George Kerevan: Chancellor’s search for a pot of gold may be in vain

ON TUESDAY afternoon, Chancellor George Osborne will get to his feet in the Commons to deliver his Autumn Statement.

Traditionally, this is when the Chancellor gives us a peek at what’s in store for the economy and the taxpayer. Osborne’s statement will follow hard on the publication of the latest economic forecast by the Office for Budget Responsibility (OBR), which is expected to be gloomy.

There is already pressure on the Chancellor “to do something” to increase growth and raise national morale before the Christmas shopping season. As the wily Sir Humphrey Appleby put it, Osborne risks falling victim to the “politicians’ logic”: “We must do something. This is something. Therefore we must do it.”

Osborne wants to stick to his budget guns and eliminate Britain’s structural deficit by the end of this parliament in 2015. He views the fact that this week the yield on UK government bonds dipped below that of Germany as a vindication of his austerity programme. Funds are shifting into UK gilts even from AAA-rated euro bonds, on the view that Britain is a safe haven from the still-unresolved eurozone crisis.

However, our George is under domestic pressure from everyone – the CBI, the construction industry, Nick Clegg, panicky Tory back-benchers, and Uncle Tom Cobbley – to do something. The Chancellor’s conjuring trick on Tuesday will be to announce measures that appear to promote economic growth, without actually altering his long-term fiscal plans.

One early hint is that he will reveal the mechanics of a scheme announced at this year’s Tory Conference, to ease credit for small companies by extending the market for corporate bonds. The details remain vague, which suggests the Treasury has been struggling to find a way of making the plan work without adding to borrowing.

The simplest way is to extend the existing Enterprise Finance Guarantee, by which the Treasury acts as a guarantor on bank lending. The boldest move would be to set up a new investment vehicle to buy SME loans from banks, and securitise them as bonds underpinned by a Treasury guarantee. The initial capital would come from the Bank of England’s quantitative easing, but eventually institutional and retail investors would buy in. On Tuesday we will see just how creative Osborne is prepared to be.

There’s also bound to be some Christmas tinsel involving capital spending. The Chancellor is on record as saying he wants the private sector to support a “wartime” infrastructure building programme worth £50 billion. But how to do this without extra Treasury borrowing? For starters, Osborne might sanction the construction of a self-funded toll road to take the pressure off the A14 at Cambridge.

What chance of restive Tory back-benchers getting a Christmas present of lower taxes? I can’t see George relenting just yet on the 50p income tax band. But he could extend NIC holidays for new firms, fiddle with capital allowances, or announce future cuts to corporation tax beyond the 23 per cent rate scheduled for 2014. What about 15 per cent by 2020?

Giving thanks, from Pilgrim Fathers to Toys R Us

WE HAD a traditional Thanksgiving dinner on Thursday, complete with turkey and Californian wine as strong as sherry. Thanksgiving in the States inaugurates the Christmas spending period and is closely monitored as an economic indicator. The US National Retail Federation expects 152 million Americans to hit the shopping malls this weekend, up 10.1 per cent on last year. Received history has the Pilgrim Fathers suffering a bitter first winter in 1620. The enterprising survivors learn about corn and turkeys from the Indians, so the harvest of 1621 is bountiful. Hence Thanksgiving.

But according to William Bradford, the Pilgrims’ first governor, the colonists went hungry for years because able young men refused to work. At first “all profits and benefits that are got by trade, working, fishing, or any other means” were held in common. As a result, “young men that are most able and fit for labour” complained about being forced to “spend their time and strength to work for other men’s wives and children”.

So in 1623, Bradford abolished this early socialist experiment and gave each household a parcel of land. The result was American capitalism – and yesterday’s queues at Toys R Us.