Expert Comment: Responding to The Chancellor’s Autumn StatementFriday 5 December 2014
Revd Tony Bradley, Professional Tutor in Social Enterprise at Liverpool Hope, looks at the Chancellor's Autumn Statement.
The Fall in deficit, frankness and good growth – responding to The Chancellor’s Autumn Statement
After the Chancellor of the Exchequer had delivered his Autumn (Budget) Statement (Wednesday 3rd December), we could be absolutely clear about one thing. George Osborne is the architect of the Conservative Party’s General Election 2015 campaign. It seems that the size of the budget deficit is not the only one ballooning. So is the size of the “bluntness deficit”.
There seems to be a dearth of frankness and not only from the Government, but, equally, from Her Majesty’s Opposition – in the shape of Ed Balls, the Shadow Chancellor – about the scale of further cuts in public services and Government departments (other than Health, Education and Overseas Development, which are inflation-protected, and Pensions, which continue on their ‘triple-lock’), following May 2015. At the same time, the official statistics about the size of the deficit that were produced today are, genuinely, much better than the predictions from many economists yesterday.
Deficit reduced socialism?
The statement's figures are that the annual net deficit is £91.3BN (down by 6% from £97.1BN) or 5% of GDP. This compares with Osborne’s March 2014 Budget prediction of a fall of 13% to £84.5BN. Additionally, what this figure hides is that the total public sector debt has risen to more than 80% of GDP. That said, many economists are entirely relaxed about this. The equivalent in France and Italy may be lower but it is about the same in Germany and 3 times that proportion in Japan.
Furthermore, there are some genuinely eye-catching headlines from the Statement. Stamp Duty on house sales has been given a marginal rates make-over. You will only pay the marginal rate on that proportion of your property purchase that falls within the band, similar to marginal rates of income tax. This gets away from the ‘cliff-face’ problem of one-off property tax thresholds.
For t’North there is a ‘sovereign wealth fund’ to be created from the windfall tax gains of ‘fracking’ for shale gas (but this could be many years away). Airport duty will be cancelled for under-12 year olds (later under-16s), which means Summer getaways will be cheaper with the kids. Banks will be less able to off-set profits against tax. Multi-national corporations that seek to off-shore their tax liabilities will be required to pay 25% on profits. And non-doms who have been resident in the UK for 17 out of 20 years will have to pay a one-off £90,000 windfall tax. So, has the Chancellor become a socialist?
Skills – higher, higher or lower, lower?
Well, of course, we are looking at a series of pre-Election sweeteners. And, perhaps surprisingly, some good news for the University sector is the offer of £10,000 loans for Masters’-level postgraduate students (from 2016-17, with predicted stringent loan repayment requirements). In addition, there will £10M to support academy chains in the North, alongside the extension of other STEM subject grants, especially in materials sciences. All-in-all “two cheers” for Osborne, in relation to a short-term skills-stimulus package, which is about as good as it gets in times of austerity.
But, all these announcements have to be seen in the context of the overall economic position. At Hope Business School we place an emphasis on studying what is known as “sustainable good growth, beyond GDP”. And the Chancellor’s announcements for the future reductions in net deficit implicitly admit – alongside the OBR’s (Office of Budget responsibility) forecasts – that Britain has moved into a long-term phase of low wage-low taxation and low interest-low inflation growth. This is profoundly not good growth.
Arguably, the only ways to increase overall well-being are to plough a very different furrow. That is to stimulate a high-skill, high wage and higher interest-inflation rate curve, recognising the fundamental steady-state nature of European economies for the foreseeable future. The Chancellor’s avowed pledge to continue budget deficit decline, through public spending cuts rather than income tax rises (recognising that income tax harvests will remain low if wages don’t rise significantly), sets his face against a higher productivity-based economy.
More welfare cuts are promised for the poor. Spending will be far tighter following the Election. And, although the Chancellor would welcome greater average prosperity, he is doing little to foster well-being for the majority. Happy Christmas! Or, should I say, a very happy pre-New Year General Election.
Tony Bradley [Revd], Associate Director, SEED/ Professional Tutor in Social Enterprise