Wednesday, 25 November 2015

Autumn statement, 2015

This afternoon George Osborne delivered his Spending Review, generally known as the Autumn Statement. His tone was triumphal: growth is higher than expected; tax receipts are therefore up and the Chancellor was able to don a long white beard and hand out early Christmas presents. Invited to sit on his lap were: national infrastructure; museums, culture and sport, the armed forces and the police - all of whom got their spending increased or at least maintained.

Osborne: We are the builders

Osborne went on to unveil some rather radical changes. He sounded low key but there could be dramatic effect if they stick: local councils to keep business rate receipts with the power to vary the rate; consequential abolition of the central government grant to councils so they become entirely self-funding. Also all schools to become "academies" and so taken out of local education authority control; a new 2% "levy" on council tax for adult social care (ie, putting up council tax by 2%) and retirement age to rise in line with increased life expectancy - some people might never see a pension at that rate.

There were several casual mentions of some quite extreme austerity. HMRC is to be 18% "more efficient", which presumably means 18% of staff made redundant. Osborne is introducing a "digital tax account" for all taxpayers and businesses and it looks like he expects all tax transactions to take place online. Once this has happened taxes such as CGT will become payable within 30 days of the transaction rather than at the end of the year as now. Nice, for HM Treasury.

He seems to have adopted "We are the builders" as his catchphrase. He's going to build 400,000 new houses before 2020 and they will be affordable to buy, not just rent. To achieve this he will throw money at the building firms and knock down nine prisons, including Holloway, and sell the land. New prisons will be built but one imagines not in London. The land value of London's big old Victorian prisons must be enormous and George could not keep his hands out of this cookie jar. Actually it's amazing he has resisted for the past five years.

He is also increasing stamp duty by 3% (of the total sale price, one assumes) on buy-to-let and bought-by-foreigners houses. There will be devil in the detail of this provision but it needed to happen. We cannot have our national housing stock bought up by the Chinese and be paying them rent forever more. He should probably have gone further.

Councils will be "encouraged" to sell assets - he didn't say how.

Income tax and Corporation tax will be devolved to the devolved nations (Wales, Scotland) with special legislation passed so the Welsh and Scots will not be entitled to a referendum before that happens. Presumably this is a poisoned chalice they would not willingly drink from.

There were a slew of cuts in other departments: Department of Transport 37% cut; "biz budget" halved, and others. Most departments are getting cuts.

His big rabbit out of the hat was the abolition of the tax credit cuts which haven't actually happened yet. SNP Treasury spokesman Stewart Hosie later noted wryly that the Tories cheered just as much for the abolition as they did for the introduction a few months ago.

After an hour and six minutes he sat down and shadow Chancellor John McDonnell rose to reply for the opposition.
McDonnell: I have a little red book

For his first twenty minutes McDonnell was lackluster and dull. He wittered on about the Chancellor not abolishing the deficit like he promised five years ago - a speech that could have been made anytime in the last year. MPs in the benches behind him started filing out of the chamber. But then, in a stroke of genius, he pulled out Mao's little red book (his personal autographed copy it seems) and started quoting the late Chairman of the Chinese Communist party. Labour MPs perked up no end and he even woke up the Tory side.

So he ended on a high.

As always the effects of this Spending Review are difficult to predict. A lot was made of the give-aways but the percentages of cuts muttered sotto voce were high. The procedural changes have the potential to be significant over the long term. Ultimately it was a job application by Osborne to become Prime Minister, and it must be said, the Tory MPs seemed quite happy.

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