Mark wrote the following reaction to the Autumn Statement for political blog, ConservativeHome. It can be read online here.
At the General Election in May, Chancellor George Osborne needed to portray an economy both firmly on the road to recovery, but in a perilous enough condition to require another five years of his medicine. In securing a Conservative majority, he triumphantly pulled off this balancing act. However the relentless focus by the media on polls over policy meant that our economic position was endorsed without being fully scrutinised.
This has created two difficulties for the Chancellor going forward. Firstly, nobody is quite clear the extent of his mandate, which is why policy needs to be tentatively tested out until it meets fierce enough opposition to provoke a retreat. Secondly, we allowed the electorate to believe we were, perhaps, three-quarters of the way to recovery when the reality is that we are barely halfway. There are some pretty heroic assumptions within the OBR’s growth projections if we are truly to finish this parliament in surplus. This makes it hard to convince voters that they should grin and bear economic pain rather than push against unpalatable decisions.
As a result, today’s Autumn Statement had rather a surreal feel to it. Our back was against the wall on tax credits, but with one bound the Chancellor is apparently free. The OBR has unilaterally changed its methodology, allowing for the sudden unearthing of an additional £27bn to play with. Essentially every Budget and Autumn Statement is an exercise in cascading figures and the truth is for so long as a Chancellor enjoys the confidence of the capital markets, this does not matter. Retaining this confidence has been George Osborne’s single biggest achievement.
I am instinctively uneasy, however, that there may be some unravelling still to come. I wholeheartedly endorse bold moves towards the greater devolution of power. However, it is clear that many of the most difficult future decisions on spending will have to be made by local authorities rather than Whitehall. By 2018/19 the cumulative impact of cuts on local councils (many of which may no longer be Conservative-controlled) will really be bearing down on service levels. Meanwhile the private sector has been asked to plug the gap on housing, apprenticeships and wages.
Nonetheless, it was a bravura performance from the Chancellor and in projecting certainty and the broad strokes of a long-term plan, he will retain the trust of the markets. He presented ambitious projection on growth for 2018 and beyond. I sincerely hope they come to pass.