George Kerevan: That autumnal feeling is running rather late
IT WON’T be long till Chancellor George Osborne makes his mis-named Autumn Statement on 5 December, just as we slowcoaches get round to our Christmas shopping. What might he have in store for us?
Gordon Brown liked pulling fiscal rabbits out of hats, so his Autumn Statement gradually turned into a mini Budget.
Osborne tried to refocus the statement on the economic forecasts from his new Office for Budget Responsibility (OBR). Now even he is tempted to make policy.
This year’s statement is bound to centre on growth prospects for 2013. Last March, the OBR predicted the UK economy would grow by 0.8 per cent this year, and 2 per cent in 2013.
As we were already in double-dip recession, that seemed all too rosy. The UK may now have come out of recession, but the eurozone has just plunged back in. So the betting has to be on a downward revision of the OBR projection.
This week the Bank of England halved its 2013 growth forecast to 1 per cent, but governor Sir Mervyn King is notorious for being over- optimistic.
A more realistic IMF has already cut its UK growth forecast to minus 0.4 per cent for 2012, and a meagre 0.2 per cent for next year. Osborne must be praying for semi-decent OBR growth numbers because any threat of a triple-dip recession this winter could trigger a down-grading of Britain’s international credit rating. Moody’s has already threatened as much. That would start to push up interest rates.
Currently Osborne needs at least £10 billion saved from the welfare bill to balance the Treasury books. Any weakening of the economy in 2013 will make these cuts worse, upsetting Nick Clegg. So expect the Chancellor to announce a special “mansion tax” on homes belonging to super rich non-doms, but which are owned by companies to avoid stamp duty rate and capital gains tax.
If the OBR forecast is really dire, there will be pressure on Osborne to boost growth. The CBI wants more infrastructure spending, paid for using the windfall proceeds of next year’s 4G licence auction (which could raise up to £4bn). Osborne is also being urged to expand the current national insurance holiday to cover the first two new staff taken on by small businesses.
PS: How can it be an “Autumn” Statement in December? Because winter does not officially begin till the solstice on 21 December.
Late fix on the cards in EU’s budget talks
Next Thursday and Friday sees the showdown between David Cameron and other European leaders over the EU budget.
Most net contributors, including Germany, want cuts in EU spending plans for 2014-20. But our eurosceptic Prime Minister has threatened to veto the whole budget if he does not get a real terms reduction.
Angela Merkel and Francois Hollande want to avoid a veto, worrying it will cause chaos in EU finances and so make matters worse for the euro. Merkel is seeking a compromise that might let Cameron off the hook.
Cameron has mooted cuts of between £80bn and £160bn to the £800bn draft budget. #
EU president Herman van Rompuy has offered up £64bn.
Merkel is trying get both sides to settle for £80bn.
The fly in the ointment is France, which is angry at deep cuts to farm subsidies in van Rompuy’s proposal. Expect the usual pre-dawn fix.
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Weather for Edinburgh
Monday 20 May 2013
Temperature: 9 C to 20 C
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Temperature: 8 C to 18 C
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