Senior ministers convey two contradictory messages in the build up to today's Autumn Statement. They give the impression of hyperactivity. Extensive leaks suggest there will be announcements galore, from wage subsidies for the young to new infrastructure projects. At the same time, they insist they do not plan to spend any more overall cash than previously announced, that Plan A will be observed rigidly. George Osborne will play Santa Claus tied up in chains.
We await the precise details to see how Osborne manages to reconcile the two messages, how he plans to "invest in Britain" while continuing with his programme of spending cuts unveiled with a premature flourish in the autumn of last year. "Where's the money coming from?" is the unavoidable question when fiscal neutrality forms part of the multi-layered proclamation. The answers can lead to difficulties in the future. In his final budget as Chancellor in 2007, Gordon Brown attempted a similar contortion, announcing at the beginning that his measures were fiscally neutral. Having tied himself up, he gave the impression for the rest of his speech that he was a liberated Santa Claus.
Only later did it emerge that Brown's much-hyped cut in the basic tax rate, his biggest gift, was to be paid for by those on low incomes, an arrangement that returned to torment him as Prime Minister. Osborne needs to be careful that, in seeking to avoid unequivocal misery, he does not also sow the seeds of future misfortunes by taking discreetly with one hand as he gives more loudly with the other.
This is what tends to happen to chancellors, a policy announced to wide acclaim can become a much darker measure over time. To some extent, the rule applies even in relation to the Office of Budget Responsibility, the other big player in today's drama. Arguably the institution is the bigger player today and might command more headlines than the Chancellor, one of the reasons why ministers have sought to get their good news in first by leaking most measures in advance.
The OBR's message will be grim as it downgrades its growth forecast. Although everyone is expecting such an assessment, the formal announcement will generate a degree of frenzy as if God had given an economic verdict that is beyond question. In this case, God takes the form of Robert Chote who acquired a deified reputation when he ran the Institute of Fiscal Studies and now is in charge of the OBR. In a way, Chote's role has not changed greatly. When he was at the IFS, his verdict was both independent and regarded with awe. Now he has an official role performing in a similar capacity.
While Chote's deification is well deserved, his elevation must be slightly unnerving for the Chancellor, even though it was the Chancellor who came up with the idea and who appointed Chote in the first place. Perhaps more than he intended when he proposed the OBR in the comfort of opposition, Osborne loses control of the narrative at key moments and Chote takes command of the stage with his bleak warnings and forecasts.
Nigel Lawson used to joke when he was Chancellor that all forecasts are wrong. At his most upbeat when the economy appeared to be booming, Gordon Brown quipped that the Treasury forecasts, while underestimating the mesmerising pace of growth, were proving more accurate than other independent bodies. Those were the days. Now Osborne prepares for the reverse, with his independent body suggesting that the situation is worse than its previous forecasts. The revision itself shows that forecasts are almost impossible in the current fluid circumstances, but it is not part of Chote's remit for him to descend from above and declare rather like the more earthly Governor of the Bank of England did the other day: "I haven't a clue what will happen to the British economy tomorrow let alone further ahead." Instead, Osborne will have to accept the darkness as described by Chote and cling to any shafts of light.
This makes his balancing act even more tantalising. He must be seen to be doing something. He will not want to make consumers even more pessimistic than they already are. It was bad enough when he compared Britain to Greece in the summer of last year when the economy was growing more steadily than it is now. Unequivocal pessimism when the British economy is much more fragile could make matters worse. And yet the good news, in the form of capital spending and the rest, cannot be over-spun without giving the impression that the Chancellor is loosening the purse strings, which he is not.
Indeed, the £5 billion Osborne plans to switch from current to capital spending is relatively small and the rest of the money supposedly from the private sector is not necessarily guaranteed. This is not exactly a bazooka. Osborne's focus on infrastructure projects is the right one, but its success will depend on scale and speed. However he chooses to present his contortion, in reality Osborne risks being too Scrooge rather than another Santa Claus breaking free of his chains.Reuse content