Heroes: If it looks like austerity, feels like austerity, then it probably is

 

 

‘When the rent man comes, what are you going to do?’ 

‘We fuckin’ spent it ain’t we?’ 

 
We start with the immortal words of Glen Matlock on the ‘Today’ program almost 47-yrs ago. 

Yesterday, the chancellor did the same, he had received a windfall of £27bn, and spent almost all of it. 

The windfall was due to year-to-date borrowing being lower than expected, partly because high inflation has lifted tax receipts. In addition, departmental spending budgets are not inflation-linked, and therefore remained static . 

The OBR said: The Chancellor spends virtually all of this on a 2p cut in NICs, permanent tax relief for business investment, and further welfare reforms, leaving debt falling by a narrow margin in five years. 

Revised OBR GDP forecasts show that UK growth is stronger than expected this year, but weaker than predicted in 2024, 2025 and 2026. Their revised forecasts are: 

2023: growth of 0.6%, up from -0.2%  

2024: growth of 0.7%, down from 1.8%  

2025: growth of 1.4%, down from 2.5% 

2026: growth of 1.9%: down from 2.1% 

2027: growth of 2%, up from 1.9%  

2028: growth of 1.7% 

In summary, the economy will grow less rapidly, inflation is expected to be higher. Yet, abracadabra, the chancellor offered-up big tax cuts to businesses and workers, all without increasing borrowing. 

What we actually have is ‘live now, pay later’; pre-election tax cuts funded implausibly tough public spending plans in future years. Austerity! 
 

‘the economy will grow less rapidly, inflation is expected to be higher’

 
The OBR, in its usual understated way noted that keeping to existing plans requires cuts in real terms of up to 4% for departments without ringfenced budgets. Especially challenging as there is already a record high backlog of cases in the courts, and councils are going bust. The OBR highlights a report from the Institute for Government thinktank that found that performance in eight out of nine public services had deteriorated since 2010, with schools the sole exception. 

Outside ringfenced areas, such as the NHS, defence and schools, it warned spending for unprotected departments would need to fall by 2.3% a year in real terms from 2025-26 if the government maintained its current plans for funding public services. 

Torsten Bell, the chief executive of the Resolution Foundation thinktank, said Hunt’s giveaways relied on ‘implausible austerity‘. He added: ‘The giveaways announced today are funded by handing whoever wins the next election implausibly large spending cuts. Tax cuts to boost business investment are welcome, but undermined by plans to cut public investment by over a third – it’s hard to think of a more anti-growth policy.’ 

The OBR also noted that there had been 11 section 114 notices issued by local authorities since 2018. The notice means an authority does not have the resources to meet forecast spending in the following year. 

‘Given local authorities’ statutory duty to provide a range of services where demand is likely to continue to grow, for example adult and child social care, pressure on local authority finances and services will continue,’ the OBR said. ‘Performance indicators for public services continue to show signs of strain, for example the backlog in crown courts reached a record high of 65,000 in August.’ 

It said ‘delivering these spending plans while maintaining or improving public services would require significant improvements in public sector productivity‘. 

The OBR doubts whether the existing plans, including more austerity, will be adhered to. ‘As previous spending reviews have approached, governments have topped up annual day-to-day spending envelopes significantly: by £39bn (14%) on average in the year up to the November 2015 spending review, and by £32bn (8%) in the October 2021 spending review. The outlook for departmental spending is therefore a significant and growing risk to our forecast.’ 
 

‘tax, a share of national income, is still on course to rise in each of the next 5-years to a postwar record of 38% of GDP’

 
Of course, this is likely to be someone else’s problem. As a result, Hunt used the windfall to reverse some, but not all, of the tax increases in the pipeline. The increases announced between the budget of 2021 and the autumn statement of 2022 will raise a total of £45bn by 2028-29. The cut in national insurance announced by Hunt will cost £10bn. As a result, the OBR finds that tax, as a share of national income, is still on course to rise in each of the next 5-years to a postwar record of 38% of GDP. 

Predictably, Tory MPs were divided in their reactions. 

For the loony right, Ranil Jayawardena, who runs the Conservative Growth Group, described the autumn statement as ‘a good start‘, but demanded action on the ‘unpopular‘ inheritance tax and on frozen income tax thresholds that have dragged millions of people into higher tax brackets, saying; ‘Next we need to turn our attention to the squeezed middle – the police sergeants, experienced schoolteachers and junior doctors – who shouldn’t be paying 40% tax, by lifting that threshold‘. 

Jake Berry, a former party chairman and influential ‘red wall’ MP, said that a ‘tax pledge‘ signed by more than 40 MPs earlier this year, including Liz Truss, – would apply to every forthcoming fiscal event, meaning the group will oppose any future tax rise. 

Representing a more moderate approach, centrists from the One Nation Caucus, which has 106 registered MPs, said it was ‘a fiscally responsible approach to spending‘. 

The shadow chancellor, Rachel Reeves, focussing on our downgraded economic growth prospects, said we had ‘hit a dead end‘. 

She continued, saying that working people would be ‘worse off‘ despite the government’s promises, as she and other opposition party figures stressed the continuing squeeze on household budgets from the cost of living crisis. 
 

‘Rachel Reeves, focussing on our downgraded economic growth prospects, said we had ‘hit a dead end”

 
One old Tory hobbyhorse, benefit claimants, made an unwelcome return, too, 

This was best summarised by Lucy Webster is a political journalist and the author of ‘The View From Down Here: Life as a Young Disabled Woman’. 

‘Once again, the Tories have delivered a budget that punches down. The chancellor tried to dress up his attack on disabled people as a generous offering of ‘opportunity,’ but make no mistake: the aim is simply to take away vital, lifesaving benefits‘. 

This is likely to impact disabled people should there be a total withdrawal of their out-of-work benefits when, inevitably, they can’t find work within the new, arbitrary 18-month limit. Many are already going hungry, cold or without essential medical equipment. 

‘Despite what Hunt says, extra money to help long-term unemployed people back into work will do nothing for those who simply can’t work. There are some disabilities and illnesses that no amount of retraining and, certainly, no amount of Department for Work and Pensions bullying will magic away‘. 

Prior to yesterday’s budget, Laura Trott, chief secretary to the Treasury, told Sky News: ‘Of course there should be support for people to help them into work but ultimately there is a duty on citizens if they are able to go out to work they should. Those who can work and contribute should contribute.’ 

Earlier, she told Times Radio the government’s plans were ‘not just about forcing people out…. But ultimately, you have to engage with that, and that is an obligation on you as a citizen to do this. And if you don’t do this, we will look at sanctions.’ 
 

‘And if you don’t do this, we will look at sanctions.’ 

 
The implausibility of the budget was summed-up in the chancellor’s opening remark when he said he was putting the economy back on track. Is this an admission that the Tories had done untold damage over the last 13 years and were only now getting round to trying to fix the problem? 

He boasted, ‘We’ve got inflation cracked‘. He clearly forgets that this was due to energy prices falling, and that inflation is still two and a half times the BoE’s target. 

Two things were totally overlooked in the budget; firstly, green policies, which are clearly’ so last year, darling’!  

The other was levelling-up; remember that? 

It was all the rage in 2019, and, in 2021 Michael Gove romanticised about the ‘Medici model‘, which was his plan to embed the cultural and economic dynamism of renaissance Florence in England’s neglected post-industrial regions. 

More recently his department unveiled the third tranche of cash from the levelling up fund – around £1bn for more than 50 projects across Britain. To date we have allocated £12bn to the cause, which palls into insignificance when compared to the C.€2tn spent by Germany on improving living standards in its east between 1990 and 2014. 

Even the ‘shovel-ready‘ schemes supposedly agreed in the aftermath of the 2019 ‘red wall’ election are now seen as unrealistic, given the impact of inflation on costs. Recently, the National Audit Office reported that work has not even begun on many.  

The public is justifiably underwhelmed; a More in Common survey this month found that less than 25% of respondents believed real progress has been made. In addition, research by the Centre for Ageing Better, found that older people in the north of England continue to die younger after spending more years in poor health and longer periods out of work. 

 

What I find especially interesting is the ongoing desire for levelling-up;  More in Common found that C.40% of Britons believe that reducing geographic disparities should remain a top priority for any government. Clearly, the discontent of people outside of London and the SE, that contributed to ‘vote leave’ in 2016, and Johnson’s 2019 election victory hasn’t gone away. 

Labour has recognised this, pledging to introduce a ‘take back control‘ bill if they win a majority. Within this is a promises to devolve greater powers to local authorities and communities. However, after the present Tory governments attempts to half-heartedly paper over the cracks caused by years of austerity, there must be more to any Labour version of levelling up.

To areas that suffered disproportionately from cuts to council funding, sufficient resources must be restored to allow public services to be rebuilt. An industrial strategy aimed at the regions needs to be backed by concerted fiscal firepower at a national level. 

Yesterday, the Tories did what they have come to know best reverting to a small-state, and tax-cuts. 

Plus ça change. 
 

‘Hello to you out there in Normal Land 

You may not comprehend my tale or understand’ 

 

‘The rumblings of discontent surrounding Lord Cameron of Austerity & Misery took a new turn this week.

Tax officials are understood to be examining whether he failed to fully disclose taxable perks such as flights on private planes when he worked for the collapsed lender Greensill Capital.

In particular, officials are said to be looking at a number of flights that took off or landed near his house in Oxfordshire and also in Cornwall, where the foreign secretary has a holiday home.

Cameron has holidayed extensively in Cornwall for many years, favouring the coastal resort of Polzeath as a destination while PM. In 2017, it was reported that he paid £2m for a holiday home nearby

Flight logs seen by the Guardian show at least 13 flights to and from Newquay airport in Cornwall, which are understood to have been for the benefit of Cameron , on Greensill’s private aircraft. Flight logs also show two involving RAF Brize Norton, again understood to have been for the benefit of Cameron. Brize Norton is a short drive from his Oxfordshire home.

They are also examining an offshore trust that it is understood was created by Greensill to pay him extra benefits.

Of course it wouldn’t be fair to leave Lord Cam of A&M without mentioning Brexit, his lasting gift to the nation.

Speaking to MPs on the Commons Treasury committee, Dave Ramsden, the Bank’s deputy governor for markets and banking, said the fallout from the 2016 referendum had “chilled” investment levels compared with other leading nations and contributed to a lower “speed limit” for the UK economy.

“It’s hard to conclude otherwise, that the decision to leave the EU – that may have had lots of goods reasons for it – but that it has chilled business investment,” he said.

A key driver for economic growth, business investment was now only 6% higher in real terms than in the second quarter of 2016, when the Brexit referendum was held, Ramsden said. “That’s less than 1% a year. Over that time, US business investment has gone up by over 25%,” he said.

“You can see a break in the trend for UK business investment in 2016. It had been going up since the global financial crisis and then it flattened off from 2016 onwards.”

He suggested weaker levels of investment had contributed to holding back the productive capacity of the UK economy. “We therefore think the speed limit the economy can grow at without triggering inflation is lower,” he said.

If the PM thinks this newly ennobled buffoon is going to change the Tories electoral fortunes, he really does have total disregard for the electorate.

Lyrically, we start with some doo-woppers with “Rent Man” by The Silhouettes. To finish, and to show this columns support with disabled people, the Tories latest victims we have “Spasticus (Autisticus)” by Ian Dury. Enjoy!

 
@coldwarsteve
 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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