Back in March, my immediate reaction to the Budget was that it may mark the point at which the Chancellor's reputation got reassessed in a more positive light. Thankfully this horrifically inaccurate bit of political forecasting didn't make it very far as it was pre-blog, but it did mean this time I have pondered a little on this week's Autumn Statement before putting thoughts to paper.
So here are my five thoughts:
- Why is everyone so surprised about the gloom? The easiest impression to pick up from the Autumn Statement was misery; the age of austerity will last until 2018 and everything will continue to be difficult for as far ahead as we can reasonably see. All true - but didn't we already know this? This year alone we have had a double-dip recession, tax receipts have been down, borrowing has been up and unemployment has remained high. The state remains large equity owner of two of the UK's biggest banks and the Eurozone remains in a critical state. To me, last year's Autumn Statement was the game-changing moment when the Chancellor acknowledged he would not meet his deficit targets by 2015. This year's forecasts are much more of the same.
- Stop blaming each other. Both sides of the political divide agree the situation is bad and that we are now living through a decade of austerity. Given the seriousness of this, the yah-boo politics of claiming each side is exclusively responsible for the mess feels increasingly irrelevant - more of a parliamentary parlour game than something credible. Labour was in charge when the bubble burst and didn't see it coming - but neither did the Tories. And whoever was elected in 2010 would have had to cut budgets for schools, policing and welfare to make any headway into the deficit so please let's stop pretending otherwise.
- The Conservatives' Green agenda is toast. The relish with which the Chancellor pronounced the last rites on the fuel duty escalator (and the recent battle over the Energy Bill) surely dispelled any lingering doubts that the Conservatives have ditched the 'hug a husky' pro-green policies that marked David Cameron's early leadership of the party. The political impossibility of introducing extra fuel duty in a recession also marks a final triumph for the fuel protestors of 2000 who won the war in shifting the political dynamics on petrol pricing.
- 2013 is all about the Spending Review. For the Government to make the numbers announced in the Autumn Statement relies on serious further reductions in Whitehall spending - especially with the huge ring fence erected around the NHS budget remaining. This means further significant cuts for the big spending departments like Defence, Home Office, Education and Local Government. For insurers, it raises the big question of how well Defra will be able to protect its flood defence spending from further cuts. All this confirms the H1 Spending Review will be critical in deciding the political dividing lines for the next election which will be held in May 2015, just a month into the first year of the period covered by the review,.
- Do we really have to go through all this again in March? Listening to George Osborne on Wednesday, it was hard to remember this was a Chancellor who promised to return the Autumn Statement back to its traditional role as a pre-Budget economic forecasting announcement and away from the mini-Budget give-aways of the Gordon Brown era. Instead, we had a fusion of forecasting, tax decisions and policy formulation that was more substantial than some of the Budgets of recent years. While the Chancellor needed a good performance (and gave one) on Wednesday to help erase memories of the 'Omnishambles' Budget, it is going to be difficult for the March 2013 Budget to be anything other than an anti-climax by comparison, especially when the real decisions will be made in the Spending Review.