The key thing to take away from George Osborne's Autumn Statement is this: Britain is broke. The gross mismanagement of the last few decades (manufacturing production fell by 47% between 1997 and 2007) has left us in a horrible hole.
But as Tullett Prebon's Tim Morgan puts it, none of our politicians knows how to stop digging. Real government spending was higher in 2011/2012 than in 2008/2009. Today, even as most people think the national debt is somehow falling, it is still rising at speed. We live in a country saddled with private and public debt, suffocated by the burden of carrying an unproductive public sector, and destined to see low or no growth unless we put in place some major reforms. We didn't get any of those this week.
Still, while the statement was all but pointless in big picture terms, there were a few items of interest. The main one is that it hits the better off hard. A Treasury analysis showed the 'squeezed middle' being mildly unsqueezed with a rise in overall household income of £400-£600. The top 10% by income lose over £1,400 a year.
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The effects of fiscal drag (allowances going up by less than inflation) will be part of that, but so will changes to the pension rules (the annual tax-free allowance falls to £40,000, while the lifetime limit falls to £1.25m).
But the interesting thing is the way these changes won't so much hit the well-paid, but the well-paid in the public sector. Those of us in the private sector don't often have to worry about having more than £40,000 a year to put in our pensions. But those in publicly financed final salary schemes (or defined benefit) do, due to the way a value is put on their contributions every year. Anyone on a salary of, say, £100,000-plus with adefined benefitpension, such as, say, a cabinet minister, will, as Aon Hewitt put it, "struggle to avoid" having to pay back the tax on the excess every year.
Finally, corporation tax. I noted in our blog earlier in the week that, given that we find it so hard to collect, we might be best to abolish it, hoping to get payback as the world's multinationals rush to set up home in Britain. If we don't, I said, we're bound to end up cutting it little by little in a desperate effort to create the same effect. Osborne has just cut it by another 1%.
I wonder if, come the day he is drawing his (mildly reduced) pension, he'll look back and wish he'd been more radical. As Morgan says, if a country is more an idea than a place, it's about time Britain came up with better ideas.
PS I don't mean to irritate you but I suspect I sometimes do. If there's anything you want to discuss in person (be it something you think we agree on or are pretty sure we don't) you can bid to have lunch with me in aid of the charity The Global Fund for Children UK Trust.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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