Economy//

Osborne is unrepentant in failure

Written by: Sam Wheeler on 5 December, 2012
Filed under Economy

The Autumn Statement is upon us, though delayed this year well into Advent. The timing may well be more appropriate. In it we expect to see little of Keats’ “mellow fruitfulness”. Rather the British economic outlook fits C.S. Lewis’s words, “Always winter, but never Christmas.”

The Chancellor is not expected to unveil any new initiatives this week, rather the focus will be entirely upon staying the course, with no talk of ‘Plan B’. In this vein much of the preliminary discussion has been about rowing back previous ideas. The cut in housing benefit to under-25s has been blocked by the Liberal Democrats, there will be no ‘mansion tax’, and, with his exhortations that “the richest need to bear their fair share”, Mr Osborne puts pay to those who harbour a view for the abolition of the 45p rate.

Yet even if the Chancellor and the government remain outwardly unmoved in the face of the economic torpor, there is movement around the edges. Some of this will be forced by the Office of Budget Responsibility, which is expected to say that the structural deficit will not be eliminated until 2018, extending the Chancellor’s deadline by yet another year. With this second revision from the initial pledge to eliminate the structural deficit in this Parliament, it has been noticed that the five year plan always seems to remain five years distant. Mr Osborne will also have to admit that he will not meet one of his “golden rules” – that debt as a proportion of the total economy will be falling by 2015-16.

With this in mind there are rumoured plans aimed at supporting growth, including a £1 billion fund to help small businesses who want to export to growing economies elsewhere in the world. For larger companies, a new capital allowance incentive for infrastructure investment has hallmarks of the Swedish economic model that Cameron’s Conservatives have often held in high regard. Big ticket items such as more housing, and key infrastructure projects like upgrading the A303 and A14, the Northern Hub rail scheme and the Thames Tideway have been backed by groups such as the CBI and the Work Foundation, and the Chancellor gave hints over the weekend that some funds might become available for these ends both from central government, and by allowing local authorities to borrow more to invest in local projects.

All this might sound like small beer given the dire economic straights in which the country still finds itself. However the Autumn Statement is a legal obligation on the Chancellor, more used for fleshing out ideas than creating new policies. On the policy fundamentals: reducing corporation tax, keeping interest rates low and eschewing protectionism, the Treasury view continues to align with that of the wider business community.

It is always possible that the Chancellor may surprise us all and come out with some new innovative scheme to promote growth, and there were certainly many to be had in Lord Heseltine’s recent report which the government commissioned. This seems unlikely however, and the submissions of various interest groups, calling for contradictory policy moves, have been little more than wish-listing. This winter it’s about struggling on in the economic blizzard. For green shoots you’ll have to wait for Spring, and the Budget.