Published on November 27th, 2015 |
by Eleanor Newis
Verdict On The 2015 Autumn Statement
Now the dust has settled on George Osborne’s 2015 Autumn Statement, and presumably also back onto John McDonnell’s copy of Chairman Mao’s Little Red Book, it’s time to work out what it all means. The media seems to be full of the U-turn (or, as it would be more accurately described, the 90 degree turn) on tax credits, and the protection of police funding. But not enough people are talking about the impact that the 2015 instalment of Osbornomics will have on younger voters – or indeed those too young to vote right now. The only people who do appear to be paying attention are young people themselves: I asked some of my friends about their thoughts on the budget, and they expressed concerns that Osborne’s austerity is hitting younger people hardest. They expressed these concerns with what I thought was sterling eloquence; however, most of their comments cannot be directly quoted in this article as they contain either profanities, suggestions of violence, or comparisons between George Osborne and Chairman Mao. The point, though, is that my friends can see perfectly clearly through the rhetoric Osborne has made his tour de force: the Chancellor has always positioned himself as a politician, not an economist, but the 2015 Autumn Statement may mark a moment of change.
The cornerstone of the 2015 Autumn Statement is basically that the UK has more money than previously thought – who’d have thought it, the Tory economic plan has worked even better than first supposed, and we’re going to have a surplus by 2019-20. So where’s that coming from? Well, at the macro level, it’s coming from £12 billion of welfare cuts; the Office for Budget Responsibility (OBR) predicts GDP growth of 2.4% in 2015 and 2016, and 2.5% in 2017. The OBR also thinks inflation will remain below the 2% inflation target in 2015, before returning to around 2% in 2019. So, it all looks fairly rosy so far, no? Actually, no. Despite Osborne’s insistence to the contrary, the Institute for Fiscal Studies have analysed his budget and concluded that approximately 2.6 million working families will lose £1, 600 per year due to his changes. The IFS also said there was about a 50-50 chance of Osborne having to revise his plans completely; their line is that if the cheery picture of UK finances doesn’t hold, he will have to hike up either cuts or taxes. Osborne posited this as a change to a “lower welfare, higher wage economy”, and announced a living wage: a living wage which will only apply to over-25s. What? Yes, a living wage which will only apply to over-25s, and which is also still below the living costs of cities such as London. Alison Garham, chief executive of the Child Poverty Action Group, described it as a “higher minimum wage”, rather than a living one. Higher wage economy, George?
Plus, it seems to have been forgotten in the hubbub of U-turns that Osborne’s 2015 budget is still extremely focused on austerity: its harshness has been rolled back slightly, not cowed. Total government spending is going to be lowered from 40.9% of national income (the last tax year’s) to 36.5% by 2025. Added to this, the 3% of funding for the NHS doesn’t hold a candle to what has been spent on it in the past, and with so much public sector funding being locked (not rising with inflation), much of the spending allocations actually amount to cuts. Since we’re on the subject, we may as well get onto the infamous tax credit cuts: they were of course axed by the Chancellor after he heard the opinions of the electorate and committees set up to deal with it, as well as MPs and Lords. Yet, the policy to roll out Universal Credit – whereby all tax credits are rolled into one benefit – will still mean that poorer families are hit. The Resolution Foundation, a think tank, has estimated that the Universal Credit scheme will cost families on average £1000 in 2020, and this could rise to £3, 000 for some households. The IFS has been speaking on this one too, as IFS director, Paul Johnson told The Guardian, “the long-term generosity of the welfare system will be cut just as much as was ever intended.”
So, it seems as if Osborne may be playing us, just a little. My problem is not that the Chancellor is proceeding with austerity (I do have a problem with that, but that rant is for my friends to suffer through), but that he is trying to cover it up. The result of this is that his numbers do not make sense. I admit that maths was never my strong point, but I have been through the 2015 Autumn Statement and Spending Review with alternative documents attached (thrilling read, really has you on the edge of your seat), and it does not make sense. There are some small numbers which don’t make sense (like the fact that inflation was 1.5% in 2014, and is forecast to be at 0.1% in 2015) and some larger ones (like public sector borrowing dropping from 2014’s 94.7 to 73.5 in 2015). But, big or small, the numbers don’t seem to add up. Apparently there have been good reactions from the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development; representatives of both are quoted by Osborne in the statement. However, the IMF has also published a study recently which shows that cuts to public spending during recovery from a financial crash can mean lower growth and tax receipts, and the need for even higher borrowing as a result. A study carried out by an academic, Richard Murphy, at City University, showed that instead of a surplus in 2015, Osborne would likely see a £50 billion gap in borrowing – a figure which would be a terrifying result after austerity hardship justified only by paying for the deficit.
Osborne is giving us paragraph after paragraph of rhetoric: in talking about devolved powers for local authorities, he fails to mention that he is also cutting those local authorities financially by a significant amount. When he talks about the “national living wage”, he fails to mention those under 25 can still be exploited (and, as my friend grumbled, “fired at 25”); when he says claimants of unemployment benefit have decreased, he doesn’t say this is (at least partly) because he has taken away their ability to claim. And these are not things I have alone noticed: they were pointed out by my friends, by people who will be voting in 2020. Osborne is playing us – but he doesn’t need to win. Whilst the 90 degree manoeuvre on tax credits is not a full reversal, it shows at least that the Chancellor did have to bend to public opinion somewhat. It also showed that the British electorate are not going to be patronised by Osborne’s messing around with the English language. And this is my (biggest, not only) problem with Osborne: I understand he favours austerity, that it is ingrained into his ideology, but I do not think that patronising the electorate by trying to pretend otherwise is ingrained in his ideology. Nowhere is it written in the tomes of Adam Smith, or Thatcher, or Friedman, that one must lie through one’s teeth and hope the voters are dumb enough not to notice. One of my friends suggested I compared Osborne’s Universal Credit to Chairman Mao: I thought she was going too far, but now I think about it, guess what Osborne called his 2014 Autumn Statement? “This Five Year Plan.”