Loading summary
Transcript17 lines
- [00:01]
A
Hello.
- [00:01]
B
Welcome to Hot Soup. I'm Martin Rogers, here with Tony Travers to talk about the Government's recent Autumn Statement. Tony, welcome. So what has the Autumn Statement done for the position in the country of the government and their economic plan?
- [00:18]
A
Well, the Autumn Statement, I think, brought us all up to date from George Osborne's own mouth, as it were, with something that most people already knew, certainly most who'd looked at these kind of issues, they. They'd already concluded that because growth was much, much slower than was originally expected, that the Government's efforts to eradicate its deficit by 2015 were no longer going to occur. And as a result, it was going to take to 2017, 18 or 2018, 19. I think most commentators had already got there and George Osborne announced it as in that way at the Autumn Statement last week.
- [00:56]
B
Did the Autumn Statement show that Osborne learnt from the Budget this year, famously known as the Omnishambles? Has Osborne learnt lessons from that event?
- [01:08]
A
I think he did, yeah. I mean, the first thing is this wasn't all leaked in advance, which was a big mistake they made in the March Budget. But more than that, he put on a confident performance and of course, as it's now widely known, for whatever reasons, caught Ed Balls, the Shadow Chancellor, on the hop. And the immediate reaction was exactly the opposite of what happened at the Budget, when it was seen to be a chaotic budget and that Osborne and co had done badly this time, it was seen that the Opposition had underperformed and that they had done less well out of it. So in those terms, I think there was some learning and the treasury controlled the process and it was all presented more effectively.
- [01:49]
B
Has Osborne been credible with this? Part of the reason that he caught the Shadow Chancellor on the hop was including the 4G sail figures, which is an event that hasn't happened yet. He's already included that in order to show the deficit coming down. And yet he made a big play of saying we don't fiddle the figures anymore like Labour used to. Are his figures as credible as he says? Is the OBR up to scratch when it comes to their numbers and predictions as well?
- [02:25]
A
I mean, you have to accept that the OBR is doing what it does and attempting to be independent. It is sort of independent of government and it does what it does professionally in the best way it can. I mean, when these licenses are sold, they would score against, or they'd reduce government borrowing and, in effect, government spending in the year that they hit the books. So the only question is, is it this year or will it be the coming year or the year after. And it's clear the OBR thinks it will be in the year it's stated to be in now. So though it looks a bit odd, I mean booking income that hasn't come in yet, there's no doubt that when it does come in, it will count in the way that is now suggested. I think the more serious question is you can only sell things off once. So whatever the effect is in the next year's figures, it won't be there to have that effect in the year after or the year after that, or ever again.
- [03:19]
B
Given that, what is the future of public spending going to be in this country, given that's going to be a one off benefit to the public finances. But what about the future going forward?
- [03:33]
A
Well, the Chancellor's decided to reduce the deficit by taking 80% of the strain is being taken by reducing or holding down public expenditure. Having said that, the present government said it wants to protect the NHS in real terms. It's doing something similar with schools. Despite all the publicity about benefit cuts to individuals and households, the total benefit bill is rising largely because of the number of older people and also because the growth in the economy has been much slower than was expected. So if you add all of that together, a great chunk of public expenditure is, cannot be cut. And that means that for the remainder of public expenditure, including capital investment, local government and one or two other departments in Whitehall like Justice and the Home Office, they're being hit much harder. And indeed the Chancellor has announced in the Autumn Statement that there will be further cuts in 201314 in order to pay for a slight shift of spending towards higher capital expenditure. So for those bits of government that are under pressure, I'm afraid they're going to remain. Thus not only to 2014, 15, 15, 16, but probably out to the end of the decade, none of this will change. Even if there's a change of government, that means very, very difficult. Huge pressures on particularly local government expenditure looking ahead.
- [04:58]
B
But what about the tax raising side? We've seen cuts to corporation tax. Is that likely to bring in much revenues? There chance of that being the stimulus that most people agree that this economy needs. They've gone for the tax reduction rather than government stimulus approach. Is that likely to bring in much revenue? Is it likely to kick start the economy?
- [05:24]
A
I think the UK government, like almost all governments these days, is locked in a downward spiral of competition over particularly taxation of businesses in this country. Corporation tax. I mean this is an issue that's been made even more complex by the Massive publicity recently given to big corporations, many of them multinationals, clearly not booking tax you'd expect them to book in this country. So it's a very complicated issue with countries competing with each other to lower their corporation tax rates, and yet big corporations seeking to avoid tax as well. So the idea that reducing corporation tax a little bit more is the key to Britain's economic success, I suspect is fanciful. It's going to take more than that. So they did announce a future cut in corporation tax. Fuel duties have also been held down. But again, this is just not big enough to make a difference for the set pattern, it looks to me anyway, of UK economic growth, or lack of it.
- [06:26]
B
Do you think there is going to be much of a positive resulting from this, or is it just too much small measures tinkering around the edges to really have much of a difference on the economy?
- [06:36]
A
I mean, the government has made it absolutely clear that cutting the deficit is its main and to some extent, absolutely not only, but nearly its only priority. Everything falls out of that. And so clearly they are now extending the period over which the deficit will be cut. That means more years of austerity for the public sector. But, you know, if you ask, does this government believe in radical stimulus to boost growth in manufacturing, or does it believe in sort of radical changes to industrial policy, I think the answer is not. Not much clue in this Autumn statement that it's changing that view. I think like previous Conservative governments recently, and indeed even the last Labour government, they believe in incentives and trying to nudge and encourage growth in the economy rather than a great big intervention policy.
- [07:31]
B
And why is it that you think the government have come out of this well and Labour have come out of it badly?
- [07:38]
A
Well, I think compared with the budget, it could hardly have been worse. The budget this year was so bad for the government that even an average or moderate reaction from the media and commentators would have been okay. In fact, I think the government's come out of it relatively well in the sense that there was nothing that shocking in the Autumn statement, nothing that's turned out to be particularly embarrassing. And the fact that Labour didn't respond particularly effectively helps Osborne. But the big test will come from now on and whether the economy either grows or slips into a triple dip recession. And you know, the next election will be one on this one issue, almost certainty it will be certainly the most important. No, no elections about one issue, but this will be the most important issue. And that's not in the hands of the government. It's in the hands of what goes on in the Eurozone, what goes on in America and China. So in that sense, the government and all of us, you know, rely on what's going on in terms of economic growth elsewhere in the world to determine their and our fate.
- [08:43]
B
Great. Thank you very much. Tony Trevors, you're off the hot seat.
- [08:45]
A
Thank you.