Friday, 6 December 2013

A bizarre Autumn Statement

This year's Autumn Statement on the economy, as delivered for the fourth year by Chancellor George Osborne (above) was a right old curate's egg affair - a mix of the good, the bad and the downright ugly (if you'll forgive two cliches in one sentence).

On the one hand, the economy is growing again - rather rapidly, in fact, though actually the Chancellor very slightly revised down official growth forecasts for 2015-17. That'll leave him plenty of room to talk about a boom in a May 2015 General Election, of course, and the lacklustre reply of the Shadow Chancellor, Ed Balls, will have cheered him no end as well.

So is the Chancellor similing? Probably not, no. Because when he announced that he wanted to 'rebalance' the economy, and lauded 'the march of the makers' - aspirations he still mouths, though less and less convincingly - he didn't think that productivity, investment and exports would do so, so badly.

The impression lingers that this isn't the recovery the Chancellor wanted, and that he's grabbed at Help to Buy and a debt-driven consumer binge to get himself out of the hole he himself dug. Just like the Conservatives did in 1954-55. And 1963-64. And 1986-87. Etcetera. The Office for Budget Responsibility now thinks that ridiculously buoyant house prices will shoot up even faster than they thought a few months ago, and that personal debt will go up more quickly at the same time. That's because real wages are going to continue to stagnate or go down, and Briton's won't be borrowing to make themselves feel good: they'll be running down their savings rate to pay their bills. All at a time when austerity as executed by public sector spending reductions won't do anything to put wind in the economy's sails: for the Government is going to speed up spending cuts, not slow them down as we get closer to balance in the next Parliament - leaving the public sector smaller than it's been for two or three generations.

It's a recovery, but it might be a voteless one - akin to the Wilson government's 'recovery' in 1968-70, which eventually led to Edward Heath defeating Labour at the polls in 1970, or the even stronger growth of 1994-97, which ended in disaster for the Major Conservative government of the time. Half of voters seem to think that the Autumn Statement was bad for an economy they increasingly define as their own household budget and outgoings. It's hard to come back from those sorts of figures.

Growth, yes. Victory, no.