George Osborne gave his fiscal summary in a confident manner. Public sector net borrowing down to zero by 2018-19, over a million new private sector jobs created, higher domestic spending as a sign of recovery, new incentives for small businesses, more students at university, petrol prices down, rail fare price rises held down, capital gains tax would be charged to foreign owners of houses in the UK; the list went on.
A major theme was how he was going to help young people with an extra 30,000 student places and the cap on places abolished in 2015. He announced that apprenticeships would double with 20,000 more. Free school meals for reception, year one, and year two. Science would be given a boost in education, and as an example, Edinburgh university would get support for a Higgs physics institute. There would also be £1billion for housing and a reduction in NI contributions for under 21’s. Young people would be offered training after leaving school, if they did not have a job.
The Shadow Chancellor, Ed Balls, gave his response not in the confident finger tip command style of Osborne, but what can only be described as a red faced huffing and puffing, devoid of counter facts and without much hint of what Labour’s equivalent policy would be. It might be unkind to suggest that this is because they do not have any, but if they had, Ed Balls clearly thought it irrelevant in this context.
Osborne’s mix of policies was both traditional Conservative, but also with support for school meals, more university students, apprenticeships, a clampdown on tax avoidance, new marriage tax allowances for young couples, and the currently popular fad for taxing elements of the rich, Ed Balls attack seemed churlish. The assembled Conservative backbenchers had anticipated the dilemma that Balls found himself in, and had evidently looked forward to this moment. He did not disappoint, responding with weak jibes about turkeys and foxes, and always facing a verbal barrage from the happy Conservative benches.
The Chancellor responded:
“The man who said that borrowing wouldn’t come down, unemployment wouldn’t come down, growth wouldn’t happen and the man who refuses to apologise for what he did to the British economy. He is the very epitome of denial”.
This may seem to have all been a success for the Conservatives on the day, but there were some underlying issues. The first is that if Osborne’s policies appear too successful then the fear factor comes out of the economy and the public may feel that they can risk voting Labour again, or indeed to widen their political options by voting UKIP. The second is that on analysis, much of what was revealed in the Autumn Statement as attractive, is in fact contentious or perhaps unworkable in reality.
The proposal to cap the annual welfare budget looks attractive, however Osborne then reeled off a list of exceptions, and did not spell out how this would work if the budget were in fact to be exceeded. All we had was that the Chancellor would be called into account in those circumstances.
Another offering was a reduction in green levies and a rebate which will save domestic electricity customers £12 on their annual bill for the next two years. Reducing the Energy Companies Obligation (ECO), would result in £30-£35 off annual bills in 2014. It was not explained how even these small savings would be funded, presumably through general taxation. This would merely shift the tax burden around and not actually reduce green taxes. Further, the subsidies on onshore wind would be lowered, but only to see subsidies for offshore wind increased.
One of the more contentious proposals was the raising of the retirement age linked with life expectancies. Someone born in 1990 will work until they are 70, this linkage will reduce the state pension bill by £400billion over 50 years. However, this does not take into account the obvious issue of the kind of work performed by the individual. Manual labourers or those in stressful jobs will not, or cannot, be expected to continue in occupation as long as those in desk jobs. The Conservatives are politically weak on this issue, although fundamentally right. This must be an opportunity point for other parties to provide a more balanced outlook, offering the same reforms, but with consideration for differing work styles. Alarmingly, the retirement age could even go to the age of 84.
In summary, this year’s Autumn Statement was a slick success for Osborne, with some carefully placed, but modestly genuine good news, and a number of populist proposals. The response from the Shadow Chancellor was inept, and did not succeed in exploiting any of the albeit well disguised weaknesses in the Statement. What we can take from it, is that Ed Balls can always be relied on to provide casebook examples in what will not work in the heated chambers of Westminster.