George Osborne today delivered his Autumn Statement, and boy did he enjoy it. Relaxed and confident, he even slipped in a couple of half-decent gags (discussing the UK’s lead role in a forthcoming mission to Mars, he took a swipe at the Labour benches by saying his party had long looked across the Commons floor to “the barren and desolate wastes of the red planet”). There will be problems, of course, but some half-decent predictions from the Office for Budget Responsibility meant the Chancellor was able to comfortably round off a week in which the government’s “long term economic plan” has dominated headlines.
Before the statement—not that anyone outside London SW1A is likely to remember—Ed Miliband and David Cameron had their weekly spat at PMQs, in which Ed Miliband asked Cameron to apologise for promises to voters he had failed to keep. We thought we’d do it the same for the Chancellor. So here is Prospect’s 2014 Autumn Statement scorecard: where has George Osborne kept to his promises, and where has he missed the mark?
The promise: Deliver a budget surplus by 2018/19
What happened? This is why the Chancellor was so confident today. Some economists, including those at the Social Market Foundation, have recently predicted that Osborne will miss this target, which he set himself at last year’s Autumn Statement. But the OBR reckon that, while borrowing this year will be higher than was predicted in their last report in March, by 2018-19 they still predict we’ll be running a budget surplus.
The verdict: Osborne is on track to deliver this one. But it should be noted that this target is already a climbdown from the Conservative election promise to eliminate the UK structural deficit during this parliament, which the government was forced to abandon in 2012.
The Promise: More fuel for the Northern Powerhouse
What happened? Osborne has rarely been seen out of a hi-vis jacket in the past year. He’s been striding around the North of England and promising new measures to make cities and regions other than the hyper-wealthy capital globally competitive. Today we got a little more on this. As was already announced by the time the Chancellor stood up today, the Treasury is investing £6bn in improving the northern road network, and today we also heard about £1bn of investment in Northern rail networks, £235m for a new centre for advanced materials research in Manchester and other research and development projects.
The verdict: Meh. The investment in roads in the north forms less than half of the overall £15bn roads investment package announced by the government. The rail investment was already announced earlier this year. The Chancellor tried to dress it up today by saying he’d rid the northern rail network of outdated “pacer” carriages, but the small print in the statement only says he will “encourage bidders” to do this. Could do better.
The promise: Make multinationals pay their way.
What happened? Ever since complex tax avoidance arrangements used by Starbucks, Amazon and other multinationals were exposed back in 2012, the public has been baying for harsher regulations to stop businesses who operate in the UK paying tiny amounts in tax. At the Conservative party conference this year, Osborne said the Tories would do something about this. Today, he announced a target to raise £5bn in the next parliament from cracking down on multinationals, and set out a few ideas for how to do it. The most important is his new “diverted profits tax,” which will tax profits made in the UK but artificially diverted out of the country at 25 per cent. Treasury sources mentioned that “some people” have been calling this “the Google tax,” but of course they would never dream of using such an inflammatory name. He also plans to change the amount of tax relief banks can claim against their losses.
The verdict: With consultations on—and full details of—Osborne’s plans still to come, we’ll have to see how this pans out. But treasury sources were clear that the rate at which the tax is set is deliberately punitive: at 5 per cent higher than corporation tax, it’s designed to force companies into changing their arrangements so they pay ordinary corporation tax. A step in the right direction, though it's worth noting that these plans will require international co-operation if they are to work.
The promise: Deliver his plan with no tax rise
What happened? Last year, Osborne said he’d be reaching his budget target without raising taxes. Nothing today explicitly reneged on that promise, but in a cautious piece of analysis on page 147-9 of its report, the Office for Budget Responsibility stresses that specific plans for spending cuts beyond 2016 haven’t yet been laid out, casting doubt in the subtlest of ways on these claims.
The verdict: The City economist George Magnus goes further, telling me that the darkening public mood around austerity and other uncertain factors mean that Osborne won’t be able to meet his target without either a tax rise or “some extraordinary benign fairy coming to bless the economy.”
The promise: “We’re all in this together”
What happened? This phrase used to appear a lot in Tory speeches, particularly Osborne’s, but since Labour have started highlighting what they call the “cost of living crisis,” we’ve heard less of it. Today it was back, both literally—Osborne uttered it toward the end of his statement—and figuratively; in some ways the spending plans announced were aimed at countering the impression that the Conservatives serve only the best off in society. Changes to stamp duty, the treasury was keen to highlight, would benefit 98 per cent of those who pay the tax, while hitting the best-off 2 per cent. The expansion of the Business Bank and the Funding for Lending Scheme are designed to help small businesses. Changes to corporation tax policy will make it harder for big banks to avoid or delay paying tax.
The verdict: He’s still not exactly “red George,” but these small yet significant moves do a decent job of muscling in on Labour turf. In particular, changes to stamp duty, which will mean most people pay less tax on buying a house while the richest pay poor, was presented as a sort of mansion tax-lite. The Federation of Small Businesses has welcomed the statement, while the more elite CBI was cautious. Time will tell how much today addresses voters’ concerns that Tories don’t care about their problems.
Before the statement—not that anyone outside London SW1A is likely to remember—Ed Miliband and David Cameron had their weekly spat at PMQs, in which Ed Miliband asked Cameron to apologise for promises to voters he had failed to keep. We thought we’d do it the same for the Chancellor. So here is Prospect’s 2014 Autumn Statement scorecard: where has George Osborne kept to his promises, and where has he missed the mark?
The promise: Deliver a budget surplus by 2018/19
What happened? This is why the Chancellor was so confident today. Some economists, including those at the Social Market Foundation, have recently predicted that Osborne will miss this target, which he set himself at last year’s Autumn Statement. But the OBR reckon that, while borrowing this year will be higher than was predicted in their last report in March, by 2018-19 they still predict we’ll be running a budget surplus.
The verdict: Osborne is on track to deliver this one. But it should be noted that this target is already a climbdown from the Conservative election promise to eliminate the UK structural deficit during this parliament, which the government was forced to abandon in 2012.
The Promise: More fuel for the Northern Powerhouse
What happened? Osborne has rarely been seen out of a hi-vis jacket in the past year. He’s been striding around the North of England and promising new measures to make cities and regions other than the hyper-wealthy capital globally competitive. Today we got a little more on this. As was already announced by the time the Chancellor stood up today, the Treasury is investing £6bn in improving the northern road network, and today we also heard about £1bn of investment in Northern rail networks, £235m for a new centre for advanced materials research in Manchester and other research and development projects.
The verdict: Meh. The investment in roads in the north forms less than half of the overall £15bn roads investment package announced by the government. The rail investment was already announced earlier this year. The Chancellor tried to dress it up today by saying he’d rid the northern rail network of outdated “pacer” carriages, but the small print in the statement only says he will “encourage bidders” to do this. Could do better.
The promise: Make multinationals pay their way.
What happened? Ever since complex tax avoidance arrangements used by Starbucks, Amazon and other multinationals were exposed back in 2012, the public has been baying for harsher regulations to stop businesses who operate in the UK paying tiny amounts in tax. At the Conservative party conference this year, Osborne said the Tories would do something about this. Today, he announced a target to raise £5bn in the next parliament from cracking down on multinationals, and set out a few ideas for how to do it. The most important is his new “diverted profits tax,” which will tax profits made in the UK but artificially diverted out of the country at 25 per cent. Treasury sources mentioned that “some people” have been calling this “the Google tax,” but of course they would never dream of using such an inflammatory name. He also plans to change the amount of tax relief banks can claim against their losses.
The verdict: With consultations on—and full details of—Osborne’s plans still to come, we’ll have to see how this pans out. But treasury sources were clear that the rate at which the tax is set is deliberately punitive: at 5 per cent higher than corporation tax, it’s designed to force companies into changing their arrangements so they pay ordinary corporation tax. A step in the right direction, though it's worth noting that these plans will require international co-operation if they are to work.
The promise: Deliver his plan with no tax rise
What happened? Last year, Osborne said he’d be reaching his budget target without raising taxes. Nothing today explicitly reneged on that promise, but in a cautious piece of analysis on page 147-9 of its report, the Office for Budget Responsibility stresses that specific plans for spending cuts beyond 2016 haven’t yet been laid out, casting doubt in the subtlest of ways on these claims.
The verdict: The City economist George Magnus goes further, telling me that the darkening public mood around austerity and other uncertain factors mean that Osborne won’t be able to meet his target without either a tax rise or “some extraordinary benign fairy coming to bless the economy.”
The promise: “We’re all in this together”
What happened? This phrase used to appear a lot in Tory speeches, particularly Osborne’s, but since Labour have started highlighting what they call the “cost of living crisis,” we’ve heard less of it. Today it was back, both literally—Osborne uttered it toward the end of his statement—and figuratively; in some ways the spending plans announced were aimed at countering the impression that the Conservatives serve only the best off in society. Changes to stamp duty, the treasury was keen to highlight, would benefit 98 per cent of those who pay the tax, while hitting the best-off 2 per cent. The expansion of the Business Bank and the Funding for Lending Scheme are designed to help small businesses. Changes to corporation tax policy will make it harder for big banks to avoid or delay paying tax.
The verdict: He’s still not exactly “red George,” but these small yet significant moves do a decent job of muscling in on Labour turf. In particular, changes to stamp duty, which will mean most people pay less tax on buying a house while the richest pay poor, was presented as a sort of mansion tax-lite. The Federation of Small Businesses has welcomed the statement, while the more elite CBI was cautious. Time will tell how much today addresses voters’ concerns that Tories don’t care about their problems.
