket construction items – schools, roads and infrastructure – that are the most dependable way of getting the economy moving. Again, good common sense, albeit with an implicit admission that the Treasury’s grand masterplan for recovery is not exactly working out as hoped.
As for household finances, this was an Autumn Statement where how one fared depended very much on one’s circumstances. Having rejected Nick Clegg’s mansion tax, and still stung by the overwhelmingly negative reaction to his cut in the top rate of income tax earlier this year, Mr Osborne insisted the super-rich would be making a contribution to the nation’s finances commensurate with their ability to pay. But how exactly he intends this to happen remains frustratingly opaque.
The undoubted winners yesterday would appear to be those households where adults are working, but not making much more than the minimum wage. It is Mr Osborne’s boast that the tax bill for such families will soon have halved. That is a commendable achievement that does much to increase the attractiveness of work to those people currently on benefits.
Which brings us to one of the main losers in this rejig of the country’s finances. There is, of course, a need for the welfare system to demonstrate that those in receipt of benefits are fully deserving of them. This is a difficult process, requiring care and sensitivity, but it is nonetheless a necessary one. However, Mr Osborne’s decision to limit the annual increase in many benefits to just 1 per cent – less than the rate of inflation – is by its very nature a blow to both deserving and undeserving recipients.
There can be no escape from the reality – made clear by charities – that this will make life more difficult for some of the more vulnerable people in our society. And that is before further cuts, south of the Border at least, in local authority services they reply upon: the likely consequence of the planned cuts in departmental budgets of 1 per cent next year and 2 per cent the year after.
Here in Scotland, the Barnett consequentials of these cuts will put new pressure on the Scottish Government to justify some of the SNP administration’s political priorities. SNP ministers have been making a trenchant defence of universal benefits, but if they are to sustain this approach they are going to have to be brutal in their cuts elsewhere. The ideological tussle on this issue is, alongside the debate on Scotland’s constitutional future, one that will be a constant in Scottish political debate over the next two years.
That debate will be conducted against a background of a UK that is struggling to drag itself out of economic torpor. Mr Osborne’s acknowledgement that the hoped-for economic recovery will take longer than envisaged is an indictment of his economic strategy. He said austerity would work. It hasn’t, at least not yet. He remains certain of the efficacy of his approach. Those who agree are becoming fewer in number by the day.
Does the country have confidence that Mr Osborne can pull this off? Not even the most optimistic Tory can say so with any certainty this morning. The Chancellor’s delivery yesterday was assured and polished, and he betrays no sign of self-doubt. But does he reassure us that the economic future of the country is safe in his hands? Or does he have the look of a man who is deluding himself, stubbornly sticking to a plan that shows little sign of succeeding?
What was striking about yesterday’s statement was the lack of an overarching message from which the man and woman in the street could take some comfort and reassurance. Will Mr and Mrs Average now feel emboldened to buy that new car or build that new extension? Will they feel that little more confident in their financial circumstances, allowing them to push the boat out a bit this Christmas? The answer must be no, and judged on that measure, the Chancellor yesterday was found wanting.