Autumn Statement 2014: George Osborne is a man on a mission — I’m just not sure what it is

These are safe pledges to make before an election, but billions will still have to be cut for the Chancellor's target to be met

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The Independent Online

George Osborne is the most effective parliamentary performer of the Government. When he speaks he conveys a sense of mission, one that will be successfully accomplished. But what precisely is his mission?

The Autumn Statement, in effect a mini budget, was Osborne’s final chance before the election to make meaty economic announcements in a highly political context. There is still the actual budget to come in the spring, but that will be an event closer to a pre-election rally, or two pre-election rallies as both parties in the coalition prepare to go their separate ways. The Autumn Statement was a more significant event, an opportunity for Osborne to convey a message backed up by policy initiatives that would frame the forthcoming long election campaign.Instead Osborne delivered two contradictory messages.

The first was that the economy was still so frail that it required more of his tough medicine, a cure that only he was equipped to administer. He confirmed that in the first two years of the next parliament there would need to be further deep cuts implemented speedily in order to eliminate the structural deficit by 2018.

There are problems with this message even if it was unaccompanied by a contradictory additional one. Osborne chose to make the elimination of the deficit in this parliament his early mission. Long ago he wisely extended the timetable. But he appears to be saying now that because he failed to meet his target during the current parliament only he is qualified to ensure the objective is met quickly in the next one.

Some of us have argued he made too much of the deficit when he became Chancellor in 2010. Indeed the current growth of the economy proves that speedy deficit elimination was not of such overwhelming significance.  The UK economy grows faster than any other in the developed world and yet the deficit is still mountainous. But the Chancellor clings to the challenge posed by the deficit like a protective shield, even if at times it threatens to become a weapon that might be used against him.

 

Osborne admits that in order to meet his revised but equally tough deficit elimination deadline there will need to be further deep spending cuts. But where precisely will the axe fall? Why does it have to fall so quickly? The answer to the second question, his latest arbitrary timetable, is solely to do with political game playing. He wants to warn of Labour’s tax bombshells exploding everywhere.

If Labour does not back his cuts he will argue that Miliband and Balls would have to put up taxes instead. The answer to the first question in relation to future cuts remains largely a mystery. Astutely Osborne announced a tax rise for banks and spoke confidently of further savings in welfare, administrative efficiencies in Government and a further clampdown on tax avoidance.

These are safe pledges to make before an election. Who is opposed to taxes on bankers, more efficient government and measures against tax avoidance? Polls suggest welfare cuts are popular. But even if all these proposals raise or save cash, many more billions will have to be cut with brutal speed to meet Osborne’s mischievous target. Benefits for the elderly are virtually untouchable.

Allies of Iain Duncan Smith, the Work and Pensions minister, are not convinced there are further billions available elsewhere from the budget and IDS is not known for being a reckless spender. The Defence Secretary, Michael Fallon, has indicated that his budget is stretched. The Business Secretary, Vince Cable, regards his department as an engine for growth and sees no scope for further cuts. The coalition deserves credit for making savings that in some cases have had no adverse impact on services and for making politically courageous decisions in relation to public sector pay and pensions. But they have made these moves already. Where will the axe fall next?

Before giving a detailed answer to the question Osborne moved on to deliver a second message that was entirely different from the first. He suggested that because he had been so successful over this parliament the economy was now strong enough for him to spend in various ways. There is an additional £2bn for the NHS. There will be new roads and new trains. The north of England is to become “a powerhouse” supported by Government investment. And of course the economy is doing so well that David Cameron has already offered £7bn of tax cuts in the next parliament.

So is the sun starting to shine once more or is the sky so dark that only a ruthless Osborne can come to our rescue, even though when he came to our rescue in a similar manner in 2010 the economy became more fragile. I know what Osborne is trying to do. He has told us many times what his message will be at the election: We have started on a path, we have made a lot of progress, but there is still a long way to go. This was the essence of President Obama’s message during his successful re-election campaign.

Yet the interplay between politics and economics is demanding. Ultimately a political message must be the equivalent of a musical composition. The elements must come together to form a coherent whole. Currently Osborne has composed two entirely different themes and I do not see how they form a single melodious electoral tune.

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