Deficit

Jonathan Eley

Andrew Cowie/AFP

On Wednesday, December 3, the chancellor will deliver the final Autumn Statement before the 2015 general election.

There will be extensive coverage of the chancellor’s speech live on ft.com. And from 3pm on December 3, a panel of personal finance experts will be on hand to answer your questions about its contents. Submit your questions in the live reader comments field on the right-hand side of this page at any time up to and during the live Q&A. We will choose a selection for our panel to answer.

On the panel are:

  • Nimesh Shah, partner at Blick Rothenberg
  • Jason Butler, financial planner at Bloomsbury Wealth and author of the FT Guide to Wealth Management
  • Claire Evans, tax partner in the Birmingham office of Deloitte

The discussion will be moderated by Adam Palin, FT Money reporter, and Jonathan Eley, FT Money editor

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Kiran Stacey

Alex SalmondWe revealed in this morning’s FT that the Treasury is making it clear to investors in UK debt that if Scotland goes independent, the rest of the UK will still be liable for the debt that it has issued.

In other words, however the debt is carved up, if an independent Scotland defaults on one of its repayments, it will be English, Welsh and Northern Irish taxpayers who will have to pay up.

In one sense, this seems to give Alex Salmond a much stronger hand in any negotiation with the rest of the UK (again, if Scotland becomes independent) about how assets and liabilities should be carved up. After all, if the UK is guaranteeing Scotland’s debts, Salmond could turn round and insist his government will only keep up with repayments in return for another of his demands – for example, being allowed to use sterling. Read more

Kiran Stacey

Philip HammondPhilip Hammond appeared on the Today programme this morning defending his position after being accused of dragging his heels on the spending review.

The defence secretary has not yet submitted his draft plans for how he could cut 5 per cent of his budget in 2015-16 (half of that asked of other departments), but he told the BBC he was not a “hold out” adding that he hopes to have an “adult conversation” about where the axe should fall.

But in case anyone was in any doubt of how willing he is to stand up to the Treasury, he added this:

We should be very clear that there is a difference between efficiency savings, which may be difficult to achieve but are painless in terms of the impact on the front line, and output cuts, which are of a very different order and require proper and mature consideration across government about the impact that they will have on our military capabilities.

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Kiran Stacey

George Osborne and Danny Alexander

George Osborne and Danny Alexander

This June, George Osborne will unveil his spending review for the financial year 2015/16. The chancellor is expecting to have to make around £10bn of cuts to Whitehall departments, which, as we revealed in the FT a few weeks ago, would mean some departments taking a particularly heavy whack.

Our figures show that cutting at the same pace as the government has done so far, which is what Osborne has promised, would mean another £1bn taken out of both the business department and the money that goes to local government. The defence budget, possibly the most sensitive of budgets, at least within the Conservative party, would fall by nearly £770m. Read more

Tom Burgis

George Osborne

Welcome to our rolling coverage of the Autumn Statement.

George Osborne has missed his fiscal targets and cut corporation tax.

We’ll bring you all the day’s developments live. By Tom Burgis and Ben Fenton.

15.45: We’re winding up the blog now, but you can follow events as they unfold through constantly updating stories on the front page of FT.com

15.31: A representation of the “flamethrower of uncertainty” can be found in the documentation of the OBR. It is also known as a “fan chart”. I doubt George Osborne is a fan of it, though.

15.24: Chote speaks of the “flamethrower of uncertainty”- a favourite phrase, unsettlingly enough, of the OBR, which is a chart showing forecasts in a wide range that makes the chart lines look like a firebreathing dragon.

15.18: Chote says that the variation in the possible range in the forecast of net debt figures for the UK is a large number, but is “dwarfed by the scale of uncertainties” on the issuance of debt. I think that’s the second time he has said that in his address.

15.12: The Spectator is running a rather scary chart showing the lost output of the current “seven-year slump” in the UK.

15.07: Robert Chote, director of the Office for Budget Responsibility, is live now, going through his department’s figures that underpinned the bad news Mr Osborne has just had to deliver.

15.05: Gavyn Davies has blogged for the FT with his view on the autumn statement while the FT’s Lucy Warwick-Ching has collated some very interesting instant reaction from personal finance experts.

14.49: Hannah Kuchler on the FT’s UK desk has been keeping an eye on business reaction to the autumn statement.

She says:

The CBI, the employer’s organisation, urged the government to stick to its guns on deficit reduction to retain international credibility, saying it was no surprise that austerity would last longer than expected.

John Cridland, director-general, welcomed investment in infrastructure and support for exports, but said the proof was in the delivery. He said:

“Businesses need to see the Chancellor’s words translated into building sites on the ground.”

But the British Chambers of Commerce was less positive, declaring the statement not good enough for a country meant to be in a state of “economic war”.
The government is just “tinkering around the edges”, John Longworth, the BCC’s director general said, adding: “The Budget next March must make truly radical and large-scale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state. Only a wholesale re-prioritisation of resources, to unlock private sector finance, investment and jobs, will be enough to win the ‘economic war’ we are facing. The danger is that our political class is sleepwalking with its eyes open.”

14.40: Lionel Barber, the FT’s editor, just passed by the live news desk so we asked him what he thought of the autumn statement.

The Chancellor is in a hole, but the good news is that he’s stopped digging. The FT supports the government’s fiscal stance, but is there more to be done on monetary policy to boost growth? That’s the question.

14.26 Who says the British don’t like doing things the French way? Might we surmise from this tweet from the BBC’s Robert Peston’s interview with Danny Alexander, Osborne’s Lib Dem No2, that the UK’s crediworthiness might be going to way of its Gallic cousins’?

[blackbirdpie url="https://twitter.com/Peston/statuses/276330461142327296"]

Others are more chipper:

[blackbirdpie url="https://twitter.com/MJJHunter/statuses/276330252601524225"]

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Kiran Stacey

Vince Cable’s speech to Lib Dem conference was just about on-message as regard to the coalition’s economic strategy. We need the state, he said; we need a demand stimulus, he said; we are taking advantage of low interest rates and borrowing more, he said. But he didn’t quite call for more borrowing for an immediate fiscal boost.

In fact, any Lib Dem wanting to call for a departure from George Osborne’s Plan A will now find it very difficult to do so after the party conference voted overwhelmingly in favour of the current fiscal plan.

This morning, delegates were asked to vote for a motion backing the “difficult decisions taken by the coalition government” and calling for the government to “do everything possible to stimulate growth within its fiscal mandate” (emphasis mine). Read more

Kiran Stacey

George Osborne

George Osborne

This morning’s papers are not going to make comfortable reading for George Osborne (not the first time we’ve said that recently…).

The Guardian has splashed on a story in the New Statesman that several of the 20 economists who signed a letter in 2010 backing the Osborne deficit reduction strategy had now changed their minds. The story was picked up in other papers too.

But of greater political significance is the piece I wrote in this morning’s FT about how the first fissures are starting to show in the joint coalition commitment to Plan A. Three Lib Dem MPs went on the record to say they wanted the chancellor to be more flexible with his   spending plans, and allow the deficit reduction targets to slide in order to pay for a short-term stimulus. Read more

Kiran Stacey

David CameronDavid Cameron’s interview with the Telegraph this morning was interesting for lots of reasons. But the main one was his big hint of having to cope with austerity until 2020. Asked if there was likely to be a decade of cuts, the prime minister said:

This is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.

I don’t see a time when difficult spending choices are going to go away.

Bleak words, which echoed what Sir Jeremy Heywood, the cabinet secretary, said last month. He told an audience at the Institute for Government:

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Kiran Stacey

Is the government in danger of handing over its reputation for being pro-business to Labour?

William Hague’s message in yesterday’s Sunday Telegraph that businesses should “work harder” to promote growth was certainly bold.

At a time when the economy is stagnating and the government’s strategy is increasingly being questioned, turning round and blaming the sector of the economy you’re relying on to turn that round seems like a reckless strategy.

Before we get on to why it’s not a good idea to blame business for not supporting growth, let’s mention why Hague has a point:

  1. The govt is implementing the cuts programme many business groups have supported, and is sticking to it.
  2. Corporation tax is low and getting lower – on its way down to 20 per cent.
  3. Embassies around the world are pushing UK trade as their top priority, and the prime minister has taken huge business delegations on state visits with him on several occasions.

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Kiran Stacey

When George Osborne told the country last November that he was going to miss the target of eliminating the current structural deficit by 2015, Labour were quick to tell everyone how the chancellor’s economic gamble had failed.

Not only was Osborne having to borrow more to pay for this failure, the opposition claimed that he was even now having to borrow more than Alistair Darling would have done under his deficit reduction plan. That claim was illustrated by this graph, showing the course of borrowing under Darling’s 2010 plan and Osborne’s modified 2011 plan:

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Kiran Stacey

Harrier jump jetsAn additional 3,000 civilians will be axed from the Ministry of Defence after ministers realised the department’s “black hole” – the gap between revenue expectations and spending commitments – was bigger than previously thought.

This “black hole” has become one of the government’s most effective examples of Labour profligacy versus coalition (especially Conservative) fiscal discipline. But in truth, we’ve never really known how big it is or how close it is to being eliminated.

It is generally reckoned that when the coalition came in, there was a £10bn gap that needed closing over the course of the parliament, but the total overspend on existing projects could eventually be as high as £38bn. Read more

Kiran Stacey

Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.

This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.

So who suffers if these are frozen or cut? Read more