Britain is broke
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.
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).
• Read the full editor’s letter here: Britain is broke.