? 2011 growth forecast cut to 0.9%
? Pension age to rise to 67 by 2028
? Bank levy increased to 0.088%, raising �2.5bn
? OBR predicts 71,000 public sector job losses by 2017
According to Lord Ashcroft's polling, "smug" is the word voters associate most with George Osborne. But he did not sound like that today. In fact, his voice appeared to dry up as he delivered the most depressing budget-type statement Britain has heard since ... well, since the last one, in 2009 or 2010. We're getting used to them now. But even by recent terms it was grim. Since the general election the Conservatives' opinion poll ratings have been remarkably robust. According to today's figures, they are still where they were in May 2010. Today might be the moment when it all starts to change. I won't try to summarise all the announcements - there was plenty of Brownite initiative-itis, with lots for the regional press, who now have no end of road announcements to write about - but you can read a good summary of the winners and losers here, and there's full coverage on our autumn statement page. But what's the picture? Here are my final thoughts.
? Britain is a poorer country than we realised and it is not going to get richer any time soon. The decisions taken today are going to have a real effect on the living standards of millions of people. Public sector workers will have two more years of below-inflation pay rises and public sector job losses are now expected to reach more than 700,000. According to the Office for Budget Responsibility, earnings are not expected to overtake inflation in significant terms until 2014. The next election will be an austerity election. And even after that it will be grim. Osborne has only managed to stay on course to met his deficit reduction targets by planning a �15bn spending cut after the election. But he hasn't told us where that money will come from. That pain is for another day.
? Ed Balls thinks he's winning the economic argument - but the jury is still out. Balls was on good form in the Commons today, taunting Osborne about the fact that he is set to borrow �158bn more than forecast and condemning his strategy as failed. But the public are not yet convinced by Labour's economic case, and Osborne believes that his tough measures - including raising the pension age earlier than expected - will show maintain his credibility with the internatonal money markets. But Osborne is running out of wriggle room, and, if the economy continues to deterioriate, it is hard to see how he can avoid missing his own deficit-reduction target. Tonight Fitch said: "Unless off-setting measures were adopted, the capacity of UK public finances to absorb adverse economic and financial shocks that would result in yet higher public debt while retaining its 'AAA' status has largely been exhausted." Given that Osborne has staked his credibility on retaining Britain's AAA status, if that were to go then, politically it would all be over for him.
? The eurozone crisis scares everyone. Robert Chote, the head of the OBR, said that he did not even try planning for the break up of the euro because the consequences could be so dire. But it is clearly a real possibility. Today Italy had to pay 7.89% to borrow money. And this morning the FT's main foreign affairs commentator wrote a column seriously contemplating the chances of the euro crisis triggering a war. (See 11.29am.) If Europe does implode, then the consequences are so serious that today's statement will seem an irrelevance.
On that cheery note, good night. AS
Damian Carrington, our head of environment, has posted his verdict on the autumn statement.
George Osborne's false economy is the death of the 'greenest government ever' pledge. It has been choked by the exhaust fumes and chimneystack smog belched out in chancellor's desperate and wrong-headed attempt to restart the economy's engine. He has sacrificed the vast economic opportunities of the green economy to an ideology that is incapable of seeing environmental action as an opportunity. Instead, says Osborne it is a job-killer that leads to poverty. Time will show him to be wrong, but time is the key commodity we are short of.
Credit rating agency Fitch just published a reaction to the autumn statement. In it, the agency said that the new fiscal projections signal a "significant deterioration" in the UK economy since March, and warned that the country's ability to absorb future shocks while keeping its AAA rating intact is now "largely exhausted".
Fitch also calculated that the UK will soon be the most indebted of all AAA-rated countries after the US.
Here's an extract from the statement.
The revised fiscal projections signal a significant deterioration relative to the March 2011 assessment by the OBR. The sharp downward revisions to the OBR's assessment of the near-term outlook has brought them in line with consensus and Fitch's own forecasts of growth of just 0.7% in 2012 before rising to 2.1% in 2013. However, the OBR has effectively lowered its estimate of the size of the UK economy by the end of the period 2015-16 by around 3.5 percentage points. Consequently, the UK government's goal of eliminating the underlying structural budget deficit is now projected by the OBR to be met in 2016-17, in line with the government's rolling mandate, rather than its previous estimate of 2014-15.
The UK government has responded to the deterioration in the economic and fiscal outlook with additional measures with reductions to current spending amounting to �15bn by 2016-17 which over the remainder of the current parliament is used to fund temporarily higher capital spending. Subsequently, the savings on current spending feed through to a significant fiscal tightening in the first years of the following parliament. Fitch's initial assessment is that the policy response does demonstrate a continuing commitment to placing UK public finances on a sustainable path, and the adoption of more realistic economic forecasts enhances the credibility of the consolidation effort, while the important target of reducing the public debt burden from 2015-2016 remains intact. However, the deterioration in the economic and fiscal outlook implies that net public sector debt will peak at 78% of GDP compared to the previous OBR forecast of 70% in 2014-15.
On a broader measure of government debt used by Fitch in international comparisons, the UK government will become the most indebted of any 'AAA'-rated sovereign with the exception of the US ('AAA'/Negative Outlook). UK government debt is on this measure projected by the OBR to peak at 94% of GDP and compares with Fitch projections for Germany and France of 83% and 92% respectively. As with some other major 'AAA'-rated sovereigns, unless off-setting measures were adopted, the capacity of UK public finances to absorb adverse economic and financial shocks that would result in yet higher public debt while retaining its 'AAA' status has largely been exhausted.
Here's a short autumn statement reading list.
? Paul Mason on his blog says there is now no chance of a sustained recovery before the election.
I think this changes the "Plan A vs. Plan B" debate as follows: Plan A is significantly amended - there will be a high chance of missing the fiscal target; but Labour's "Plan B" must take account of the OBR's damning judgement about what Labour did to the structural deficit.
We are now about to find if a bit of dirigisme, a lot of austerity, and swathes of printed money can a) prevent recession b) turn the economy around c) get a coalition of Conservatives and Lib Dems elected - should they wish to be so - in 2015.
I don't think this will provoke a wave of public sector strikes on top of the pensions unrest already under-way. What it does is tee up a much bigger electoral pitch by Labour to the public sector workforce.
? Michael White at the Guardian thinks George Osborne played a poor hand with political skill.
I thought he played a poor hand with political skill. As for the economics, well there is less difference between Osborne's room for manoeuvre and the space claimed by Balls than either of them would admit.
Balls says the chancellor hasn't won the bond markets' confidence; low interest rates in Japan for years have merely proved the economy is flat.
Clever, but you can also have a flat economy and high interest rates. Just ask those Italians; their debt is having another bad week. Osborne has capped one problem ? debt costs ? while worsening another ? growth. With the two Eds in charge it might have been the other way around.
As things stand, Labour is complaining tonight that Osborne is squeezing public sector pay and not spending enough. At the same time the Tory right and its allies are complaining that he's not cutting hard enough to keep the borrowing under control. Not easy to get the balance right.
? Duncan Weldon at the TUC's Touchstone blog says the Office for Budget Responsibility does not seem impressed by some of the measures announced by Osborne.
? Coffee House has five charts with what it considers the key data from the autumn statement.
? The Guardian's Comment is free has the verdict from Labour's Chuka Umunna, Politeia's Sheila Lawlor and David Blanchflower, the former member of the Bank of England's monetary policy committee.
The Adam Smith Institute (ASI) has issued a damning rebuke to George Osborne. Eamonn Butler, director at the right-wing think tank, has dismissed many of today's announcements as: "Gordon Brown-style tinkering measures that look good in the papers* but end up being bureaucratic and wasteful".
Instead of the �40bn loan scheme for businesses and �5bn of new infrastructure spending, the ASI argued that Osborne should have "scrapped the minimum wage for under 25s, abolished the 50p tax rate and lower the 40p tax rate to 35p, and got rid of the mandatory retirement age."
* We'll see about that. GW
The Social Market Foundation has published a good analysis of the autumn statement on its website. Here's an extract.
The story of the Autumn Statement was a play in three acts:
First the big news that the chancellor needed to find �15bn of extra cuts by 2016-17 to meet his fiscal targets, even using all the flexibility offered by his little-understood five-year rolling target. This �15bn will all come from cuts to spending, but we don't yet know where they will fall.
The second big story was the shift from tax credits to transport with �1.3bn of cuts to the former being redistributed to motorists and commuters.
Third was investment plan, comprised of credit easing for SMEs and possible long-term reforms to get more private capital into infrastructure projects, where big numbers were trotted out ? some more concrete than others. These measures have no impact on the chancellor's fiscal mandate but that doesn't mean the taxpayer is off the hook.
The Resolution Foundation, a thinktank that studies the plight of low and middle-earners, has described the "straightforwardly regressive". Here's an excerpt from its news release.
Scrapping the planned increases in child tax credit and freezing more elements of the working tax credit takes money from those who can least afford it, with more than three-quarters of the �1.2bn savings planned for 2012 coming from the bottom half of the income distribution.
Cuts to the child tax credit will mean families lose the extra �110 per child they had been expecting in 2012, and the freezing of the working tax credit will reduce the incomes of working families by a further �100. Around 5.5 million families will lose as a result of the changes to child tax credits with 2 million facing a double hit because of the working tax credit changes.
The OBR has made clear that it will be 2014 before households see any significant rise in living standards. New analysis by the Resolution Foundation, using the OBR's revised forecasts, shows that even in 2016 typical wages will be no higher than they were in 2001 - �1,400 below their 2009 pre-recession peak.
Gordon Hector, public affairs manager of the Joseph Rowntree Foundation says the message from the autumn statement is clear: "Things are going to be tough for a long time."
Whatever your politics, it wasn't good news. And that is my overall impression of the statement. It wasn't notable as a failure of economic management; it was a notable as final confirmation, if needed, that ours is an age of sustained austerity. Today was about the Gathering Clouds of Economic Despair, not about the Future Sunlit Uplands of Prosperous Britain.
Small print alert. Table 2.1 (see 4.46pm) is worth reading because it shows where the money is actually coming from. Of the tax changes announced by George Osborne, only four are worth more than �100m in 2012/13.
The key one is the delay in the fuel duty increase - the Jeremy Clarkson tax cut. That's going to cost the Treasury �975m in the next financial year. The next biggest tax cut is the extension of the rate relief holiday for small business, which is costing �210m.
Osborne is paying for these measures by cutting tax relief on asset-backed pension contributions (a meaure which will raise �450m in the next financial year, even though it passed me by when Osborne mentioned it in the speech), by increasing the bank levy, which will raise an extra �280m and by cutting current spending by �910m while putting just �660m of that into capital spending.
Of the spending cuts, there are four really signifcant ones.
? Scrapping the planned above-inflation increase to the child element of the child tax credit. This will save �975m next year, and more than �1bn by 2014/15.
? Allocating less for international aid. The government is committed to spending 0.7% of GNI (gross national income) on aid by 2013. But, because national income is lower than expected, Osborne can save �380m from this in 2012/13, and �525m by 2014/15.
? Freezing working tax credit. This will save �265m in the next financial year.
? Restraining public sector pay. This only saves �75m next year. But in 20114/15 it saves the Treasury more than �1bn.
The London stock market just closed for the day, with the FTSE 100 up 24 points at 5337. Traders say the autumn statement had little effect on the City, although the speech was closely watched.
Joshua Raymond, chief market strategist at City Index, explained:
Much of the weaker revisions for growth had been expected, given that they follow closely to downgraded forecasts from the Bank of England ... Most investors are fully aware that the UK stands on the brink of recession.
Small print alert. The most important table in the autumn statement report (pdf) is 2.1, the one on page 46. It's the one that shows how much money the Treasury actually makes or loses as a result of today's decisions.
And two figures stand out. In 2015/16 the Treasury will raise �8.29bn from cuts to public spending. And in 2016/17 the Treasury will raise �15.1bn from cuts to public spending.
George Osborne can bank this money because he has decided to extend the spending freeze. Here's how the Treasury document explains this.
The Government will set plans for public spending in 2015-16 and 2016-17 in line with the spending reductions over the Spending Review 2010 period. Total Managed Expenditure (TME) will fall by 0.9 per cent a year in real terms, the same rate as set in Spending Review 2010, with a baseline excluding the one-off investments in infrastructure announced in the Autumn Statement. As a result, spending will be �15 billion lower in 2016-17 than it would be if it increased in line with inflation from 2014-15.
In its report, the Office for Budget Responsibility cites these two figures as the ones that have put the government "back on course" to meet its deficit-reduction target. AS
The TUC is saying that public sector workers are being asked to accept the equivalent of a 16% pay cut. This is from Brendan Barber, the TUC general secretary.
None of the Chancellor's post-election assumptions have turned out to be true. Growth has stalled, the Eurozone has crashed, the structural deficit is bigger than previously thought and unemployment continues to rise as the private sector fails to take up the public sector slack.
The Chancellor's stubborn determination to stick to his plan A despite the evidence that it is not working and won't work in the future means that we are locked into permanent austerity.
Of course there were some welcome moves in the statement as the Chancellor tries to reinvent infrastructure spending, youth employment and regional assistance programmes. But the catch is that they are being paid for by freezing tax credits, holding back public sector pay and increasing public sector job losses to 710,000 by 2017. Those with the broadest backs who caused the crash have escaped once again.
Cutting employment rights will not create a single extra job, but they will make employees feel more insecure and even less likely to spend.
His refusal to back a Robin Hood tax and make nurses pay instead speaks volumes about his values. Public servants are no longer being asked to make a temporary sacrifice, but accept a permanent deep cut in their living standards that will add up to over 16 per cent by 2015 when you include pay and pension contributions.
It is no wonder that the government has alienated its entire workforce who are coming together in unprecedented unity tomorrow to take a stand against such unfair treatment.
Small print alert: Our colleague Mark King has spotted that while Osborne announced the cutting of the Humber bridge toll, elsewhere in the Autumn Statement there are suggestions that tolls are being considered to help pay for the government's road infrastructure plans.
Of the A14 work, the statement says: "The Government will explore innovative ways of financing this work, including tolls, which will also be investigated for other new capacity proposals." Later, there's this line in the document: "The Government will also consider tolls to fund other road infrastructure if appropriate." GW
Our colleague Patrick Collinson has sniffed out an interesting angle in the OBR report - the tax take from wine drinkers is expected to rise by over 50% in the next six years, from �3.1bn in 2010-11 to �4.9bn in 2016-17.
Angela Beech of chartered accountants Blick Rothenberg called it "a clear attack by the government on wine drinkers," while duties on spirits, beer and cider will rise more modestly. More details here.
Small print alert. Today's announcemements will lead to child poverty increasing by 100,000 in 2012/13, according to the distributional impact published by the Treasury. AS
Small print alert: British workers face the prospect of an extra six months of pain before they actually seen a real increase in their wages. Page 97 of the OBR report shows that it does not expect real earnings growth (allowing for inflation) to turn positive until the second quarter of 2013. The previous forecast was for real earnings to start outstripping inflation in the third quarter of 2012. Families won't feel significantly better off until 2014, when the OBR expects productivity to be up, and inflation down.
This graphic shows the OBR's old, and new forecasts.
The OBR also estimated that household disposable income will fall by 2.3 per cent in 2011, a post-war record.
Duncan Weldon, senior policy officer at the TUC, has blogged about the OBR's forecasts, calling them 'grim' and 'distressing'.
The two year squeeze on real incomes is set to last for at least another three years.... Real household disposable income is now expected to fall by a further 0.3% in 2012 before gradually recovering in the following years ? up by 0.9% in 2013, 2.0% in 2014 and 2.5% in 2015.
Weldon also questioned whether UK GDP would really grow at the pace estimated by the OBR, if households are suffering so badly. GW
On the Treasury website you can find the Treasury's analysis of how the government's measures affect the wealthy and the poor (pdf). The charts cover tax, tax credit and benefit changes, but not other cuts to public spending. On this basis, the Treasury says all the measures taken collectively since the election are progressive, in that the wealthy pay most. But, on certain measures (see, for example chart 1.E) the very poor are losing out by more than those in the middle or near the top. AS
More reaction.
From Nick Pearce, director of the IPPR thinktank
This mini-budget does not address the main problem facing UK economy in the short-term: the shortage of aggregate demand. Many of the Chancellor's collection of small measures are welcome but it is wrong to squeeze the living standards of lower and middle income families relying on tax credits in order to pay for lower increases in fuel duty.
From Len McCluskey, Unite's general secretary
George Osborne is like a pilot, who has put his plane into a tailspin, and is now wrestling desperately with the controls as the aircraft rapidly loses height.'
At long last, the message seems to have half got through to the Chancellor of Exchequer that his deficit reduction programme has brought us to the front door of a double-dip recession in early 2012 ? as predicted by the OECD yesterday.'
This has been further compounded by today's Office for Budget Responsibility's announcement which shows growth flatlining at 0.7 per cent in 2012. With no growth, there is no agent for renewed economic activity and the extra jobs that growth engenders.'
Now George Osborne is scrabbling around to put together a semblance of a programme to inject much-needed demand and spending power into the beleaguered economy that has been brought to its knees by his hardline austerity measures ? but there are serious flaws in the new proposals.
From Ian Brinkley, director of The Work Foundation
The chancellor has signalled some of the right long-term priorities ? investment in infrastructure, support for enterprise and more help for young people.
However, there is little that will put demand into the economy in the short-term, and the longer term measures outlined are too small in scale. There is still too much reliance on a spontaneous revival of the private sector.
There are huge risks this forecast will turn out worse than expected. The OBR's outlook on jobs and unemployment looks far too optimistic. Unemployment is likely to get higher and remain higher than the forecasts assume.
From Andrew Harrop, General Secretary of the Fabian Society
We already know that this depression will last longer than that of the 1930s. But George Osborne is still gambling that he can end it while also sucking public money out of the economy.
His plans today may encourage a little more private spending at the margins. But against such huge headwinds, sustained public investment is the only route to growth. The time to dramatically close the deficit is after the crisis has passed, not as the storm clouds gather once again.
The autumn statement has found favour with Britain's businesses, with the CBI calling it a "Plan A Plus in all but name". This is from John Cridland, the CBI Director-General.
This autumn statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs.
The full CBI response is on its website.
More reaction to the autumn statement.
Louise Cooper of BGC Partners, the city firm, told us that the goverment's plan to improve UK infrastructure has a glaring flaw - the Treasury itself has only committed a "paltry" �5bn to the plan.
For the rest of the money, we have yet to see if pension funds will come in with their cash. And this sums up the problem with the whole budget - that the government has very little money to do anything with. Mr Osborne may have plenty of ideas and plans to get growth going, but has little spare cash to do much.
And this is from Gavin Hayes, general secretary of Compass.
The scale of his plans simply do not rise to the challenge required to tackle Britain's worsening economic situation and a deepening unemployment crisis.
And here's some comment on the autumn statement from politicians.
David Miliband, the former Labour foreign secretary, told MPs in the Commons that George Osborne had had rejected a job guarantee for the young unemployed in favour of wage subsidies. When Ken Clarke, then the Conservative chancellor, tried a similar scheme in 1995 aiming to help 130,000 young people just 2,300 applied, Miliband said.
The chancellor has recognised that 260,000 young people have been unemployed for over 12 months, That's over 100,000 more than 18 months ago, he has rejected the argument for a job guarantee and instead embraced wage subsidies which he says will help. Will he look at the same scheme that his right hon. friend the secretary of state for justice announced in 1995, the same scheme promised 130,000 jobs then, 2,300 applications came forward. Will he look at that experience to make sure we don't have a repetition of the very low take-up of wage subsidy schemes.
Alistair Darling, the former Labour chancellor, told BBC News that Osborne's decisions were making the situation worse.
We are in for a grim time but I think it has been exacerbated by the decisions taken by this government. The worrying thing about today's announcement is that the growth forecast that the chancellor made in his budget in the summer of last year has completely fallen away and we're talking about growth now having died at the end of last year, it's going to flatline for another two or three years, there's not a shred of evidence to suggest a reason why it's going to recover the year after but it will mean we are borrowing more, not less.
Rachel Reeves, the shadow chief secretary to the Treasury, told the BBC Osborne was just shifting money from one area to another.
The cost of economic failure is more people out of work, but also it's higher government borrowing and we've seen both of those today. I don't think the government are doing enough to get the economy back on track, to create the jobs we need ? all they've done is move money from one area to another.
But Michael Fallon, the deputy chairman of the Conservative paryt, said the chancellor had reassured Britain that the government would protect the country from the storm overseas.
Yes, I think what the Chancellor reassured us about was that he is still sheltering Britain from this storm that is engulfing the rest of Europe, that he's doing his best to help families through it at a time of rising prices and that we're still on course to meet our deficit reduction plan. By the end of this Parliament, just beyond the end of this Parliament, we will have got rid of the structural deficit ? we're still on track to do that.
Turning away from the OBR press conference, here's some reaction to the statement. George Osborne's decision to freeze elements of the working tax credit has been criticised by several charities.
Chris Johnes, Oxfam's director of UK poverty, said it could push more families into poverty:
Freezing working tax credits will penalise those who are trying to make a living by working their way out of poverty - this should be among the last places the Government looks to make savings.
Citizens Advice chief executive Gillian Guy said the chancellor had broken his promise to protect families on the lowest incomes.
Make no mistake, this means children in the poorest homes are at risk of going cold and hungry to pay for the new schemes the Chancellor has announced today.
Alison Garnham, chief executive of Child Poverty Action Group, was deeply disappointed that the chancellor has dropped plans for a "�110 above inflation increase" to the Child Tax Credit that was planned for 2012-13.
Warnings of a bleak future of rising child poverty have not just been ignored, the government has actively decided to let child poverty rise. This is not the fairness we were promised and it will cost the nation dearly in years to come.
Robert Chote is now taking questions.
Q: What would happen if there were a crisis in the euro zone?
Chote says trade would be affected. There could be a tightening of credit. Government borrowing could be affected too, he says.
Robert Choate is now talking about George Osborne's two targets.
First, the fiscal mandate - balancing the budget over a five-year period. He says that the government is on course to meet that, but only because of the measures taken today.
Second, getting debt falling by 2015/16. The government is on course to meet this, he says.
Robert Chote is still speaking.
Without the measures announced today, debt would have peaked at 78.1% of GDP in 2015/16. But now it is expected to peak at 78% in 2014/15.
Robert Chote is still making his opening presentation.
Compared to March, the outlook for the recovery looks even weaker than previous recoveries.
But we now confront an "addititional threat" from the euro area.
Chote says the OBR's figures are based on the assumption that the euro area will struggle through. But it is possible that it could collapse, with much more serious repurcussions. He says the OBR has not modelled these, because they are impossible to predict. But the possibility of the outcome being much worse than it will be if the euro zone struggles through is higher than the possibility of the outcome being much better.
Robert Chote is still making his opening statement at his press conference.
The central growth forecasts are now:
2012: 0.7%
2013: 2.1%
2014: 2.7%
The uncertainty surrounding forecasts dwarfs any difference between the OBR's and those from other organisations, he says.
Firms may have less cash to invest, he says.
Real disposable income has fallen this year. And earnings are not expected to rise ahead of inflation by a significant margin until 2014.
But inflation will fall sharply next year as the January VAT increase falls out of the calculation.
Unemployment is expected to rise for the next four quarters. The claimaint count is expected to peak at 1.8m.
Chote is now going through the OBR's report in more detail.
Britain's output weakness probably reflects the weakness of underlying productivity, he says.
As for why productivity is so weak, explaining that is not easy, he says.
Tight credit conditions may be making it hard to allocate capital from unproductive activity to productive activity.
Robert Chote, the head of the OBR is giving his press conference now.
He says the OBR now thinks the government is weaker than it estimated in March.
The government would have missed its target to get rid of the defict over five years without the spending cuts announced today, he says.
Here are some extracts from Ed Balls response to the statement in the Commons.
[Osborne's] still clinging to the fantasy that any change of course would make things worse. How much worse does it have to get? How many more young people have to lose their jobs? How many more businesses have to go bankrupt? How many billions more in borrowing do we need to pay for failure before this chancellor finally sees sense ...
Growth flatlining this year, next year and the year after; unemployment rising; well over �100bn more borrowing than the chancellor planned a year ago - more borrowing than the plan the chancellor inherited at the last general election ... As a result, his economic and fiscal strategy is in tatters. After 18 months the verdict is in: Plan A has failed and it has failed colossally. With prices rising, with unemployment soaring, families, pensioners and businesses already know it's hurting. With billions of pounds more in borrowing to pay for rising unemployment, today we find out the truth: it's just not working ...
It is clear the chancellor's plan is not working. The OBR knows it. The markets know it. The IMF know it. We know it. Increasingly, the chancellor's coalition colleagues know it. His arch rival the Mayor of London certainly knows it. But we all know why the chancellor can't change course ... It is because to change course now would mean to admit he's got the key economic judgment of this parliament absolutely, catastrophically wrong. I believe we either need a new chancellor or new plans.
Earlier (see 12.46pm) we said that aid spending would go up by less than planned. That's not quite right. We've just had this clarification from the Department for International Development.
What [Osborne] said is that we are maintaining our commitment to spending 0.7% of GNI on international development from 2013, even in today's economic circumstances. However, since today's OBR forecast shows GNI will shrink, the planned amounts of spending meant we would actually be overshooting that target which the chancellor said he didn't think could be justified. Therefore the DfID budget has been adjusted. It is not the case that we were "planning" to spend more than 0.7% after 2013. Our commitment has always been to 0.7% from 2013, which stands.
AS
Small print alert. In Osborne's statement he said that he would be asking the public sector pay review bodies "to consider how public sector pay can be made more responsive to local labour markets". He moved on so quickly that I didn't really notice it at the time.
But it's actually a huge proposal. In most public sector jobs, national pay rates apply (although there is London weighting). Under this proposal, which is due to come into force from 2013, pay rates will vary. Treasury officials, who have been briefing journalists, insist that this measure will not be used to cut the overall public sector pay bill. But it will mean that public sector workers living in, say, the north-east of England or the south-west of England could find themselves earning noticeably less than their counterparts in the south-east.
According to one government source, this will create a better balance between the public sector and the private sector.
This is a very big, long-term structural change. The public sector in some areas of the country squeezes out the private sector ... If you speak to any economist about it, they will tell you that all the evidence is that flexible public sector pay will actually allow the private sector to flourish.
National pay bargaining would continue, government sources say. But national pay bargaining would only cover percentage increases. Actual pay levels would vary from region to region.
"We are not envisaging that people will get pay cuts as a result," a source said. But it could mean that, in areas where local wages are particularly low, public sector workers could find their wages depressed for even longer. AS
The full details of the Treasury announcements are now available on the Treasury's website.
Small print alert: The new Economic and Fiscal Outlook published by the Office for Budget Responsibility includes a forecast that total job losses across the UK public sector will reach 710,000 by the first quarter of 2017, compared with the first quarter of this year.
That's a huge increase on the previous forecast that around 400,000 jobs would be lost between the first quarter of this year and the first three months of 2016, and indicates that the public sector is going to suffer even more pain than expected.
The OBR reached the figure based on the government's plans for further cuts in public spending, combined with data showing that average pay per head has increased more than it expected in March (implying fewer workers). But that also includes the continued pay freeze announced today, and the plan for wage rises to then be capped at 1%.
The OBR cautioned that there were "considerable uncertainties around the total reduction in GGE that is implied by the Government's spending plans, let alone around the time profile."
The OBR continued:
The overall change will depend on choice between squeezing paybill and non-paybill costs and on the choice between employing smaller numbers of relatively high paid workers and larger numbers of relatively low paid workers.
The prediction is contained on page 95 of the OBR's report. GW
The sharper City economists are starting to give instant reactions to the autumn statement. Jonathan Loynes of Capital Economics warns that public borrowing will swell by around �111bn by 2016, compared with earlier forecasts. Furthermore:
A reasonable chunk of this extra borrowing is deemed to be a reflection of permanent damage to the economy and is therefore structural rather than cyclical ... Nonetheless, thanks to some re-allocation between current and capital spending, the main fiscal mandate to return the cyclically adjusted current budget to surplus over five years is still expected to be met.
Howard Archer of IHS Global Insight said the OBR's short-term growth forecasts (which slash GDP growth) look realistic. However, he was less convinced by the longer-term estimates (which show the UK economy returning to more buoyant growth).
On the hopeful assumption that the eurozone does finding a way of solving its crisis, GDP growth of 2.1% in 2013 looks just about achievable. However, we have severe doubts that the economy will be able to grow by more than 2.5% on an extended basis over the medium term, barring a major acceleration in global growth which lifts investment and exports.
GW
Ed Balls has just finished his reply to Osborne. Britain needs either "a new chancellor or a new plan", he says. I'll post more quotes from his speech shortly.
But Labour have already sent out a briefing note with the main point: Osborne is set to borrow �158bn more than he planned a year ago, and �37bn more than envisaged under Labour, the party says.
Here's how Labour get the �158bn figure.
Today's forecast for 2011/12 borrowing: �127bn (up �10bn since November 2010)
Forecast for 2012/13 borrowing: �120bn (up �29bn)
Forecast for 2013/14 borrowing: �100bn (up �40bn)
Forecast for 2014/15 borrowing: �79bn (up �44bn)
Forecast for 2015/15 borrowing: �53bn (up �35bn)
And here's how Labour get the �37bn figure.
Forecast for 2012/13 borrowing: �120bn (up �14bn on the 2012/13 forecast that applied on the basis of Labour's measures, before Osborne's first budget last year).
Forecast for 2013/14 borrowing: �100bn (up �15bn on the Labour figure.)
Forecast for 2014/15 borrowing: �79bn (up �8bn on the Labour figure.)
These calculations are slightly spurious because so much has changed since the general election that Labour's borrowing forecasts were bound to have to change. AS
And here's one comparing previous predictions of public sector borrowing with the latest forecast.
Here's a graph showing new GDP forecasts compared with previous predictions.
Snap political verdict: Osborne's shock raid on public sector pay makes it hard to believe that he - or anyone else in government - was serious when asking public sector workers to think again about going on strike tomorrow. This will anger the unions, entrench the divide between the private sector and the public sector - and possibly quash all hopes a deal on pensions. That was the surprise announcement in a statement that was poorly delivered (Osborne's voice was playing up) and chock-full of Brownite micro-economic tinkering. But at least no one can accuse him of being unrealistically cheerful. More later, after I've had time to go through the small print. AS
Snap economic verdict: Economically, this reads like a "blame it on the eurozone budget". The changes to the growth figures in the short-term are eye-wateringly bleak, with the OBR now predicting that Britain will expand by just 0.7% in 2012 (down from 2.5% in the March forecasts). Despite that, the longer-term growth targets look ambitious -- 2.7% GDP growth in 2014, and 3% in 2015 and 2016? Unlikely if the eurozone implodes, and still a big stretch if it doesn't (with the public pay freeze and cap likely to dampen UK household spending).
And the true picture could still be even worse - yesterday the OECD reckoned that Britain was heading in recession.
But the reaction in the City is interesting - with UK bond yields actually falling through the speech. That indicates sluggish growth as much as fiscal stability - but Osborne NEEDS yields to stay around their current levels. The chancellor now expects to borrow �100bn in 2013-14, up from �70bn in the March budget. If yields rise, the cost of servicing that debt could punch a big hole in the future forecasts. GW
There's a mixed reaction to the Autumn statement on Twitter, with Osborne generating little excitement. here's a round-up:
Douglas McWilliams, the head of the Centre for Economics and Business Research, questioned the OBR's claim that the UK economy will be growing by 3% per year by 2015.
@DMcWilliams_UK: Obr forecast revisions blame everything on the eurozone. So they still blue sky the outlook after 2013. They just don't get it.
The news that the freeze on public sector pay will be extended, with rises then capped at 1%, surprised Ros Altmann, director-general of Saga Group -- coming the day before public workers strike over pensions
@rosaltmann: Announcing a 1% increase for 2 years following a 2 year pay freeze seems rather incendiary at this time. Why announce it now?
Liberal Democrat MP Julian Huppert, who represents Cambridge, said he was relieved that the news in the budget was not worse:
@julianhuppert: Working age benefits up 5.2%; better than feared.
UK accountancy firm PKF argued that Osborne needed to be more ambitious with his attempts to help British business:
@PKF_UK: SME lending plans, more on "what" but we're still missing the "how"
@PKF_UK: New R&D tax credit in 2013 - good news but why not now?
Osborne is winding up now.
People know that quick fixes are like "the promises of a quack doctor offering a miracle cure", he says.
The government is committed to taking Britain through the tough times, he says.
Osborne says rail fares will increase by less than originally planned.
? The 3p fuel duty increase planned for January will be cancelled. Taken alongside the fuel duty cut announced in the budget, that means fuel will be 10p a litre lower than planned.
Osborne is on education now.
? An extra �1.2bn will be spend on education. Some �600m will go to authorities that need new school places. And the rest will fund 100 new free schools.
? Free nursery places will be extended.
Osborne is on employment measures.
? A Youth Contract will be offered to young people unemployed for more than three months. (This is the scheme announced by Nick Clegg last week, and attacked by Labour as a watered down version of the Future Jobs Fund.
Osborne confirms that he is looking at merging the adminstration of income tax and national insurance.
He says he will freeze the capital gains tax threshold, using the savings to fund a tax relief scheme for people who invest in a start-up.
? The business rate tax relief holiday will be extended until April 2013.
Osborne says the government will consult on further changes to employment laws.
? The government will consult on allowing small firms to make people people redundant without them being able to claim unfair dismissal. It will look at introducing a system of compensated, no fault redundancy.
Osborne says he will help firms affected by new carbon regulations. "We are not going to save the planet by shutting down our steel mills," he says.
This package of support will be worth �250m.
The government will reform the planning laws, he says.
In the financial markets, Britain's government debt has risen in value slightly since George Osborne announced the new OBR forecasts for GDP and public borrowing.
The yield on 10-year gilts hit a low of 2.21%, from 2.25% this morning (and still below the German equivalent). That indicates that investors are not startled by the forecasts. But it also reflects the fact that GDP growth will be so low in the short-term.
There's little other immediate reaction in the City, although the FTSE 100 is now down for the day (down 7 points at 5305). That reflects the fact that most of the announcements (so far) had already been announced or leaked.
Osborne says he is confirming almost �500 for science projects.
He is making it easier for firms to compete for government procurement contracts.
A new above-the-line R&D tax credit will be introduced from 2013.
Osborne's voice seems to be packing up. He's coughing quite a lot. Shades of IDS ...
On infrastructure, Osborne says he wants savings to be used to fund projects. You could call it "British savings for British jobs", he says.
Some 35 projects will be able to go ahead as a result, he says.
He rattles through some of them.
? In the south west of England, water bills will be cut by �50 a year.
Osborne says he will explore "all the options" for maintaining the south's status as an airport hub, except for a third runway at Heathrow.
This all amounts to a huge commitment to improve the infrastructure of the nation, he says.
Osborne says that Britain became over-dependent on the City of London.
Labour was relying on finance for one in every eight pounds it raised in taxation.
That left Britain "completely exposed" when the banks failed.
The government will publish its response to the Vickers report next month.
The government will not support an EU financial transaction tax.
Instead, Britain has a permanent bank levy.
? The bank levy will go up to 0.088%. That's is to ensure that the Treasury rasises the �2.5bn expected to raise when the bank levy was introduced at a slightly lower rate last year.
Osborne is on housing now.
The government will help fund new mortgages for first-time buyers.
And it wil "re-invigorate" the right to buy.
The scheme was "strangled" by Labour.
Under the new plan, families in social housing will get discounts of up to 50%.
Osborne is now on support for business.
There will be a major programme of credit easing, he says.
This means a national loan guarantee scheme will be launched.
It will be used to fund loans to firms with a turnover of less than �50m.
It means the cost of loans should fall by 1 percentage point, he says.
The govenrment is also launching a �1bn business partnership for medium-sized companies. They will get a new source of investment.
If it takes off, the Treasury will stand ready to increase its size.
Osborne says no government has attempted anything as ambitious as this before.
Osborne turns to the pension age.
? The pension age will rise from 66 to 67 by 2028, he says.
This will save �59bn. It will show the government is serious about Britain paying its way. Australia, Germany and the US have a similar rule, he says.
Osborne is now talking about benefits.
? The pension credit will go up, paid for by a rise in the threshold for the savings credit.
? Benefits will be uprated by the September inflation figure, 5.2%
? The child element in the tax credit will be increased.
? But other elements in the working tax credit will be frozen.
Osborne says that the governmen will stick to its commitment to meet the 0.7% of GDP aid target.
But the government was planning to go above that. Now it won't, he says.
? Aid spending will not go up by as much as planned. It will still rise to 0.7% of GDP by 2013, but a planned increase beyond that will be cancelled.
Osborne is talking about public sector pensions now. Lord Hutton, the former Labour minister, says it is hard imagine a better deal than this, he says.
Osborne urges the unions to call off tomorrow's strike.
Osborne says he is going to restrict public sector pay rises.
? Public sector pay will go up by just 1% for the two years after the pay freeze is over.
Osborne says many public sector workers receive pay rises because their pay goes up with length of service.
Labour MPs are now jeering. This was not anticipated, and will affect millions of workers.
Osborne says Britain is borrowing money more cheaply than Germany because the markets have confidence in the government.
Today's announcement will not affect overall spending, he says.
But there will be "significant savings" in current spending. This money will fund capital projects.
Osborne says Britain would be at the centre of the borrowing storm now if the government had not cut spending. It would have had to borrow more than �100bn more than it is, he says.
? Osborne says he will not be able to get rid of the structural deficit by 2015. But he will still meet his "fiscal mandate" target of getting rid of it within five years.
? He says the debt will peak at 78% of GDP in 2014/15. After that, it will fall, meaning that he will meet his target of getting it heading down by the time of the election.
Osborne is now on borrowing.
? Government borrowing costs will be �22bn lower than predicted because of low interest rates, Osborne says.
Osborne says that if MPs accept the forecasts of the OBR, they should also accept its analysis.
The OBR says world inflation has played a bigger part in Britain's slow-down than they realised, he says.
And the OBR is also saying that Britain's economy was damaged more severely by the banking crisis than people realised, he says.
This government will sort out this out, he says.
Osborne is on the growth forecasts.
The OBR is not forecasting a recession, he says.
But the forecasts have been revised down. They are:
This year - growth of 0.9%
2012 - 0.7%
2013 - 2.1%
2014 - 2.7%
2015 - 3%
2016 - 3%
George Osborne is starting now.
He says much of Europe appears to be heaing into a recession, caused by debt.
The government will ensure that Britain lives within its means.
There will be lasting investment in infrastructure and education, so that Britain can pay its way in the future.
George Osborne has just entered the Commons chamber.
These days the Treasury post the key announcements from the budget and the autumn statement on Twitter as soon as George Osborne gets to them in his speech.
You can find them on the Treasury's Twitter feed.
George Osborne has just left the Treasury by car.
It's been a quiet morning in the City ahead of the autumn statement, with traders nervously awaiting the chancellor's new growth and deficit forecasts.
The pound has risen against the US dollar, up more than 1.5 cents to $1.561. That, though, is more due to optimism that the eurocrisis could be solved than anything Osborne might produce from his red box.
Jane Foley, senior currency strategist at Rabobank, warned that:
Sterling may be hit if the budget shortfall causes a few shockwaves.
While Michael Hewson of CMC Markets predicted that Osborne will be reluctant to announce anything that might cause major movements in the financial markets:
The budget is likely to be fiscally neutral as the chancellor tries to maintain the confidence of the ratings agencies and keep borrowing costs at their current low levels.
Currently, the FTSE 100 is up 21 points at 5333, a gain of 0.4%. GW
Here's a short pre-statement summary.
? George Osborne has briefed the cabinet on the statement he will be making at 12.30pm. At the lobby briefing, Downing Street would not say how it went down, although the prime minister's spokesman did concede there was no applause. Earlier, Nick Clegg told the BBC the measures would keep Britain "safe from the debt storm and the market turmoil in Europe and elsewhere." Acknowledging that the revised growth figures would be grim, Clegg went on: "We are going to be upfront with people about the difficult challenges we face."
? Ed Miliband has described the measures being announced by Osborne as "smoke and mirrors". Apparently popular measures would be funded by cuts, he said. "It is smoke and mirrors," he went on. "They are saying 'free nursery places' with one hand, but with the other hand they are cutting childcare help for mums." He said Osborne should announce a change of course and adopt Labour's five-point plan for growth. AS
According to Benedict Brogan, John Bercow, the Speaker, is expected to reprimand George Osborne over the fact that so much of the autumn statement has already been leaked in advance. In the Commons yesterday Bercow said he was "gravely concerned" about how much of it was already in the public domain.
Personally, I've always thought the convention that important announcements have to be made in the House of Commons first is daft. But it's a rule that the government claims to support, and this year's advance leaks to seem to be more extensive than normal. At the lobby briefing yesterday I asked the prime minister's spokesman why. He said there was nothing they could do to stop journalistic speculation. I had to point out that Danny Alexander had been doing interviews that morning. He wasn't speculating; he was explaining the government's infrastructure announcements. AS
Here's a pre-autumn statement reading list, with some of the most interesting comment from the other papers and the blogosphere this morning.
? Tim Montgomerie at ConservativeHome worries that George Osborne sounds too much like Gordon Brown.
A senior minister asked me a question last night: Can you think of any measures in Osborne's Autumn Statement that Gordon Brown couldn't have announced?
I can actually. Chris Grayling's health and safety reforms, for example. But the minister has a point. We appear to be in "the age of Osbrowne" where a government scheme or subsidy is routinely preferred to a tax cut or some deregulation. Look at today's childcare announcement. Government is throwing more money into an already over-regulated and therefore over-priced market. Childcare needs supply-side reform with greater and more diverse provision, as Liz Truss MP has argued.
I'd also caution against getting too excited/giving a hoot about the changing estimated size of this 'structural deficit '. This is a classic language, being used ? as Orwell would have put it ? to give the appearance of solidity to pure air. All it means is an estimate of how big the deficit will be when the economy has recovered.Your guess is as good as mine. It's a far smaller figure than the deficit itself, so it suits the government to have journalists using this fake metric.
God knows how many hours were wasted worrying about Brown's just-as-spurious Golden Rules. Deficit should be measured in simple terms: what the government spends, minus what it raises. And that's something no one can spin.
In short, the Conservatives continue to win the argument that they are cleaning up a mess they inherited. Last autumn, I believed that Labour was losing this debate because it had spent the summer months engaged in its leadership contest; inevitably, it was talking to itself rather than the wider electorate.
But that contest ended 14 months ago. Labour has a settled duo at its helm: Ed Miliband and Ed Balls. They have not been short of opportunities to attack the government and proclaim their own alternative. Bluntly, they have failed to make an impact.
? Nick Robinson on his blog says today's autumn statement will be a defining moment.
The sight and sound of George Osborne reading out figures - described as "shocking" by some who've seen them - and the reaction of the House of Commons, will drive home to many people the sheer scale of the economic challenge the country now faces.
The developed world is starting from a much higher level of affluence than it did the 1930s. In an economic crash people might still lose their savings, their jobs and their homes ? but they are less likely to be reduced to utter destitution. As a result, they may be less prone to political radicalisation. The Latvian economy shrank by 18 per cent in 2009 ? but in the recent election there, two centrist parties came out on top. In Spain, unemployment is already over 22 per cent ? and over 45 per cent for the young. And yet a moderate centre-right party won this month's election.
So, although the risk of a severe economic crisis is very real, I don't believe that we are at risk of sliding back into war. But that may simply be the failure of imagination of somebody lucky enough to be raised in a period of unparalleled peace and prosperity.
? Ed Balls in the Daily Mirror says George Osborne's gamble has failed.
The OECD said yesterday that our economy will continue to flatline, or worse, well into next year. And the Government is set to borrow �46billion more than it planned ? the bill for the economic failure and extra unemployment it created. If that figure rises even further today ? and we see billions more in borrowing than expected ? it will be a huge blow to the Government's credibility.
And after blaming the snow and the Royal Wedding, the Chancellor's latest excuse is to blame the rest of Europe.
Of course if the eurozone continues to fail to sort out its problems, it will have an impact here. But Britain's economic recovery was choked off over a year ago ? well before this crisis. And of 27 countries in the EU, only Greece, Portugal and Cyprus have grown more slowly than us this past year.
The government likes to say it will not countenance any "unfunded tax cuts". It is far from clear what that means. When Margaret Thatcher cut the top rate of tax from 83% to 40% it more than doubled the top rate tax take. That was no doubt an "unfunded" tax cut, yet it yielded rich dividends in increased growth, increased earnings, and increased tax revenues ...Governments should be wary of big infrastructure schemes. Very few work. But if they do work, they do so by allowing our businesses to overtake their international competition, not just creep up on it. Only 1 in 500 UK households have a superfast broadband connection. In Japan the figure is 1 in 3. So we should cancel the blighted HS2 rail project, which will take us twenty years to work up to being second to France, and spend a small fraction of its bloated costs on a superfast broadband to every house in the country, allowing us to steal a march on the whole world, pushing Japan and Korea into second place.
How much blame should George Osborne carry for the bleak economic forecasts he will announce in the autumn statement? Two leading economists argued over this on Bloomberg this morning.
Robert Skidelsky, professor of political economy at Warwick University (and an avowed Keynesian) argued that the chancellor blundered badly by attempting to reduce government borrowing so aggressively while the private sector was also cutting back.
People bought the idea that cutting the deficit would automatically lead to growth - that story has been proved to be wrong.
Roger Bootle of Capital Economics, though, argued that the chancellor had made the best of a "nearly impossible position", by keeping Britain's AAA rating and encouraging borrowing costs down (see 10.02am)
Bootle said that:
The government has played a blinder by achieving the rating in the market that has been achieved.
Bootle also warned, though, that we cannot expect the financial markets to remain so calm about Britain's finances, at a time when other countries are being dragged to the brink. GW
Andy Beckett's profile of George Osborne in G2 today is well worth reading. Beckett has even got a comment on Osborne from Denis Healey. This is what Healey said when asked to rate Osborne's performance.
I think he does it quite well. He's not outstanding.
From Healey, that's actually quite complimentary. AS
Is George Osborne sticking to Plan A? Michael Fallon, the Conservative deputy chairman, and Owen Smith, a Labour Treasury spokesman, have been slugging it out on BBC News. According to PoliticsHome, here are the key quotes.
From Michael Fallon
We're absolutely on Plan A and that was confirmed yesterday by the OECD's report on us ? they need the plan to continue. We have the credibility of the markets ? in fact it's only because we're sticking to Plan A that now we've got credibility in the markets, our borrowing rates are low, that we're able to bring forward some of the infrastructure projects and give a little extra help for families who are facing higher prices.
From Owen Smith
It's manifestly not Plan A ? they've already decided that the Plan A isn't working ? we've got, as you know, unemployment soaring, we've had a problem with inflation all year and quite clearly the government decided it needs to do something to act. However it's acting far too late because it's not going to deliver the growth.
The torrent of leaks from the Treasury in recent days means that we already know about many of the measures that will be announced in the autumn statement. Here's a run-down:
? Infrastructure investment ? This will be a key part of Osborne statement, as he attempts to kickstart growth in the UK. Under the �30bn plan, commercial pension funds will provide funding for more than 500 public sector projects - with another �5bn of funding coming from Whitehall underspend.
? A plan for credit easing was pre-announced back in early October. It is likely to involve the government underwriting bank lending, to encourage them to offer more generous loans to small firms, and could be worth up to �40bn.
? A �300m boost for small businesses. This will include extending the current holiday on business rates by another year, and a new 'angel' investment scheme to bring capital to new ventures.
? A new bank levy ? The chancellor is likely to increase the bank levy to ensure that the sector will continue to provide �2.5bn to the Treasury despite having cut their balance sheets (the tax is levied against the value of the debts on their books).
? Tax credits ? Some will be frozen at the higher income end to fund other commitments. The freeze on tax credits (for which 90% of households are eligible), could save �1bn, but hit working families the hardest
? �250m worth of support will be given to energy-intensive companies - a move already criticised as environmentally unfriendly and a boost to some of Britain's richest firms.
? Education ? �600m over the next three years, expected to fund another 100 free schools.
? Housing ? �400m fund to enable housebuilders to build up to 16,000 new homes, plus extra funding to refurbish abandoned houses .
? Unemployment ? �1bn youth contract, providing at least 410,000 work places for 18- to 24-year-olds. Deputy prime minister Nick Clegg has said it will provide "hope" to young people, after youth unemployment crashed through the 1m barrier.
? Fuel duty ? The chancellor is expected to defer a 3p rise in fuel duty which was scheduled to come in next January, after fierce lobbying by Tory backbenchers.
? Transport ? Rail fares rises will be restricted to 6% on average in January rather than 8%. The move came as a surprise to the industry, which was poised to announce new inflation-busting rises.
? Nursery places - Free childcare for two-year-olds from disadvantaged families will be extended, providing places for 260,000 toddlers.
When the chancellor delivers his budget, the leader of the opposition responds. But today, because it's the autumn statement, Ed Balls, the shadow chancellor, will reply to Osborne. The relationship between the two has become one of the most interesting in modern politics. They are both powerful, intellectually self-confident, small-p political strategists eclipsed by leaders with warmer public personalities. They have staked their reputations on rival approaches to deficit reduction. But they actually seem to get on. At the weekend we saw them being genuinely polite about each other on Andrew Marr's sofa. And, in an interview with the Independent on Sunday, Balls said he could always have a conversation with Osborne "in a friendly way".
The Ashcroft research I mentioned earlier (see 8.58am) might explain why they get on. The public view them in a similar way. In a poll, people were asked to choose from 15 words or phrases they associated with the two men. For both men, the top four phrases were the same: smug, out of his depth, arrogant and out of touch.
Here's the chart for Osborne.
And here's the chart for Balls. AS
George Osborne is expected to replay his favourite soundbite today, that his fiscal plans have made Britain a 'safe haven' from the panic raging in the eurozone. Is it true? The latest prices in the bond markets would appear to support the chancellor, with Britain's borrowing costs still slightly below those of Germany.
Bloomberg data shows that the yield (or interest rate) on UK 10-year gilts is trading around 2.25% today.
For Germany, the equivalent Bund is changing hands at a yield of just over 2.3%.
Those prices should reflect the price that either country would have to pay to issue fresh debt, so the Treasury should be reassured that the UK yield is close to its record low. Critics, though, point out that low yields are a sign of economic malaise (else investors would find somewhere better to put their money). GW
There are two polls around this morning. For the record, here they are.
YouGov for the Sun
Labour: 39% (up 9 since the general election)
Conservatives: 37% (no change)
Lib Dems: 9% (down 15)
Labour lead: 2 points
Government approval: -24
Labour: 39%
Conservatives: 37%
Lib Dems: 10%
Labour lead: 2 points
The Independent have splashed on the ComRes findings showing that an overwhelming majority of voters (69%) think the government should slow the pace of its spending cuts in order to boost growth. But the same poll shows that, although this is Labour's policy, voters by a clear margin do not think that Ed Miliband and Ed Balls would do a better job of sorting out the economy than David Cameron and George Osborne. The YouGov poll has some questions on the economy (pdf) which paint a similar picture. Asked if they like the way cuts are being implemented, voters will say no. But asked if the cuts as a whole are necessary, voters will say yes. AS
Nick Clegg has given a soundbite to BBC News about the autumn statement.
He said it would do three things.
Firstly, it keeps us safe, it keeps us safe from the debt storm and the market turmoil in Europe and elsewhere. We are going to be upfront with people about the difficult challenges we face. This coalition government will continue to lead to provide the country with the stability we need.
Secondly, it will make sure that even as we take these difficult decisions we do so as fairly as possible. We will be giving support to the poorest, to those who lost their job through no fault of their own, more childcare to help thousands and thousands of families, more support to get young people into work..
And, third and finally, it will set out a plan to get building, to build the homes, the houses, the roads, the broadband infrastructure we need for a strong and prosperous Britain. Those are the three things this autumn statement will do.
City analysts believe that George Osborne will be forced to admit to a "black hole" totaling tens of billions of pounds in Britain's public finances. The OBR is expected to slash growth forecasts for at least the next couple of years, which will scupper the chancellor's goal of eliminating the structural deficit by the end of the parliament. The Financial Times (subscription) has calculated that this weaker growth (which results in lower tax receipts) means Britain will still be labouring under the burden of a �30bn structural deficit in 2014-15, not the �6bn structural surplus targeted by Osborne for that fiscal year.
According to Howard Archer, economist at IHS Global Insight:
The chancellor's fiscal targets further out now look unattainable under the current public spending and revenue plans, given likely extended weak economic activity.
It's not exactly a disaster for Osborne - read the small print, and the target is to "balance the cyclically-adjusted current budget by the end of a rolling, five-year period", so he can argue that he has not failed his own test. But it will mean that further austerity measures will probably be needed into the next parliament to tame the deficit, making a pre-election giveaway budget even harder to achieve.
And the short-term picture could be even bleaker -- Michael Saunders, UK economist at Citi, reckons the structural deficit could be �50bn larger than planned in 2013. The kind of black hole that devours every
bit of optimism in its path? GW
Plans to provide �5bn of public sector funding to stave off recession will hurt the poorest in society the most, charities for low-income families have warned. Our colleague Jill Insley has the full story.
Len McCluskey thinks the voters want to hear reassurance, not gloom, from George Osborne today, but a study of public opinion commissioned by Lord Ashcroft, the former Conservative deputy chairman, suggests the opposite. Ashcroft published his research, which combines polling with focus group work, at the weekend, and it's worth reading (pdf). Ashcroft thinks voters will respond well to "honest gloom" because they won't believe anything more sunny.
George Osborne can take comfort from two things as he prepares to deliver a gruesome autumn statement to the voters. First, they will be more impressed to hear honest gloom than they would be by a cheerful assessment that seems to deny the evidence of their own eyes. Second, nobody believes there is very much he, or any government, could do today to overcome the economic crisis ...
If the Chancellor's message seems unpalatable, it will at least have the merit of being, for voters, believable. Over-claiming on the economy would not just be unconvincing, it would reinforce persistent perceptions that he and his party are out of touch with life as it is lived by most people.
According to Ashcroft's reseach, participants in focus groups were also not impressed by Labour's five-point plan for growth. They had not heard of it and, even when it was explained to them, they were sceptical. "When explained, some participants thought some of the five proposals had some merit, but ? as with government growth initiatives ? sounded small given the crisis," the report says. "They did not need to be taken seriously because they were not likely ever to be implemented, and sounded as though they would cost money, further underlining suspicions that Labour were not serious about the deficit." AS
Like Ed Miliband, Len McCluskey, the Unite general secretary, wants George Osborne to use his autumn statement to announce a change of course. In an article, McCluskey says Osborne should offer the electorate optimism, not pessimism.
Unite has always argued that the call for cuts is misguided. The only way to recover our economy is for the government to embark on a programme of growth, similar in scope and intelligence to that pursued by the post-war government ...
George Osborne should realise the public are not interested in fiscal pyrotechnics. They want reassurance. They want to know that you can create real jobs, that these will be stable, and will allow people a dignified working life. They want to stop the fear heaped on top of fear, with the attacks on earnings and job stability.
This country needs leadership, not Private Fraser claiming "we're doomed". The fear this government is spreading may be crucial to its plan to roll back our state and to destroy the social architecture which has sustained this country since 1945, but as analyst after analyst states, it isn't working. Time to change tack, and fast.
On the Today programme this morning Colin Ellis, a former Bank of England economist and now head of research at the British Private Equity and Venture Capital Association, said that George Osborne could not blame the eurozone crisis for Britain's sluggish growth. The quote is from PoliticsHome.
[Blaming the eurozone] certainly stacks up in terms of where we are now and the uncertainty effecting the economy now but the problem is in terms of what we have seen last year it doesn't stack up at all. Actually in the 12 months to September of this year we have only seen the economy grow by 0.5% which is the about to 2% lower than we would expect in a normal year. The big reason for that isn't the eurozone crisis, the big reason is we haven't seen the rebalancing in the UK economy that we had hoped.
Ed Miliband, the Labour leader, has been on ITV Daybreak this morning. He said he would like to hear George Osborne use his autumn statement to announce that he was changing course.
I think what we are going to see today is unemployment is up, growth is down and borrowing, which was the test the government set itself, is on the way up too. That is why I hope the chancellor, in the interests of the nation, will change course today. He will say 'Actually, we haven't got it right, we took a gamble, it hasn't worked. Let's change course, let's find a different way forward'.
On days like this, my inbox normally gets clogged up with emails from betting companies publicising their silly budget bets. But I'm sure none of them will be willing to take money on a bet that Osborne's won't be saying: "Let's change course." AS
Good morning. I'm Graeme Wearden. Two economic questions will dominate the autumn statement: how badly has Britain's growth slowed, and is George Osborne still on track to hit his "fiscal mandate" (eliminating the structural deficit and delivering a balanced budget, excluding capital expenditure, by 2015-16)?
Both questions will actually be answered by the independent Office of
Budget Responsibility. Osborne will announce its latest forecasts in the statement, with the OBR itself releasing a detailed Economic and Fiscal Outlook after the chancellor finishes speaking.
The new forecasts could give Osborne one of his more uncomfortable moments since becoming chancellor 18 months ago. The GDP predictions in March's budget must be revised down ? Britain will not post growth anywhere close to 2.5% in 2012. Instead, the gloomy outlook will probably show that the UK economic recovery has come badly unstuck.
Critically, the OBR will also rule on whether the government is likely to hit its fiscal targets (both for balancing the budget, and a "supplementary" target for Britain's debt-to-GDP ratio to be falling by 2015-16). The OBR outlook report will also include detailed projections for unemployment, inflation and the credit market. The chancellor can (and surely will) point to the debt crisis across the Channel for holding Britain back.
Still, the more disappointing the figures, the greater the concern that Osborne's fiscal consolidation programme has floundered. And for the City, that could put Britain's reputation as a relative safe-haven under scrutiny. GW
"I'd start with the gloom - and build up to the doom." That's the cartoon in today's Times, depicting an adviser to George Osborne. When Osborne became chancellor, he wanted autumn statements to be low-key affairs. Gordon Brown had turned the traditional autumn statement into the pre-budget report, a mini budget that allowed him to indulge in parliamentary grandstanding. Osborne's plan was to save his big announcements for the spring budget, and to revert to the convention of using the autumn statement as a policy-lite update on the state of the national finances. But, with the economy stalling, Osborne embarked on a Whitehall scramble for ideas - almost any ideas - that might kickstart growth. Today we're going to hear them. This is as big as a budget.
I'm Andrew Sparrow (AS) and I'll be writing the live blog today with my colleague Graeme Wearden (GW). We'll use initials to show who's writing what; if there are no initials on a post, that'll be because we think it probably doesn't matter. Broadly, I'll be writing about the politics and Graeme will be writing about the economics. There are two key timings that you need to know.
12.30pm: Osborne delivers his statement in the Commons. That's expected to last for about an hour. After he has spoken, Ed Balls, the shadow chancellor, will respond and then other MPs will get the chance to question Osborne. The whole session should finish at around 2.30pm.
3pm: Robert Chote, chairman of the Office for Budget Responsibility, holds a press conference. Osborne will mention the OBR's new growth forecasts in his statement, and the OBR's report will be published as soon as Osborne sits down, but the press conference will be important because the OBR's figures are likely to be the key story of the day. According to Nick Robinson on the BBC, government sources who have seen them describe them as "shocking".
It's never easy being chancellor when you have to deliver bad news. Osborne claimed yesterday that the public supported the government's economic strategy, and polling figures suggest that there are some grounds for thinking that's true. But today's he's going to have to find a new political narrative on growth. We've already had two, quite different, ones from the Conservatives.
1. Sharing the proceeds of growth. After David Cameron became Tory leader, he and Osborne based their strategy on the assumption that Britain would continue to grow richer year by year. The Tories would "share the proceeds of growth" - ie, continue to fund public services, but save a bit of money for tax cuts.
2. Postponing growth. After the 2010 election, Osborne told the electorate to prepare for two or three years of economic pain. He assumed that growth would safely by back on track by 2015, and (although he never said this) that the Conservatives could win a second term on the back of pre-election tax cuts.
Now there's a new backdrop.
3. Er, what growth? Today's figures will suggest that the recovery will be much harder than anyone thought.
I'll be following today's announcements in detail. But, in political terms, the real test is whether Osborne can persuade voters that the government is doing the right thing in such a bleak economic climate. AS
Source: http://www.guardian.co.uk/uk/blog/2011/nov/29/george-osborne-autumn-statement-live
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