George Osborne’s “Autumn Statement” is certainly not a Pre Budget Report, as he promised it would not be. Instead, it is much more like a mini-Budget or even, given the timescales involved in many announcements, a mini-Spending Review.
Like all politicans, when he was in Opposition anything that went wrong in Britain was the (Labour) Government’s fault – now he’s in office all our problems are some else’s fault. The the last Government, the Euro, international inflation, the international financial crisis – anyone but him.
On spending he claims to be not changing the spending totals set out in last years Spending Review. Instead he is systematically robbing Peter to pay Paul – mostly current spending to pay for £5bn of extra capital spending. To do this he will further restrict public sector pay and pensions; reduce regional pay levels for public workers; reduce Departmental Expernditure Limits (DEL) to take account of pay savings; and trim the international aid budget.
The net effect of all this will be to further ‘front-load’ cuts in public services and benefits – the cuts will happen much earlier than the extra capital spending, making for a small but significant extra short-term reduction in demand in an already faltering economy.
He has been helped by the OBR forcast of growth which whilst pessimistic does not forcast an immediate recession (as the OECD and many others do) and forcasts a return to almost trend growth by 2013-14 or the year after. The forcast of a sudden jump in growth from 0.7% in 12-13 to 2.1% in 13-14 seems optimistic, to put it mildly. Both the Treasury and the OBR have so far proved over optimistic in their growth forcasts and is unclear why they think they are right now.
The general message of this announcement is not even jam tomorrow, but the day after that or maybe the one after that. Economic recovery is not just about shifting money about, it’s as much, if not more, about changing attitudes. Britain’s dismal economy has as much to do with insecurity and negativity in homes and businesses generated by the constant reiteration of the size of our debt/deficit problem, which has been massively exaggerated by this government.