Tuesday, 29 November 2011

The autumn statement - for better and for worse

Make no mistake, today's Autumn Statement by the Chancellor, George Osborne (above) is very, very, very bad news for every Briton. Despite a sequence of quite well thought-out and welcome measures - especially on lending to small and medium-sized firms, credit easing and infrastructure spending - the forecasts coming out of the Office for Budget Responsibility overwhelm all of that in a tsunami of gloom.

The OBR used to say that growth this year, and over the next two years, would be between two and three per cent. Now it's likely to be less than one per cent this year and next, and then only just two per cent in 2013.

Why? Ministers would have you believe this is due to the crisis in the Eurozone. It's not true. It's in fact due to the enormous risk that Liberal Democrats and Conservatives launched out upon in their austerity drive - a high-stakes gamble that this column always opposed.

Unemployment has been rising for months; consumer confidence flatlining; growth stagnating. In fact, it's been clear since the spring that something is very, very wrong with the British economy. What's wrong is a massive hole where demand should be. John Maynard Keynes, that great master of twentieth century British economics, would say something very simple now: borrow. Spend. Look confident. Talk the economy up. Ministers' failure to do that since May 2010 has done immeasurable harm to many companies, many lives and many of Britain's poorer regions (who just got told, with the end of national pay bargaining, that they're getting their economies hacked back yet again).

And although lots of Mr Osborne's ideas announced today are good, they represent only a partial U-turn - an L-turn, perhaps. New youth employment programmes? Then why scrap the Future Jobs Fund in 2010? More infrastructure funding? Why did you cut £50bn from it last year? More lending for small firms? Why did you go so easy on the banks during the ill-fated Project Merlin, then? The questions go on and on.

What lies ahead is now a long, grim slog. There will be round after round of public sector spending cuts. There will be higher taxes. There will be higher unemployment and more uncertainty. And the debt stock still won't peak until early in 2015 - just before the next General Election. All because growth is likely to be so slow.

Tell me again what a good idea it is to take a lot of risks?