Cuts

Kiran Stacey

We reported this morning that Tory MPs are trying to make sure that the MoD doesn’t suffer further cuts at this year’s spending review. Mark Pritchard, a Tory backbencher, summed up the feeling of many of his colleagues when he told us:

Colleagues have, to date, reluctantly backed reductions in the MoD budget. However, any additional cuts to the defence, beyond those already agreed, will create a substantial political backlash. In short, the MoD budget has been cut enough, and the Treasury needs to look elsewhere for savings.

Pritchard and his colleagues should be on safe ground: the prime minister himself said that the defence settlement signed in 2010 would require “year-on-year real-terms growth in the defence budget in the years beyond 2015”. 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"]

 Read more

Jim Pickard

Terry Smith, chief executive of Tullett Prebon, was among those making the case this evening for bigger, deeper cuts at a fringe event. The businessman called for a Plan B: not the “Keynesian stance of Ed Balls” but something else: “Deeper cuts, or, real cuts, we haven’t really had any cuts so far.

Clearly this would not be music to the ears of the left; but then Smith estimates that Britain’s real debt (including pension liabilities, PFI commitments, bank guarantees etc) is about £3.6 trillion – or £60,000 per capita.

He warned that the biggest areas of public employment – public sector, housing and finance – were unlikely to experience growth in the near future. Cuts were inevitable: “It’s only a question of when the markets will impose them.”

His counter-intuitive theory is that banks don’t have enough capital to lend because people will not deposit money with them when interest Read more

Jim Pickard

When Nick Clegg called for paid internships last week there was an ironic twist as it emerged that the coalition had just cut funding for that purpose.

Now, as Cameron makes his most rightwing speech on immigration to date, it is worth pointing out the flaw in his vow to make incomers speak the Queen’s English.

As the Guardian points out today, the coalition is making deep cuts to the state programme for teaching immigrants the language.

From the autumn these lessons will only be free for immigrants on jobseeker’s allowance Read more

David Cameron actually made three policy concessions this week. At this rate, he may as well install a revolving door at No 10. It’s another Lib Dem victory of sorts, but they’re not really crowing about it.

Buried in the documentation for the Universal Credit is a softening of the plan to cut payments for disabled people in care homes. Read more

Jim Pickard

Ed Miliband just quoted Paul Twivy, former chief executive of the Big Society Network, during prime minister’s questions. It’s worth repeating the quotation because I haven’t seen it in any newspaper before.

According to the Third Sector website, Twivy – who stepped down as ceo in October but is still involved in the network – admitted that the BS idea was not popular.

“The big society is a raw ideology promoted by the Prime Minister,” he said. “It is divisive even within the Cabinet, and it is increasingly loathed by the public. The problem with the big society is that we’ve had huge ideologies come and go before.”

It is a striking confession, coming from someone so closely involved in the Big Society, and one which Miliband used to deadly effect.

Cameron came off worse during today’s clash between the two leaders, attempting without much success to defend cuts to charity budgets. Read more

Jim Pickard

Eric Pickles has claimed that councils can make huge savings – enough to counteract the impact of imminent cuts – by administrative changes such as cutting pay and merging departments.

Indeed there are numerous examples of council waste or extravagent spending. BBC London is reporting today that Newham Council (now laying off dozens of staff) spent £111m on buying and refurbishing its head office. Read more

Jim Pickard

It turns out today that cuts to local government “spending power” will only be 4.4 per cent on average next year across Britain’s councils. So says Eric Pickles and his DCLG department. This sounds great compared to the figure floating around recently about a 10 per cent cut for the same period.

Except this is looking at apples and pears.  Read more

Jim Pickard

My colleague Fiona Harvey has dug out the fact that an array of flood prevention schemes could soon be culled – despite claims by ministers pre-CSR that flood funding would be protected.

There could be “dozens” of flood measures among the casualties of the spending round including a £100m flood prevention scheme in Leeds.

Caroline Spelman, secretary of state for the environment, said on Wednesday that although the floods budget would be cut by 20 per cent much of this would be found through efficiencies. But Defra has since admitted that proposed flood defence projects would be cancelled, although it has not yet offered any details.

The budget for building new flood defences and upgrading existing defences has been reduced from an average of £335m a year to £261m a year for the next four years.

You could say this is unsurprising in the context of wider cuts to almost all parts of government. But it flies in the face of comments by ministers: such as Ms Spelman’s insistence during the summer that she would ensure the protection of vital spending on the key areas of animal health and flood prevention.

 Read more

Jim Pickard

The first post-CSR survey of public opinion I’ve seen has been published by KPMG and Ipsos Mori. They have spun the results as:

The majority (59%) of the British public believe that it is necessary to cut spending on public services in order to pay off Britain’s high national debt Read more

Jim Pickard

When George Oborne addressed the cabinet this morning his message was the usual one about trying to make the cuts as fair as possible and to “fall on the broadest shoulders”. The chancellor admitted that this was an “anxious time for some in the public sector” who could now lose their jobs.

Lord Adonis meanwhile claims in this morning’s FT that “Whitehall is stunned and morale risks plummeting” as the cuts reality dawns. This chimes with what I’m told by several civil servants who read this blog.

Many departments are already going through a redundancy process – instigated in June – even before the new £83bn wave of cuts which will see an estimated half a million public sector jobs go.

I am told of one leaving party for BIS staff, held in a local pub, which attracted three or four hundred attendees. The atmosphere was utterly morose. Meanwhile some civil servants are receiving letters giving them only a week to decide whether or not they want to leave. As for those who are quitting, there are rumours that they may not be paid their redundancy payments until the end of November – a six week gap. “It feels really chaotic,” one tells me. Yet this is only a foretaste of the cuts to come. Read more

Has Michael Gove’s discreet approach to budget negotiations paid off? Education bravely resisted the shroud waving that marked the defence review. But it looks like Gove has emerged with a better deal than Fox, at least in terms of his resource budget.

We already know that schools spending — based on the Ed Balls baseline — will rise in real terms (albeit by a tiny amount). Today’s surprise will be that the education department will win the best settlement of all the unprotected departments. That means its resource budget will be cut by less than the 7.5 per cent imposed on defence. When it came to a stand-off between kids and frigates, the kids appear to have prevailed.

Now, as with all settlements announced today, the headline figure mask a great deal of pain. Spending channelled through local authorities (such as children’s services) will suffer. So will spending on 16 to 19 year olds. And of course the resource settlement does not include the education capital budget, which is about to be thumped. Read more