Wednesday, 5 December 2012

Autumn statement, winter blues..

Good morning. It's a difficult day for George Osborne, who has nothing much in the way of good news to offer, and plenty of bad. For public consumption he needs to give an honest assessment of where we are and what the next five years look like. His only chance of making the Tories electable in 2015 lies in persuading the voters that he and David Cameron, more than anyone else, are the best guarantors of sustainable, affordable recovery. But his other task is to shore up his share price in Westminster and in particular on the Tory benches. As Tim Montgomerierightly points out, he is a powerful Chancellor who enjoys the full support of the First Lord of the Treasury, but he is also a Tory whose use of power in Cabinet is a times seen as capricious, counter-productive and self-serving. The number of his Cabinet and backbench enemies is growing, in part because his approach is seen by some as bullying. There is nothing wrong with that, of course, but only if he can demonstrate that he wields his stick with a purpose. Today he will be watched by his own side for evidence that he has a plan and that it is credible.
What was a five year deficit reduction plan now looks to be an eight year scheme, with the FT (£) reporting that the Chancellor will confirm that austerity will be here until 2018 at the least. Stagnant growth over the Coalition's term has meant tax revenues are behind those projected by the Treasury and OBR at the time of the Budget. As a consequence the deficit is up and falling debt levels are still a pipe dream. As theTelegraph reports, the Chancellor's headline move will be to bolster infrastructure spending by making £5bn of cuts to Whitehall budgets. Around 100 new free schools are expected to be built as a result of the investment spending. The Independent puts the number of jobs in the firing line at 13,000. Cuts are also coming the way of the police, social care and flood defences, according to the Times (£), who add that the Chancellor will also raid the banks for a fifth time, requiring them to hand over a larger portion of their balance sheets in tax. The good news? The planned 3p per litre rise in fuel duty will be put on ice again. The Suncalculates that the move will save the average driver £7.69 a month, although given the political impossibility of forcing high pump prices higher still, a more straight-forward approach might be to strip the duty escalator out of future assumptions altogether. There will also be a pitch for the Beijing buck, with shopping visas for Chinese visitors rushed through. That's bad news for Theresa May who opposed the move when it was mooted in August. It's not quite as bad as the news for the Lib Dems, however - there won't be a mansion tax in sight today.
Switching spending from current to infrastructure spending serves a point. After 2015 the Tories hope they will be freed from the shackles of their Lib Dem partners, something which would allow them to cut harder and faster than they have been under the Coalition Agreement. One-off capital spending can be stripped out more painlessly than current spending, meaning that a shift in the balance between the two paves the way for future cuts while staying true to agreed spending levels. The bad news is that the Chancellor's infrastructure projects have a habit of failing to materialise. The Guardian points out that less than half of the infrastructure spend promised last November has been spent, and none of the £21bn of private sector investment which was anticipated has arrived either. This year's £5bn increase in investment will, the paper claims, have a "negligible effect" on growth. That's a pity, because George needs to find some somewhere. The OBR are set to cut today's 2012 growth forecast from 0.8pc to zero, and 2013 from 2pc to 1pc.  
What needs to be done? More of the same, says the Mail, which praises the Chancellor as a "beacon of realism in a sea of greens" in its leader. TheTelegraph and the Times (£) both use their leader columns to call for a more honest approach to the scale of the Government's debt addiction and the time it will take to fix the public finances. John Redwood, writing in the Guardian, argues that it is the monetary straight-jacket hampering the Chancellor, not the fiscal balancing act. While Mary Riddell argues in the Telegraph that George Osborne is happy in the mad axeman role and it is Ed Balls who has an identity crisis, many are worried that the axe is far too blunt. In the Times (£) Danny Finkelstein argues that the Chancellor's strategy will not work if the public feels he is failing to make progress, while the Telegraph's Allister Heath worries that the Mr Osborne doesn't have it in him to stop the rot:
"Osborne is stuck in a vicious circle of his own making. Low growth is making it impossible to cut spending, tax and eventually debt as a share of the economy; and excessively high spending, tax and debt are one of the main drivers of low growth. We are moving inexorably towards the levels of government debt identified by Carmen Reinhart and Kenneth Rogoff in This Time it is Different, as the threshold above which meaningful growth is all but impossible."
For industry leading coverage of the Autumn Statement as it unfolds, visit the Telegraph's dedicated website section. In addition to our rolling blog, Damian Reece and I will be presenting live video commentary before and after the Chancellor speaks. We will also have the most comprehensive news, comment and graphics coverage in Fleet Street. Don't miss out.
In a week when spending promises will be under the spotlight, the Government's statistics watchdog has rebuked David Cameron and Jeremy Hunt over their claim that spending on the NHS has risen under the Coalition. Andrew Dilnot wrote to Mr Hunt warning him that real terms NHS spending in 2011-12 was lower than in 2009-10, although he added that "given the small size of the changes and the uncertainties associated with them, it might also be fair to say that real terms expenditure had changed little over this period." The Independentreports that the Department of Health's response when challenged was to praise itself for a 0.1pc rise in real terms spending between 2009-10 and 2010-11. A classic example of "if you don't like the question, answer another one".
Tourists visiting the African scrublands in the hope to glimpsing the wildlife will soon be able to photograph one of the "wonderful" and "rather majestic" windfarms so beloved of Greg Barker. Mr Barker's boss Ed Davey has pledged £2bn in aid to take green power to the Third World, the Telegraph reports. The breakdown includes £15m to low-Carbon farming in Colombia, £100m on wind and solar powe in Africa, and a separate £15m for Ugandan wind turbines. The sum equates to £70 per household. "A fool and his money are easily parted," Jacob Rees-Mogg warned sagely from the backbenches.
Dave is planning to offer an in/out EU referrendum in a major speech on Europe in the new year, according to the Times (£). Dave would prefer to offer a loose/tight poll on the extent to which Britain binds itself to the EU's core projects, but his strategists worry that such a move would simply be grist to the UKIP mill. The Boris mill, too. The Mayor of London has been calling loudly for a radical renegotiation, and the Prime Minister can outstrip him within the Tory party by offering the in/out poll the base are after. His speech on the subject yesterday ended, as theTelegraph's Michael Deacon noted, with a quote from a Clint Eastwood film. Shortly before delivering it, Clint disposes of his much hated superior. Boris must have forgotten.
Gordon Brown has lost his pet stick insect, the Independent laments. Any suggestions as to where it might be will be gratefully received by the former Prime Minister's wife via Twitter. You could write to him via Parliament, but even given the rather sedate pace of the breed, it is likely to have moved on by the time he makes his next foray down to the Big Smoke.

John Hayes may not be Ed Davey's favourite underling but he makes one MP very happy:

@danielbyles: "Listening to John Hayes answering Select Committee questions is always a pleasure. He is so unfailingly polite and courteous."

In the Telegraph
Best of the rest
Daniel Finkelstein in The Times (£) - That bid deficit is a bogey: avoid at all costs
John Redwood in The Guardian - What George really wants
Ben Gummer in The FT (£) - It is vital that we continue the struggle against public debt
Ian Birrell in the Daily Mail - What the NHS needs even more than money - a dost of kindness
10:15 am: Michael Gove will appear before the Education Committee. The Education Secretary will be quizzed the Commons Education Committee on reforming Key Stage 4 qualifications. Portcullis House, London.
10:30 am: Defence Secretary Philip Hammond gives evidence to Joint Committee on National Security Strategy. Committee Room 4a, House of Commons.
12:00 pm: Prime Ministers Questions. House of Commons.
12:30 pm: Chancellor George Osborne delivers his Autumn Statement. House of Commons.