Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
An account already exists for this email address, please log in.
Osborne takes a leaf from Brown’s book
The Chancellor made a classic Gordon Brown play in revising the figures to fund his U-turns, says John Stepek.
The Autumn Statement may have given us the perfect demonstration of why good government in the UK requires competent opposition, argued Janet Daley in The Daily Telegraph last week. And she's right. While several pundits lined up to applaud the political wizardry of George Osborne's U-turn on cutting tax credits, and his cunning ruse of leading everyone to expect cuts to policing that never actually materialised, anyone who actually cares about the long-term state of the UK economy should have been dismayed by last week's show.
Osborne pulled a rabbit out of the hat this time on the basis of revised forecasts from the Office for Budget Responsibility (OBR). The OBR said he'd have £27bn more than he expected, due to higher expected taxes and an assumption that interest rates on Britain's debt would remain lower than it had previously thought. As Daley notes, if "the Treasury ends up with more money than was originally predicted, surely if he believes what he believed he should use that windfall to pay down the debt so that we ensure economic security for the future".
Instead, he used it to fund his U-turns. This is a classic Gordon Brown play revising the figures when they're not adding up in quite the way that you want them to and it wasn't the only leaf he took out of Brown's book. As my colleague Merryn Somerset Webb has noted elsewhere, Osborne has made an art form of presenting fiddly tax changes as "feel-good stories" by "hypothecating" them diverting VAT on tampons to women's health charities, for example, or describing the 0.5% additional company payroll tax as an "apprenticeship levy".
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
But the reality is that Osborne bottled it. His tax credit cuts were more than justifiable given the sheer rate at which spending on them has grown (more than quadrupling in "real", inflation-adjusted terms between 1998 and 2011). And if he can't make them now early on in a parliament, and up against an opposition that's as unelectable as it's likely to be then he will never be able to do so.
The risk for Osborne, of course, is that by avoiding making those tough decisions now, they might come back to bite him. Rising interest rates could reverse that "windfall" overnight and the last thing he wants when he's a leadership hopeful in the run-up to 2020 is for the country to be staring another debt crisis in the face yet again.
Sign up for MoneyWeek's newsletters
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
