Jonathan Algar – There is still much to do if we want to win in 2015
Regrettably the Autumn Statement provided precious little relief for low-wage Britain.
I can only hope, both for the sake of economic justice and the Party’s 2015 electoral prospects, this was the statement to robustly showcase the laudable fruits of Plan A, with deficit reduction and growth progressing to a core focus of bolstering international competitiveness and long-term export-led growth.
Hopefully this is all part of the electoral strategy – better positioning the Chancellor to launch an all-out assault on falling living standards in Budget 2014 and leveraging the resultant bounce in the polls for when campaign seasons starts.
That said, don’t get me wrong – the statement wasn’t all bad news. Removing employers’ national insurance contributions for under-21s is sound, as is cancelling a planned rise in fuel duty.
Yet the flagship policies that will win us a majority in 2015 are yet to be identified (or at least announced) and I remain convinced, based on polling evidence, that increasing the minimum wage will be a vital piece of the mix.
The subsidy for shale gas was the most welcome announcement. As recently highlighted by the International Energy Agency – European gas prices are three times those in the US. Industrial production cost in UK are too high, and with TTIP on the horizon, we have to address this structural price differential head-on to be competitive in the new post-TTIP global environment.
This subsidy is vital as the energy sector will would not meet the infrastructure costs on its own.
Then there’s the announcement of £25bn in SME export financing. Yes, Cameron brought home some big wins for China-UK bilateral trade, but almost exclusively for big business. Only one in five of the UK’s SMEs currently export. There is huge potential to bolster this number. Coupled with the shift in funding for lending away from ineffective mortgages to SME lending, it looks promising.
On a separate note, kudos to the new tax relief for investment in social enterprises and new social impact bonds. It’s this kind of smart, public-private policy thinking that is this Government at its best.
Jonathan Algar is an executive member of Bright Blue
Antonia Cox – The OBR’s growth forecasts have changed the game
This Autumn Statement felt a bit like that moment where you change one single number at the top of the spreadsheet and everything all the way down goes from red to black. That is the effect of the spectacular raising of growth forecasts by the Office of Budget Responsibility.
We may not have had the big noisy tax cuts today, but there is clearly room for something of the kind before the election, thanks to those transformed OBR predictions. But Conservatives must not get carried away. Ed Balls talked about Tory complacency, and, unusually, he is not wrong. Complacency repels all those who have not yet felt the recovery, and it is easy to be complacent if all you see is the crane-filled sky above London.
That said, there is plenty of good news here for entrepreneurs, with the extension of small business rate relief for another year and the £1,000 discount for small shops, pubs and cafes on those embattled high streets in shire towns.
This was a surprisingly good Autumn Statement for young people too, especially in rural areas where work is scarce. Scrapping employer’s National Insurance for under-21s, worth about £1,000 on a £16,000 a year job, should really help school and college leavers desperate to find work. Combined with the cancellation of next year’s fuel duty rise, making petrol 20p less per litre than it would have been under Labour, these measures should benefit those in suburban and rural areas who have to drive to find and keep a job.
Admittedly those leaving school now will have to work until they are at least 70 years old. But my resident young adult didn’t think his friends would be much bothered – after all, age is a country beyond their horizons.
Antonia Cox is a Telegraph journalist turned education campaigner
Nick Faith – A clear message and signs of green shoots
The OBR has revised its growth estimates upwards. Public sector net borrowing will be in surplus in 2018-19. 1.4 million private sector jobs have been created. However, Osborne made it clear that the job was far from done.
He made a significant economic and political move by announcing that the coalition would set out a new fiscal rules framework to ensure that debt continues to fall as a percentage of GDP.
As a Policy Exchange paper outlined recently, the UK’s debt-GDP is currently projected to exceed 100% of GDP by 2015, the highest level since modern records began. Without a new set of fiscal rules binding governments to strict fiscal commitments, deeper recessions, tax rises and greater spending cuts may become a long lasting fixture for the UK.
It was also pleasing to see the Chancellor address the issue of housing. Councils will now be required to sell off expensive council housing when it becomes vacant. Policy Exchange found that such sales could raise £4.5 billion annually which could be used to build 80,000-170,000 new social homes a year and create 160,000-340,000 jobs.
It would be good to see the government focus more effort on getting Britain building, including the creation of at least one garden city, but this was a good start.
There were other policies addressing the cost of living crisis including a freeze on business rates and fuel duty as well as a small but popular pledge to give £100million in Libor bank fines to military charities.
But this was a macro-economic speech. The message was clear. Britain will be in the black before the end of the next Parliament if you stick with us. Don’t hand the keys back to the guys who crashed the car.
Nick Faith is Director of Communications at Policy Exchange
Peter Franklin – A victory over right wing critics, but a failure to take on the utility companies
While the Statement itself will be remembered as a humiliation for Ed Balls, George Osborne’s rightwing critics are also looking rather exposed. The claim that the Government is making no real cuts to public expenditure now looks like a silly statistical game. According to Robert Peston’s analysis of the OBR forecasts, the elimination of the deficit will be achieved by reducing the government’s share of national GDP to its lowest level since 1948. This goes further than anything Margaret Thatcher achieved.
We also saw some significant moves to embed the principle of fiscal conservatism. There will be an updated Charter for Budget Responsibility and a cap on welfare spending. What these count for in policy terms remains to be seen, but politically they lay down a trap for Labour, who will have to decide whether or not to vote against the measures when they’re debated in Parliament.
On a less positive note, there was a poor response to Labour on energy prices. Anyone who thinks that we can drive down costs by prioritising nuclear power while weakening support for energy efficiency is utterly deluded. In failing to take on the utility companies, the Government must be hoping that market movements in oil and gas prices (combined with a recovery in wage growth) will mask the impact of our deeply dysfunctional energy and infrastructure policies.
The rich and powerful didn’t entirely escape the Chancellor’s attention. There was more action on tax avoidance – and even a ‘mansion tax’ of a kind (in the form of an extension of Capital Gain Tax to non-residential owners of residential property). But while most voters will welcome a tax on the oligarchs who seem to own most of central London, we still need action against the oligopolies that control our energy sector.
Peter Franklin edits ConservativeHome’s Deep End
David Green – Osborne unwisely wants to force up the cost of energy
By common consent we need economic growth, something that you only get by improving productivity and producing goods and services at competitive prices. A wise government would give absolute priority to ensuring that it was not adding unnecessarily to the costs of industries that are vital to our recovery.
Instead, the Autumn Statement confirmed that the Government is intent on forcing up the cost of energy, with about 800,000 jobs at risk in the energy-intensive sectors. Climate-change related costs are already greater than for our main rivals, 50% more than Germany’s for example.
Yet, the Chancellor confirmed that energy prices would be fixed to ‘prioritise offshore over onshore wind’, which means he has chosen to subsidise the most costly method of electricity generation. It’s true that he also plans to encourage the exploitation of gas reserves, which will eventually allow us to build more gas-fired power stations, but backing offshore wind farms is a self-inflicted wound. Moreover, the carbon price floor continues to add further to the costs of key industries, including chemicals, ceramics and steel.
A big increase in support for export finance to £50 bn was announced, a significant change that could help recovery, but billions are still being diverted into the ‘Help to Buy’ scheme, that is very likely to increase house prices and add to the cost of living for already hard-pressed families.
Raising the state pension age to 69 is long overdue. Mr Osborne thinks we should be able to spend about one-third of our adult life in retirement, but contributory pensions were first introduced in the 1920s and to keep pace with life expectancy at that time the pension age today should be 75. With the exception of people in physically demanding or dirty jobs, it would be more sustainable to move progressively to 75.
David Green is the Director of Civitas
Peter Hoskin – Osborne took up our ideas and stood firm on the deficit
Let’s get the obvious caveat out of the way first: yes, the improved economic and fiscal forecasts are as nothing beside what the OBR predicted back in June 2010, when George Osborne delivered his first budget. Back then, it was expected that the structural deficit would be eliminated by next year, rather than in 2017-18. Back then, growth was expected to be 2.9 per cent this year… and so on.
But, really, that’s less a judgement on today’s Autumn Statement than on those old, crazily optimistic forecasts. If I’m to judge what Osborne said today on the brief list of prescriptions that I wrote a few days ago – and bearing in mind that I haven’t had opportunity to properly check the small print yet – then I’d have to say it was pretty good. The two main policies I called for were both announced: a freeze in fuel duty and a cut in the national insurance contributions paid by employers taking on young workers. And perhaps the most significant policy – the linking of the pension age to life expectancy – is eminently sensible.
Besides, and most importantly when it comes to the grand sweep of British politics, Osborne stuck by deficit reduction. There were some silly giveaways here – including free school meals for more kids, including rich kids – but they were kept to a minimum. Both in his rhetoric and in policies such as the welfare cap, the Chancellor emphasised the need for continuing fiscal diligence. Let’s hope he now keeps it up until the election, even if the economy does give him extra legroom, for all the reasons I gave on Tuesday. There’s no point drawing a divide with Labour, only to cross it on to Labour’s side.
Peter Hoskin is a ConservativeHome Contributing Editor
Andrea Leadsom MP – Tackling the deficit, plus support for marriage and young jobseekers, is a winner
The Chancellor has played a blinder! He deserves great credit for sticking the course of deficit reduction through the massive criticism from the opposition over the last three years. His approach has surely now been vindicated. The economy is starting to recover, and the economic mess left by Labour is gradually being sorted. As I said in my post on ConHome on Monday, continuing with plan A is the best way to help families who are struggling to make ends meet.
So I’m delighted that the Chancellor is carrying on with the deficit reduction plan, with the aim of clearing the deficit, and being in surplus by 2018-19. It is absolutely right that he plans to pay down debt, rather than start spending as Labour would do. As the economy recovers, I think we will need to focus even more on more incentives for business growth through further tax cuts, as well as reducing the national debt.
Linking pension age to life expectancy is vital. Current pension obligations are a time bomb for the young, who will have to pay taxes to fund the pensions of the current workforce when they retire. So the Chancellor’s proposal not only makes long term financial sense, but will also reduce the future burden on all our children.
Support for marriage through the tax system is welcome and long overdue. We know that couples with children who are married are 5 times more likely to stay together than those who are cohabiting. The Conservative Party has always been the party of the family, and we need to do everything we can to support them. It’s a good step in a positive direction and will particularly help those families where one parent stays at home or only works a few hours, in order to raise children.
Scrapping the tax on jobs for young people is an excellent move. The twin approach of eliminating employer national insurance contributions for those under 21 combined with benefit reform to encourage work offers great hope. Getting all young people proficient in English and Maths is part of our determined effort to make sure all young people have a real chance at a fulfilling job.
I am looking forward to seeing the details of tax relief incentives for investment in social enterprises and social impact bonds. Having been involved with the ‘parent infant partnership’ social enterprises for many years, I know how hard it is for them to attract investment, even though they make a huge difference to our society. Encouraging philanthropy in this way is a superb idea that will promote more volunteering as well as expansion of many worthwhile charities.
This was an Autumn statement designed to secure the British economy for the long term, but also determined to press ahead with targeted reforms that will make a positive difference to our society. I think it has every chance of working.
Andrea Leadsom is MP for South Northamptonshire
Andrew Lilico – A good show on many fronts
Well done, once again, to George Osborne. He ticked many of the right boxes in this speech. Most importantly for today, he emphasized that accelerating growth leaves no scope for net spending or tax cut giveaways, and every new measure must be paid for (though I found his “banks to tanks” policy of using LIBOR fines for the military rather peculiar).
The structural deficit remains unchanged and huge, but it is good that the overall deficit will fall, slightly, this year for the first time since 2011.
The OBR has, for the first time, had to upgrade its forecasts, with 2014 growth now expected to be a healthy 2.4%. If anything, that is a rather conservative figure and there is every chance it will be raised further in the Budget.
Osborne’s SME tinkering is relatively harmless as such “seen to be doing something” measures go.
The announcement of delay to Universal Credit is a welcome opportunity to rethink the whole misbegotten scheme.
A further rise in the pension age is also welcome, albeit far too slow. Today’s fifty year olds should not expect to retire before 75.
Overall, a good show on many fronts. Let’s just hope the inflation/cost of living issues coming don’t get too disastrous before 2015!
Andrew Lilico is an economist
Simon Richards – We’re on the right road; now go further and faster
He has every right to remind people that Labour’s incoherent apology for an economic critique has proved as incorrect as it is irresponsible.
If the Conservative Party is to win the next election, it will do so by persuading voters that it deserves the nation’s trust. Labour has forfeited that trust, because of Gordon Brown’s economic mismanagement, but the Tories have yet to gain it. If he continues to stick to his guns on debt reduction, the Chancellor may just win over a sceptical public. It is a goal worth pursuing.
The best thing that governments can do is to get out of the way and leave people and businesses to carry on with their lives, so the best thing about this Autumn Statement was what it didn’t contain. Although debt reduction must be the number one priority- and the reduced borrowing requirement of £111 billion remains alarmingly high – the surest road to sustainable long-term growth is through a massive reduction in the scale of the swollen public sector. This will enable significant cuts in the excessive tax burden that is crippling our economy and making ordinary people’s lives so much more difficult than they need to be.
So yes, well done George for capping social security spending, cutting ‘green’ taxes and capping increases in business rates, but, if Britain is to be able to compete with thriving economies beyond the economic disaster area that is the EU, it needs to bring taxes down to the levels that have helped the Asian tiger economies achieve such spectacular growth. Ample room remains both for spending cuts and tax cuts.
Bring ‘em on!
Simon Richards is Director of the Freedom Association