Autumn Statement 2014: Seven thinkers share their views
Seven thinkers share their reaction to the Chancellor's Autumn Statement, delivered on 3 December 2014.
Mark Ferguson, Editor of LabourList
The headline announcement of the Autumn Statement - the rabbit that Osborne pulled from his mottled hat at the end of his speech - was a reform of the Stamp Duty system. Osborne’s new system will see Stamp Duty rise gradually in accordance with house prices, rather than increasing at “cliff edge” points on the scale.
It’s hard to argue against, because it works in a similar way to the income tax system, which most people would accept makes sense. And it may instil a little bit of sense into the housing market in some parts of the country, where house prices jump from £240,000 to almost £300,000 on the basis of a single one off levy.
However, the Stamp Duty wheeze comes at a price - as Osborne’s games always do. This measure (a simplification, as the right will certainly call it) could cost the taxpayer around £400 million each and every year. That’s a substantial amount of money over the course of a Parliament, and could undo a great deal of government damage. It could - for example - pay to eliminate the Bedroom Tax.
More importantly still, the UK’s housing market remains fundamentally broken and in a sustained period of crisis. That’s not because of Stamp Duty, it’s because not enough homes are being built to satisfy demand - creating an extreme shortage of supply and spiralling prices.
If Osborne was serious about solving Britain’s real problems he’d have announced a plan to build more houses today. Instead, he’s far more focussed on winning the election, which is why his housing rabbit was Stamp Duty reform - largely benefitting those fortunate enough to already be on the housing ladder.
Richard Murphy, tax expert and accountant
In 35 years of listening to budget statements I have rarely heard one that had so little content.
We had a small tax give away on stamp duty. This will supposedly be paid for by additional tax on banks and tech companies. Otherwise on the tax front this budget did little on anything.
So what is significant is the language used and what was not said. It seems that it is claimed the deficit is falling purely on the basis of an accounting trick that restates the cost of debt - probably by not counting the interest paid on gilts now owned by the Bank of England as a result of quantitative easing .
And although this was heralded as good news what we did not hear was any claim by Osborne that he is going to legislate for when he will close the deficit, which had been predicted. He clearly lacks confidence in his own forecasts.
But perhaps the most telling thing we heard was that Osborne has a plan - and yet we were given no clue what it really is. In practice crossing fingers and simply hoping things go slightly better in the UK than elsewhere seems to be the sum of it. As a final economic statement from this government this was a summary of all that has gone before - this was a statement from a Chancellor who has ridden his luck and honed his excuses, and those excuses were all he had to offer us.
Professor Özlem Onaran, Economist at the University of Greenwich
The Autumn Statement paints a rosy picture of Britain as the strongest growing economy in the developed world, and the only causes of concern are in the global economy. What the Chancellor has not mentioned is that growth is once again built on the shaky ground of consumer debt, and the most important risks to the British economy are home-made rather than external. He celebrated that real earnings will grow for the next five years, but has not mentioned the forecast of the Office of Budget Responsibility that real earnings will not return to pre-crisis levels over the next five years after a continuous fall since the crisis. The Chancellor has also not admitted that pay freezes, low paid new jobs, low incomes of the involuntary self-employed are behind the rosy unemployment figures, and this is the reason why the tax revenues have not grown sufficiently, and public borrowing has increased despite draconian public spending cuts.
The budget deficit is the wrong policy target to begin with; Britain’s main deficit is the deficit in investment and equality. Neither cuts to public investment nor tax incentives to private businesses will help to cover the equality and investment deficit of Britain. A genuine sustainable development in Britain requires a public policy mix with two priorities: First, a massive programme of public investment in renewable energy, public transport, housing, child care, elderly care, health, and education, which will close both the investment and decent work deficit in Britain. Second, labour market policies to ensure that wages grow in line with the historical growth rate in productivity as well as inflation such that the loss of labour’s share in national income in the past decades is reversed, and the recovery is wage-led rather than debt-led. Our advice to any new government is to take care of full employment, decent pay for women and men, equality, and ecological sustainability, and the budget will take care of itself.
Dr Kailash Chand OBE, former GP and PCT chair and health campaigner
Today’s Autumn Statement was a litany of spin and mistruths by George Osborne. The reality is that the OBR are forecasting the economy to slow. They are forecasting the deficit to be higher than what they predicted in March. The ‘new’ money allocated to the NHS is partly funded by money already within the NHS Budget. £2 billion for NHS-Yet another sticking plaster on a gaping wound! Osborne is offering nothing to ease the pressure on the NHS this winter and only false promises for the future. None of this disguises the fact that the Coalition broke their promise to grow NHS spending in real terms every year.
The gaping hole in Osborne’s speech was UK Wages, which are suffering their most sustained fall since records began in 1859,the NHS family is the worst sufferer. The UK economy is in desperate need of investment in capital expenditure projects that will boost the economy and create real jobs. At a time when Osborne has cut the HMRC budget by £577m, it is no surprise that uncollected tax has jumped £3bn on his watch. George Osborne offered little reassurance that he will take tax evasion seriously.
Much of the detail of the Autumn Statement will be unpicked in the coming days. No doubt the UK Statistics Authority will have the final say on Osborne’s latest claims that he has halved the UK deficit. We are in desperate need of a budget that improves the lives of ordinary people and asks the wealthy to pay their fair share. George Osborne made clear that while he remains Chancellor of the Exchequer, those hopes will not be fulfilled by him.
Ann Pettifor, Director, Policy Research in Macroeconomics (PRIME)
The deficit – the government’s overdraft – has become a bizarre political fetish. It’s time that UK politicians abandoned this fetish. This Autumn Statement provides us with an opportunity to salute the economic achievements of Gordon Brown.
When private sector investment collapses, as it has since 2007-9 then public sector investment must necessarily step in and fill the gap.
This simple economic reality – well understood for decades – finally dawned on the Chancellor and the Treasury in 2012, when the slashing of public investment was shown to be exacerbating the continuing recession. Cuts in public investment had redoubled the slump in private investment.
And so a 180 degree U-turn was swiftly executed. This year the government will borrow £91bn as opposed to the £86bn forecast. Contrary to George Osborne’s deluded predictions, the deficit has risen, not fallen. The Chancellor and the OBR foolishly predicted it would fall to £40bn in 2015, but latest figures show that it will rise to nearly £100bn in that year. But while the change in policy is evident to all, the propaganda, and the ideological assault on the welfare state and on the most vulnerable in Britain, has continued.
As we predicted in “The economic consequences of Mr. Osborne” higher public spending and borrowing has not led to a collapse in investor confidence etc., but to the beginnings of a recovery. It is a weak, and unbalanced recovery, and is based on falling wages, disinflation and the increased leveraging of private debt. Nevertheless it is beginning to look like a recovery.
In Europe no such U-turn is possible. The binding corset that is the Gold Standard-like Maastricht Treaty means that it is not possible for France or Italy or any of the Eurozone states to pull off the same trick as George Osborne has performed since 2012.
As a result, these countries will continue to experience economic failure, high unemployment and rising public debt. We owe a great debt to Gordon Brown: as a result of Britain’s refusal to join the Euro under his watch, no such constraints are imposed on George Osborne.
Tim Page, Senior Policy Officer at the TUC
Today’s Autumn Statement contained some important announcements on infrastructure spending. Among them, the government has committed £15bn to improve the national road network. Over £2.3bn will be invested in more than 1,400 flood defence schemes over the next six years. As part of the Chancellor’s drive for a northern powerhouse, a comprehensive transport strategy for the north is forthcoming.
Infrastructure spending is important. There are, however, two reasons for concern at today’s news.
First, £15bn sounds colossal, but is it? Last month, a report by Standard and Poor’s argued that UK infrastructure investment has lagged behind other developed economies for several decades and that lifting UK infrastructure spending by one per cent would create more than 200,000 jobs in the first year alone. Private sector infrastructure investment has risen, but has failed to offset falls in public sector spend.
Second, the ratings agency added that every £1 spent on infrastructure results in an increase of GDP of £1.9 over three years, meaning it is likely to be self funding. But UK capital spending has been funded by permanent reductions in day-to-day spending, cuts that were clearly not necessary.
More infrastructure spending is both necessary and possible. But there is no need for cuts in other areas. This investment will pay for itself.
Ellie O'Hagan, Media and Communications Officer for Class
According to the OBR, at the end of this decade, public spending will be at its lowest rate for 80 years. To me, that is a remarkable fact a time of stagnating wages and falling living standards. And even without those conditions, it is a damning indictment of how much the government values the people. What is the point of reducing the deficit (which doesn’t even need to be done with austerity, or done so quickly) if you totally hollow out society in order to achieve it?
So much of the Autumn Statement was announced in advance that George’s Osborne’s speech yielded few surprises on the day. In the build-up there was much tut-tutting over the fact that the government’s offering didn’t include any “pre-election bribes.” Are a few pill sweeteners the best we hope for?
In their daily lives, people care about quality of life, relationships, communities, mental and physical health, and freedom from poverty. And yet, it’s almost viewed as weakness to talk about politics in anything other than the most hard line economic terms. Between that disparity and the unedifying jeers from politicians as the Chancellor made his statement, is there any wonder people are disillusioned with mainstream politics?