The Autumn Statement in more detail

1. Introduction

If there is one thing George Osborne excels at, it’s telling a good story. Yesterday’s speech to the House of Commons was a case in point. He gave a confident, positive speech that appeared to eliminate all the negatives created by his tax credits fiasco and put him back in the running for party leader. As usual, the media were willing to shower him with praise.

And as usual, it is up to commentators like ourselves to look beyond the glossy spin to uncover the reality. This article examines some of the issues that Ekklesia is interested in more detail, highlighting why with this particular Chancellor it’s so important to always read the small print.

2. Main headlines

The £4.4 billion planned tax credit cuts have been scrapped, with taper and threshold rates for working tax credits and child tax credits remaining the same

This is a huge ‘U’ turn for the government and a big win for Labour, the SNP, Greens, Plaid Cymru and Liberal Democrats who all opposed it due to public pressure. However, £12 billion will still be cut, and as noted here , it comes at the expense of reduced housing benefit for people in social housing. In addition, people on universal credit will still have this cut and those who have more than two children per family will not receive tax credit for their extra children. So, what looks at first sight is a help for working families, is anything but, with many families being £1,000 a year worse off.

The government will therefore breach the overall welfare cap in the first years of this Parliament

This is immensely embarrassing for George Osborne. Earlier in the year, he set a cap on welfare spending, not because it was necessary, but as a political ploy to make Labour look profligate for opposing it. Labour avoided the trap by not voting against it, a position they have continued to hold. Though many of us felt they should oppose it seem that they might have been right on this occasion. Osborne’s tactics have misfired totally, and he will be forced to go to the House of Commons to ask for a vote to lift an unnecessary cap that he himself imposed. It is hard to see how this will reflect well on him.

State spending will be 36.5 per cent, as a share of total output, in five years. Down from 45 per cent in 2010.

Although this is less than forecast, due to a windfall that is looking increasingly shaky , it is startling to see how much state spending has reduced in five years. By 2017, the UK is predicted to have the lowest state spending in Western capitalist countries, confirming that austerity has always been about ideology rather than necessity.

The overseas aid budget will increase to £16.3 billion by 2020. The Foreign Office budget will be protected in real terms

It is good to see an increase in the aid budget, and given international tensions, it is not surprising that the Foreign Office is being protected. However, we should be a bit wary of celebrating too much. Overseas aid is being linked to the protection of the ‘national interest’, with new aid aims being ‘strengthening global peace, security and governance’. In addition, the Chancellor has been very clear that aid and defence will go hand in hand. We should pay close attention to the aid projects funded over the next few years to ensure their mission is not distorted by military aims.

Day-to-day spending on transport, environment and energy will be cut by 37 per cent, 15 per cent and 22 per cent respectively

These are strange cuts from a Chancellor committed to developing infrastructure. How the Department of Transport is supposed to function on two thirds of its budget is anyone’s guess. Expect to see reduced local bus services, increased train costs, and potholes coming to your area soon. The environment and energy cuts are also worrying, particularly when the focus on energy is being switched to nuclear and fracking at the expense of renewables.

Defence spending will rise from £34 billion to £40 billion by 2020. More money for the security services

As ever, there is always money available for war. This £6 billion increase clearly covers the rising costs of Trident. However, as noted in previous article, the £12 billion increase in equipment not mentioned here, but announced recently, seems to be a direct correlation with the £12 billion welfare spending cuts.

3. The Economy

We are producing an in-depth look at the economic forecasts in the Autumn Statement. However there are a couple of points to note here. In 2010, the Chancellor predicted the deficit would be halved by 2015. He failed to achieve this and so one wonders how seriously we can take his claims to be in surplus by the end of the Parliament. Particularly when some academics are suggesting the deficit might actually rise again. Furthermore, it seems like he has based his figures on a very lucky £27 billion windfall, which as noted above, may prove to be inaccurate. Despite his confidence, George Osborne may yet fall on his face. And, as the Shadow Chancellor, John McDonnell pointed out yesterday, it is often the Chancellor who gets the biggest cheers on the day who is roundly criticised further on down the line.

4. Security, justice, police

Given the events of Paris, it is not surprising that Osborne has stepped back from no real term cuts to police budgets. And despite his sarcastic comment to Andy Burnham that the Shadow Home Office Minister asked for 10 per cent cuts, in reality, the Chancellor is also bowing to pressure from the Opposition who argued that 10 per cent should be the maximum amount of cuts.

However, there will still be ‘efficiencies’ to be made in the sharing of resources, and (as noted in previous articles) there is always a limit about to the amount of back office functions you can merge. We may not be losing any more police on the streets, but their capacity to respond will be seriously hampered if they have insufficient infrastructure to do the job.

We should also pay close attention to the closure of Holloway and building of new prisons, and whether these will remain in state or private hands. Whilst the sell-off of under-used courts will put pressure on an already stretched court system as well as meaning some people being forced to travel further to attend court.

5. Welfare and tax credits

As noted above, the tax credit cuts won’t stop poor people being targeted. Capping housing benefit for tenants in social housing is likely to hit many families hard, in particular, people with disabilities. Whilst stopping payment to people going abroad for over a month will hurt families who have relatives abroad and may need to visit for longer periods at times of crisis.

The idea of merging job centres with local authority buildings is another version of sharing back office functions. Given how overcrowded local authority buildings already are, and that the Chancellor is urging councils to sell off their assets, it is a bit difficult to understand how this might be achieved in practice.

A number of changes are being proposed around disability benefits, which are analysed in more detail here. As yet their implications are unclear, but based on past experience, disabled campaigners remain concerned

6. Health and social care

The rise in the NHS budget of £20 billion, plus a cash injection of £26 billion is offset by the service needing to make £22 billion savings. Furthermore, the extra frontloaded money (£10 billion already pledged, a further £6 billion to come) is just creating problems further down the line.

The increase of £600 million for mental health is welcome, but a drop in the ocean due to social care cuts, and the devastating impact of welfare cuts on mental health. Whilst scrapping grants for student nurses and replacing them with loans will undoubtedly reduce the number of people willing to train, rendering the promise to train 10,000 new nurses meaningless.

Similarly, increasing the Better Care Social Fund by 1.9 per cent will hardly change anything. Whilst taxing local people for their social care is only likely to produce sufficient income in richer areas. Whilst the promise to use £15 million raised in the unnecessary Tampon Tax on essential women’s health and domestic violence services beggars belief. Effectively, it says that men have no responsibility for paying for women’s needs.

And a worrying trend behind this (tax for social care and women’s health, loans for training) is that it pushes the burden of cost of services on individuals rather than the State.

7. Housing and local government

Again we see more financial burdens placed on individuals. All Osborne’s solutions for housing are focused on people taking out bigger loans to buy housing, with no thought given to producing a fair private and social rented sector. Whilst allowing councils to keep all the funds raised in business tax, discriminates against poorer communities. You can see more analysis of this here

8. Education

Whilst the schools budget is being protected, the Chancellor airily promises all schools will be academies by the end of 2020. The evidence of the effectiveness of academies is very thin on the ground. And the costs of conversion are rarely considered. Whilst there will be a saving as local education authorities are dismantled, this comes at a huge cost to academies who will be forced to create finance and HR posts, and buy in expertise from private companies who are likely to charge more. With the phasing out of the schools funding formula, the scrapping of the Education Services Grant and a £600 million cut to the academies budget, schools look set to struggle in future.

It is good to see that Further Education colleges which have been badly hit by the cuts are being left alone. However, like most public services they are still experiencing cuts from previous years and therefore are likely to struggle for some time to come.

9. Conclusion.

George Osborne put on a great show yesterday, proudly declaring that his economic strategy was on track, public services were great and hard workers will be rewarded

But on closer examination, it is clear that the opposite is true. His forecasts of a growing vibrant economy are based on sand. His rosy view that public services are great, bears no relation to a reality in which disabled people are sleeping in their wheelchairs because there is no-one to care for them. Whilst many of his solutions penalise hard working people, whether its those who will experience housing benefit cuts, or all of us who will pay for essential services through our council taxes.

Time and time again, the Chancellor has been lauded for his political skill at presenting his arguments well. But his fine speeches always mask a harsh reality, of a country where every public service is struggling to function and where the poorest people continue to be penalised. So I hope on this occasion, his Autumn Statement gets the scrutiny it should. And that when the dust settles, the media and the nation will see through the smoke and mirrors and recognise George Osborne for the con man he undoubtedly is.

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