Autumn Statement 2014: Osborne’s performance will be his most theatrical

Joe Wright, 3 December 2014

‘Are we any better than we were four years ago?’ According to the ONS’ latest Economic Review, GDP remains strong with a seventh consecutive quarter of growth and an overall rise of 3 per cent since last year, marking by far the best period of economic stability since 2008.

Real earnings have fallen fast for low- and medium-skilled occupations. This was momentarily offset by more people entering higher-skilled occupations in 2014, but this trend is reversing, again ‘pulling down real earnings growth’. Most households adjusted spending to compensate.

So the answer remains ‘not really’. The economy is growing but the majority are no better off than when the Coalition entered office, save for the Liberal Democrat-inspired rise in the income tax Personal Allowance.

The state of government finances fares little better. The Chancellor missed most of his own deficit reduction targets. There remains a £50 billion black hole. On economic rebalancing, the more positive his campaign pledges, there’s little progress. Manufacturing has precariously improved, despite falling European demand, but overall growth is concentrated on London.

George Osborne is politically, not economically dogmatic. His decision to lower taxes after entering office, £7 billion more of which have been promised, show where the deficit lies in relation to his priorities. On these terms, he will be comfortable with today’s announcements: no matter how bad they seem, today’s speech will be ignored by most in the long run. Mentioning the word growth in every interview from now until the election will ensure the Conservatives maintain their poll lead on the economy.

Today’s statement will be more political theatre than policy. The business rates review, trailed by the papers as a give-away, is a good example. Business rates are the tax charged to companies for non-domestic property use. After wages and rents, they are small firms’ highest cost. Contributing £27 billion to the Exchequer, UK rates are among Europe’s highest. Property valuations, on which rates are based, occur once every five years. The last was in 2010, after which values have fallen across many regions. A recent open letter to the government published in the Telegraph listed more than 100 of Britain’s biggest names calling for premises to be revalued.

Though the review is welcome, along with government infrastructure announcements, it has been in the pipeline for some time. Announcing it in the budget as a ‘major policy shift’ is pure theatrics. The one real positive for the Conservatives in today’s message – unless Ed Balls gives another poor performance – is that they’ll have a welcome media break from immigration or Ukip.

Ed Balls needs a big moment today. ‘No austerity, no more deficit, no substantial tax rise’, still makes little sense. He needs to be candid about how he would fill the gap. Polls show patience is waning with austerity, he may have more room to argue cutting spending is not the only way to reduce a deficit. That will take more courage than has been shown in past responses.