Autumn statement reveals borrowing up, growth down

George Osborne Autumn Statement 2012 Picture 2The Chancellor of the Exchequer presented the Autumn Statement to the House of Commons this afternoon, with the highlights being the scrapping of a planned 3p a litre increase in the cost of fuel duty, cuts to benefits, a £1bn tax grab from middle income Britain and huge borrowing figures.

The UK Government will have to borrow £212 billion more than planned due to the collapsing economy, the Chancellor revealed today. In March the Chancellor told us that growth would be 0.8% this year and 2% next year. Today he admitted it would be -0.1% this year, and just 1.2% next year. In his first budget the Chancellor told us that the Government would have balanced the books by the time of the next election. Today it became clear that that public sector debt will still be growing as a percentage of GDP until after the next election. Austerity will have to continue well into the next Parliament.

The Government will want to make clear that the biggest losers from this Autumn Statement will be the top 10% of earners. They will say that the real terms cuts to working age benefits are about fairness, about being fair to those who get up and go to work whilst their neighbour lays in bed until lunchtime, living a life on benefits. They will insist that the economy is taking longer to recover because it was in a worse state than anybody realised.

Meanwhile Labour will insist that the borrowing figures show that the Chancellor’s plan has failed. They will insist that the £212 billion overshoot on borrowing is because of the Government’s austerity programme choking off growth. They will claim that the cuts to benefits, hitting those who have least the second hardest of all groups, show a lack of fairness at a time when 8,000 people earning over £1,000,000 a year will each have a tax cut next April of £107,500.

In the coming days both sides of the argument will show their colours. They will argue for people who they want their party to represent. The Tories will argue that their policies benefit those who are trying to better their lives, the strivers. The Labour Party will argue that the Government’s policies hurt those who have the least, contrasting it with a suppposed let off of those who have the most. The Lib Dems will try to justify their existence by pointing to the adjustment to the lower tax allowance, which will lift 24,000 people out of tax entirely in the East of England, cutting the taxes of 2.3 million people. All three will have a point, but it is more what they don’t say than what they do say.

The Tories won’t tell you that their plans are off track, despite the massive evidence that they are. Labour will hope you don’t notice the contradiction in their position, where they are attacking the Government for having to borrow more than they planned to whilst also maintaining their line that the Government is cutting too far and too fast. The Lib Dems won’t admit that they have been sidelined in many Government departments, and that their main hope of a “mansion tax” were treated with ridicule by their Tory partners in Government.

Scrapping Labour’s planned rise in fuel duty, 3p a litre next January, will save the average motorist £40 a year. There are 3.6 million cars in the East of England, so this could see an extra £144 million in the pockets of motorists over the next year, stimulating demand. Fuel costs remain a huge issue for people, and Robert Halfon MP, who represents Harlow, was rewarded with a name check during the Autumn Statement for the hard graft he has put in on the issue.

Working age benefits are planned to rise by just 1% for the next couple of years, representing a real terms cut, and whilst the Government will try to make this to be about benefit claimants who are of working age but out of work, this will also hit those who are in poorly paid work hard. Polling continues to show net approval for the cutting of the benefits bill, although the net approval rating is falling quickly, and the language has changed from cutting welfare to cutting working age benefits to reflect this.

Changes to income tax will create winners and losers. More people will have to pay the 40p tax rate, because the Chancellor is raising the earnings threshold by just one per cent to £41,865 in 2014 and £42,285 in 2015 – below the current rate of inflation. The move will save the Treasury around £1 billion. However, he will also allow higher rate taxpayers to take advantage of the personal allowance – the amount on which there is no tax payable.

On pensions, the tax free allowance will be cut from £1.5 million to £1.25 million over a lifetime from 2014 onwards. The annual allowance will be cut from £50,000 to £40,000, saving £1 billion.

For this Government, formed by two political parties who “came together in the national interest” to get rid of the budget deficit by the end of the Parliament, the most important part of the Autumn Statement will be the painful admission that they are missing their borrowing targets by a long way. The defining purpose of this Government was to get debt falling as a percentage of national income by the end of this Parliament. Today the Government admitted defeat on that.

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3 Responses

  1. Balls would have carried on as Labour do and blamed the banks. At least Osborne has tried.

  2. Did you listen to it? Osborne started his speech by bklaming the USA and Obama! Then later blaming Labour and the Eurozone – the only thing you got right is he never blamed the banks- but most of us would

  3. Voter UKIP to stop so much of our wealth being sucked into the bureaucracy of the EU and restore a soveriegn government accountable to the electorate. Much of the criticism made in this article is valid but it fails to point out that in many cases the government is following EU policy directives.

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