Wednesday 3 December 2014

George Osborne's Autumn Statement Failure

Would you trust someone with the economy when they don't know what season it is? Well, the British electorate did and as it's winter that means it's Autumn Statement time! How exciting. Alas, a bravura performance from George Osborne it was not. Forced to backpedal on collapsing tax revenues and missed deficit targets, while throwing in the bingo phrases - "the mess we inherited", "Labour's recession", and "long-term economic plan", it was enough to keep the Tory benches in good, if hardly excitable, order. Yet over the way, it was a different story. Rarely have the two Eds been tickled as pink as they were this afternoon. To have Ed Miliband openly mocking you with no comeback ... how can the man who would lead the Tories recover from that? Then came a forensic demolition from Ed Balls, followed by a savaging (a savaging) by Alistair Darling to the chimes of laughter all round. Not good. And then, at the end of the day, putting the boot in as only they know how the Tories' willing little helpers over at BIS blasted Osborne's tax plans as fantasyland economics. Not a great day, all told.

Still, the Autumn Statement is a welcome opportunity to dissect something seldom seen from the Tory benches - a morsel of quivering substance. The headline grabber, and what I'm going to stick to here, was the cut in stamp duty. A nakedly political move, of course, one that has to reach out to voters while punching the opposition in the guts. On turning the electorate's heads, this can be - and is being - spun as the Tory party embracing hardworking Britain (puke) by leaving not inconsiderable sums in their pockets. The ones who really benefit from this, however, are not your archetypal young couple priced out of the market and saving to step up to the housing ladder. No, the big gainers here are buy-to-let landlords, the majority of whom handle property of modest to middling values. Since Thatcher's council house sell off in the 80s, the constituency has been assiduously cultivated and protected by the Tories. Today's stamp duty announcement might have perceived swing voter appeal, but it's another tax payer handout to private rental.

On the other hand, by whacking up stamp duty for the 2% of homebuyers with cash to splash on £25m properties Osborne and his Treasury team and Lynton Crosby think they've stuffed the mansion tax into a sack and drowned it down the canal. The potential for Labour to gain from a bit of left populism around it has been nullified. And there we were thinking that Osborne was supposed to be some sort of political genius. On immediate appearances it does seem like a masterstroke, but it only is if it forces Labour to abandon its scheme. There is absolutely no sign the party will do so. Whatever stamp duty jiggery pokery the treasury can pull, Labour's mansion tax will go ahead because a) it guarantees a regular monthly income to the NHS, b) it is popular with people who live in the real world, and c) those same real world people are happy to see tax dodging-London spivs and whiny celebrities getting soaked, soaked, and soaked again. Presumably Osborne has calculated that he'll be able to score points off Labour by claiming theirs is a "homes tax" on aspiration and a declaration of class war. Except attacks lines like that have all the bite of Michael Fabricant's toupĂ©e. Just as it's a bad idea for the Tories to try and out-UKIP UKIP, it's just as daft to give out-Labouring Labour a go.

But Osborne's biggest error are the mixed messages he's sending out. The economy is growing strongly, but things are still "precarious". The public finances are under control, but deficit spending and public debt are growing again. We need fiscal discipline, but the government are splurging money on tax cuts and road building. From this a coherent message Osborne hopes to fashion. But he won't. Every new spending announcement he makes undermines claims against Labour's so-called profligacy. The unearned lead the Tories have on economics and finances are, unsurprisingly, starting to slip and with the government having very little to say about people's actual standards of living, this is ground Labour can make up between now and election day. Careless, yes. Savvy, definitely not.

This will be Osborne's last autumn statement, and is to be noted above all for its incoherence and wishful thinking. In that respect, as the chancellor's stewardship of the economy draws to a close he ended as he started.


Andreas Paterson said...

A really interesting thing (from my point of view at least) is the extent to which the economy still depends on housing and the wealth effect generated by rising prices. This cut seems like a cynical attempt to keep the housing market bubbling just long enough to hold off any potential disaster until after the next election.

Anonymous said...

The liberal democrats have facilitated everything the Tories have done, but they think the electorate are so stupid to believe there attacks on their coalition comrades is even semi serious.

An analogy can provide what the Lib dem position is.

If the Condems were a rape, the Lib Dems task is to pull down the victims pants in order the Tories can carry out the actual rape, then once it is done they say,

"You really shouldn't have done that, at least you could have worn a condom!"

PS I will leave it to your imagination to guess who the victim is.

Anonymous said...

They are also splurging money on trips to Mars,and paying off 100yr old debt we don't need to pay off urgently.

Roger McCarthy said...

2% of buyers pay £25m+ for a property?

As should be obvious if you think about for even a minute this is massively, massively wrong.

Do some quick mental arithmetic:

If the average is £177,000 then 2% of properties costing £25m plus would mean that about a third of total UK property market sales would be accounted for by £25m mansions.

latest actual figs that I can find that feature any breakdown by price is the HPI for Aug 2014 when 'only' 254 properties out of 82,000 (i.e. 0.3%-ish) cost more than £2m.

Nobody AFAIK even reports on the breakdown over £2m but I'd guess The number selling for £25m plus in any month is probably in low double or single figures (and may even be zero in some months) and so a tiny fractionette of 1%.

Curtly said...

The financial crisis was caused by fraudster bankers.The frustrating thing is that Miliband doesnt handle the accusations from the Coalition about 'the mess we inherited very well'. Miliband should reply by saying the crisis would have happened irrespective of who was in government at the time. I.e would the Tories have regulated the banks. And if Labour had they would have been accused of being interventionist and socialist.
Osborne and Cameron used (and still are using) the crisis to implement their ideology of cutting the state well back. They have believed in this since they were little boys at Public School and was demonstrated by Osbornes tears at the Thatcher funeral.