Autumn statement 2011 as-it-happened
Read our minute-by-minute account George Osborne's autumn statement with politics.co.uk's live blog.
By Ian Dunt Follow @IanDunt
10:03 – Morning all. It's supposed to be one of the major highlights of the parliamentary year, and if you suffer from severe brain damage or pronounced spiritual decline then that may be true. For the rest of us, it's an extremely dull piece of political theatre in which the central message is one of doom. Today's autumn statement will likely see the Office of Budget Responsibility (OBR) downgrade all its expectations for the British economy, while chancellor George Osborne tries to reassure us that his new initiatives will make everything better. I'll take you through those in a moment, as well as what we can expect from the OBR, which is the main news of the day really, but in the meantime here's today's news story.
10:13 – The theory in Westminster – and I don't mean that in a disparaging way – is that Osborne's been announcing a hatful of initiatives because the Treasury knew today's news would be dominated by the downgraded forecasts from the OBR. That's got the ring of truth about it. Osborne has announced a plan to prop up banking loans to small- and medium-sized firms by up to £20 billion. Because the government is only liable if the banks offering the loans collapse, the extra borrowing doesn't appear on the balance sheet. Then there's the £5 billion for infrastructure projects, funded through 'under-spends', including tax avoidance.
10:25 – Osborne's trouble is that he has to balance two competing requirements. On the one hand, he wants to maintain market confidence by sticking to the deficit reduction programme. If the markets aren't satisfied, we'll face higher costs of borrowing and it will be harder to eradicate the deficit, Osborne has argued. Meanwhile, he needs to boost consumer confidence, because without that there's no growth and it's still impossible to cut down the deficit. But is the choice really as simple as that? Plainly not. Yesterday, the OECD said there was room for relaxation in the spending cuts programme without spooking the markets. Osborne will be reluctant to go down that road now, primarily for political reasons. In fact, he could change a thousands aspects of his plan and he'd still call it Plan A. The OECD isn't the only source of concern, however. This morning's ComRes poll for the Independent shows majority concern even among Tory voters for a pause in the deficit reduction plan. The poll shows 54% of Conservative supporters demanding a delay to the cuts, together with 71% of Liberal Democrat supporters and 86% of Labour voters.
10:45 – Poll after poll shows the public accept both ideas: that the deficit must be reduced, which will mean cuts to public services, but also that no confidence means no spending, no spending means lay offs, and lay offs mean a higher unemployment benefit bill, among other things. Furthermore, with prices – particularly energy prices – rising and wages flat-lining, even at work families are facing one of the most significant squeezes on their living standards for a generation. Osborne's pre-statement announcements have concerned investment – bank lending, house building and the like. But he has nothing to offer the squeeze on working families. That's why you can expect Ed Balls to make a big deal out of the 'squeezed middle' in his response in the Commons this afternoon.
10:49 – On the investment side, expect Osborne to confirm that £20 billion of the infrastructure investment programme will come from pension funds and £5 billion from capital under spends. There should be £600 million over the next three years for 40,000 extra primary school places, although there's suspicion in Westminster that this is a re-announcement. There'll be a £1 billion youth contract to alleviate unemployment for young people. The bank levy is likely to be increased to counter the banks using capital adequacy rules to reduce their balance sheets. The increase will probably still see the same £2.5 billion income. There is also expected to be a 3p rise in fuel duty, a freeze on higher income tax credits, £250 million support for energy-intensive companies and a restriction on train fare rises to six per cent – little bit of 'squeezed middle' policymaking at the end there.
11:01 – On the economic forecast, things are a little more complicated. Look out for the rise in net national debt, which was expected to hit £1.36 trillion in 2014/15 but will probably be higher by the end of the day. If it stays level, Osborne's will sleep soundly this evening. Also watch for how net debt rises in percentage terms. This is important politically – Alistair Darling had planned for a 60% rise, while Osborne had planned for 51%. If those figures get closer it presents a bit of a problem for both parties. There'll also be news on jobs, with OBR forecasts for employment. Hook that up with projections for average pay and prices and you've got the most potent political data available. There should also be data on why the growth figures are being downgraded – if the OBR blames the eurozone it will be music to Osborne's ears, but if it's domestic it plays into his enemies' hands. Obviously, we'll be watching the market reaction when the statement is done – both the FTSE 100 and the cost of insuring the sovereign debt.
11:25 – OK, final bit of analysis. Watch out for exactly how much debt we end up with today. Debt will be partly reduced by record low bond yields – allowing Osborne to argue that by sticking with the programme we win market confidence and can afford to direct more money to schools and hospitals. But there's another angle to that. Low growth means high unemployment, which means more welfare and less productivity, prompting higher public sector borrowing. (You may want to bear this in mind the next time you hear Osborne say 'you can’t borrow your way out of a debt crisis'). Reuters think the borrowing bill will be £86 billion higher. It’s possible the figure by the end of the day will be £132 billion, once you factor in the £46 billion already announced. This opens up a strong attack for Labour, because it was over the level proposed by Gordon Brown at the election. Best of all for Labour – that borrowing would have been to create jobs, not to pay for people to be unemployment. Finally, today will probably be the day we know for sure that the structural deficit will not be wiped out by the time of the next election – a key part of the coalition's political strategy.
11:30 – The prime minister's spokesman just informed journalists there was applause at Cabinet this morning when Osborne presented the autumn statement. Well that may be, they are entirely mad after all. Barring a remarkable development, this is not a good day to be George Osborne. Our correspondent will be in the Commons while I live blog from outside. Once it's done we'll bring you comment, analysis and a parliamentary sketch. Kick off is at 12:30.
12:23 – Well we just watched the chancellor arrive in parliament, so it won't be long now. Foreign Office questions is currently winding down in the Commons, with William Hague's distinctive voice, and less than distinctive views, filling the chamber. Meanwhile, RMT general secretary Bob Crow hasn't bothered waiting for the autumn statement to deliver his verdict on the autumn statement
12:26 – Labour whips Rosie Winterton and Tom Blenkinsop are busily organising the opposition benches. On Twitter, wry pundits are taking bets on how long it will be before Osborne mutters the classic lines – 'this mess we've inherited' etc.
12:29 – MPs are busy tweeting away in anticipation as well. "In the chamber for the important Autumn Statement. It will be interested to see how many of the things I've pushed for have made it in!" says Lib Dem Julian Huppert.
12:32 – Osborne is up and says he will explain our current situation. "We will do whatever it takes to protect Britain from this debt storm," he says of the eurocrisis. "Today we set out how we will do that, by showing this country can live within its means."
12:33 – The central forecast from the OBR does not predict a recession in the UK, Osborne says, but they have revised down growth prospects for the UK. We'll get 0.9% growth this year and 0.7% next year. We'll have 2.1% growth by 2013, three per cent for 2015 and 2016. Bad news. Osborne says we probably won't avoid recession if the eurozone slips into oneHe adds that the OBR blames external inflation shock for the downwards revision. They say this explains the slowdown in UK growth. They also blame the unsustainable boom before the crisis and have therefore significantly reduced assumptions about potential for the economy. "The boom was even bigger, the bust even deeper and the effects will last even longer," he says.
12:38 – That's a 25% cut for growth figures for this year and 70% for next year, by the way. Borrowing levels have beaten Darling's plan. It's £127 billion, then £120 billion, £100 billion, £79 billion, £59 billion and finally £24 billion.
12:40 – "Borrowing is falling and debt will come down," Osborne says. "It is not happening as quickly as we wished because of the damage to our economy by the ongoing financial crisis. We will see Britain through the debt storm." Cameron looks very grave. Clegg keeps biting his lips and whispering to Danny Alexander. It looks like the increase in borrowing has hit £100billion in less than eight months. Miliband and Balls are talking animatedly on the opposition bench and comparing notes.
12:43 – Public sector pay freeze to be extended by two years to one per cent per year. He says this is "tough but fair". The independent pay review bodies will look at how public sector pay can be made "more responsive" to local markets – making the regional economies more "balanced". There are shrieks of hate towards Osborne from the Labour backbenches.
12:46 – Osborne breaks off to demand the unions "call off the strikes tomorrow". Bad time to mention it. At the current rates of inflation, he's committing to a four per cent real cut in public sector salaries each year for another two years.
12:47 – Welfare payments – the annual increase in the basic state pension is protected by the triple lock, he reminds MPs. It means the state pension rises by £5.30 next year, the largest cash rise and "a commitment of fairness to those who have worked hard all their lives". Cameron is frowning so hard the wrinkles may never fade.
12:49 – Osborne confirms he will up-rate working age benefits in line with September's CPI of 5.2%.
12:50 – "Let's not leave it to our children to take emergency action to rescue public finances. The state pension age will rise from 66 to 67 from 2026 – in line with Australia and Germany. "We are showing a world sceptical that democratic western governments can take tough decisions that Britain can pay its way in the world." Fascinating sentence.
12:52 – The national loan guarantee scheme will use credibility from international markets to help domestic economy. He confirms he'll use £40 billion from the Bank of England.
12:54 – "The important thing is to get credit flowing to Britain's small businesses," Osborne says. He says "no government has ever tried anything like this before", then adds: "We won't get every detail of this right first time". Now we're on right to buy.
12:56 – There are sporadic moments of silence, then more bitter, angry shouts from Labour. Osborne says right-to-buy will be "brought back to life". He will publish the government response to the Vickers report next month – much sooner than expected. He will oppose the EU financial transaction tax – "it is a tax on people's pensions". Instead they'll stick to the permanent bank levy. He confirms he will raise it. It will be 0.088% as of January next year. He will stop pension funding arrangements, saving half a billion quid.
12:58 – Roads, railways, power station, broadband networks – these are all promised, along with the requisite finance from savings in the current Budget. Watch for the small print on that one, ladies and gentlemen. He mentions "exploring guarantees and letting city mayors borrow against future tax receipts". He jokes: "It's British savings for British jobs" – a play on Gordon Brown's ill-advised 'British jobs for British workers' line.
13:01 – Osborne announces a series of measures on regional roads, bridges, water bills etc. It sounds impressive, but again – be cautious. Much of this could be a re-announcement, or could fall apart under investigation in the next couple of days. "This all amounts to a huge commitment to overhauling the physical infrastructure of our nation," Osborne says. "And we will match it by overhauling the digital infrastructure too." Cue announcements about super-fast broadband.
13:03 – Cameron's face is fascinating. The frown is epic, and when a smile creeps in at Osborne's forced jokes, it looks strained and under extreme duress. Occasionally he looks up dreamily, as if plagued by doubt. Osborne's voice is going – it always does at these things.
13:05 – Backing there for new Thames crossing and extended Northern Tube line – an interesting chapter in the confusing relationship between Osborne and Boris. Eric Pickles is clasping his hands together as if he's praying. Osborne is dropping many green initiatives. Bercow urges the House to calm down. "One honourable member has probably shouted enough for one day," he says precisely. Can't see who he was referring to. Some Labour MPs are red-faced with hate. Osborne is confirming getting rid of employees rights to make it easier to 'hire' (read: 'fire') workers. There will also be cuts to health and safety – "because we have a regard for the health and safety of the British economy too".
13:10 – Osborne confirms gradual stepping down of corporation tax – it'll be cut to 25% in April 2012. There will be income tax relief at 50% for investors putting less than £100K into a business. The business rate holiday has been extended until 2013. With attacks on employee rights, union strikes, public sector pay, green industry and foreign aid and praise for Thatcher's right to buy, this is all becoming a satisfying event for right-wing Tory backbenchers.
13:15 – Osborne goes out of his way to praise Michael Gove, who is "doing more than anyone who's ever held job before", apparently. Some 40% of two-year-olds will get nursery support, he says, doubling the current amount of early years learning funds. Osborne is really struggling with his voice now.
13:18 – Osborne says British people understand the problems we face. "People know that the promises of quick fixes and more spending at times like this are like the promises of a quack doctor offering a miracle cure. We do not offer that today. We offer a government committed to take Britain safely through the storm. Leadership for tough times, that's what we offer." And with that, he's done. Ed Balls is up. Extraordinary noise.
13:19 – Bercow shuts up Tory MPs. Balls blames Osborne for a "truly colossal failure" of his plan. The OBR has confirmed that growth is flat lining – down this year, next year and the year after. Unemployment is rising. More borrowing than Osborne planned, more borrowing than the plan he inherited at the last general election. "His economic and fiscal strategy is in tatters," Balls says. "Plan A has failed and it has failed colossally." "Today we find out the truth – it's just not working. The PM likes to say you can't borrow your way out of a crisis. Can the chancellor confirm that is exactly what he has been forced to do?"
13:21 – The Tory benches are relatively quiet as Balls talks. "It's not as if they weren't warned – including by their coalition colleagues," Balls continues. Balls quotes the IMF boss who warned against "slamming on the brakes too quickly". He says consumer and business confidence has slumped. We have slower growth than anyone but Japan – who had an earthquake. Growth will be 0.9% this year, he says, with mock sadness. "We learn that even judged by the one objective this chancellor set himself – to get the deficit down – he's failing." Will Osborne confirm that compared to his autumn statement a year ago, borrowing won't be the £46 billion already announced, but £158 billion?
13:25 – "The complacent hubris of a year ago now a distant memory", Balls says. With unemployment up and borrowing up "going further and faster has been counter-productive and self-defeating – we've had all the pain and none of the gain". Osborne blames everyone and everything, from snow to the Japanese earthquake. "Anybody but himself, Mr Speaker. It is his failing plan that has pushed up unemployment and pushed up borrowing. Britain's economic recovery was choked off a year ago, before the eurocrisis." Only Greece, Portugal and Cyprus have grown slower than us.
13:28 – Bercow has to stop Balls due to noise. "No matter how long it takes," Bercow warns. Balls says the government doesn't like it when someone speaks the truth. "How much worse does it have to get, how many more young people have to lose their jobs, how often does he need to come here and downgrade his growth forecast before this chancellor finally sees sense?" Balls asks. "Once again the chancellor is making a catastrophic error of judgement. He is refusing the learn the lessons of history or economics. He got it wrong 18 months ago. He's getting it wrong again today."
13:31 – Balls says the OBR forecasts show growth revised down, so it clearly doesn't believe his plans will create growth. Similar calculations have been made on unemployment. He says the forecasts says unemployment will be higher next year and year after. Employment will fall by 100,000 next year. Both these facts were not mentioned by Osborne. This is effective stuff from Balls – good rhetoric, logical argument, strong parliamentary performance. Ed Miliband looks up at him like it was his daddy.
13:34 – Even in the last few minutes studying the small print, Balls says, they've noticed Osborne giving with one hand and taking with another. The growth measures will involve a cut in tax credits – how much will it cost a working family? he asks the chancellor. "If we're all in this together, why is it always families, women and children who pay the price?"
13:36 – Grim faces on the government front bench. "We all know why this oh-so-political chancellor won't budge. Because to change course now would be to admit he's got the key economic judgement of this parliament absolutely categorically wrong," Balls says. He calls for a balanced and credible plan on the deficit. And with that, he sits down. Osborne's back up. "The shadow chancellor complains we're borrowing too much and then proposes we borrow even more. It is completely unconvincing and a reminder to this side of the House why we are so pleased he's in the job we're doing. He is a permanent advertisement for why… we should never trust Labour again."
13:39 – Osborne says Balls was wrong to say the OBR found UK growth below eurozone growth. Tories lose it a bit, dramatically pointing at the document for Balls. Unsavoury spectacle, as you'd expect. "There is not a single credible political party proposing more spending apart from the Labour party opposite." Not true by the way – there's the government of Denmark. Osborne now reads Blair's interview on Radio 5 this morning, saying any government would have to make tough choices. "Go on, boo him," Osborne dares Balls.
13:42 – As Osborne speaks Balls shouts at him "from a sedentary position" as Bercow would say. For his part, Osborne and Cameron just had a chat during Ball's statement. Osborne focuses on the eurozone crisis, as before. Everyone knows his argument is absurd. "Why does he advance it?" the chancellor asks. "There is a very simple reason. Because if he admits we're in a debt crisis then he has to admit we borrowed too much when he was in office."
13:44 – As Osborne finishes his statement, Balls resorts to the old 'flatline' gesture. He really must stop that. OK, we now go to backbenchers. We'll leave it there for now. News, sketch, analysis and more coming up. See you tomorrow for PMQs, when the scenes will be just as appalling.
