Deficit

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 >>

Kiran Stacey

Alistair DarlingOn the day after George Osborne admitted that he had recently lowered his short-term growth expectations, and with a row currently waging over the government’s wish to scrap the popular 50p top rate of income tax, Ed Miliband might have been expected to use the first PMQs after the summer to attack David Cameron on the economy.

But instead, we found ourselves in two rather old arguments, about police numbers and NHS waiting lists. While both are undoubtedly important subjects, somehow the debate felt a bit off-topic.

The reason for Miliband avoiding the big issue of the day became apparent later in the session, when the prime minister was asked by a Labour backbencher about the 50p rate and replied:

The person responsible for Labour’s economic policy at the last election said that they had no credibility whatsoever.

He was referring to Alistair Darling, Labour’s former chancellor, whose memoirs published this week describe a 2009 pre-Budget report whose creation was so chaotic and disunified that it resulted in a complete mess of an economic policy. Read more >>

Jim Pickard

I provided a link earlier today to Philip Stephens’ scoop on the Sir Gus O’Donnell memo asking for potential stimulus measures to have on standby if the economy deteriorates.

At this morning’s Downing Street press conference there was a hint that the memo had not gone down very well with senior cabinet ministers: Read more >>

Jim Pickard

Alan Johnson has seemed assured and capable since taking the job of shadow chancellor – despite joking that he would need to read an economics primer to get up to speed. (In fact none of the last four chancellors have had proper economics backgrounds).

But his maiden voyage this morning was not the most awe-inspiring of occasions, taking place at the KPMG offices just off Fleet Street. There were only 20 or 30 people in the audience, all of which seemed to be either journalists or accountants from the host company. Read more >>

Here is an idea for the new “nudge unit” in Downing Street.

David Cameron has pledged to protect the £2.7bn winter fuel payments to the over-60s — but he never promised to keep the name.

Surely it is time to stop people claiming these handouts by calling them something more appropriate that would deter the wealthy middle-classes? After all, the payment has nothing to do with fuel. Done properly, this cunning intervention could save hundreds of millions of pounds — while still permitting the needy to claim.

Neil O’Brien of Policy Exchange thought something absurdly bureaucratic would do the trick. Would you bother to claim the Voluntary Age-Related Season Specific Dependency Credit? And would you be able to ever find the forms on the internet?

My preference is for something much more unappetising. Perhaps the Old Age Support Ration? That would put off Ken Clarke and Vince Cable from sending in the application. Or maybe the Elderly and Infirm Support and Sustenance Payment? Read more >>

Jim Pickard

The always self-depracating Alistair Darling* remembers today how he arrived in the Treasury without any inkling of the global crisis about to hit financial markets. I like the quote, not only because he is kind about the FT but also because it’s an insight into just how much of a shock the credit crunch was to many policy-makers.

When I was appointed Chancellor in the summer of 2007, I gave my first interview to the Financial Times – a paper for which I have the highest respect. Read more >>

Jim Pickard

It was Ed Miliband who called for all workers to have the right to flexible working earlier in the week – in a speech that pointed out that GDP isn’t the be all and end all of everything. (At present only carers and parents can do so automaticallyRead more >>

Look beyond the make-up on the public sector reform commission. John Hutton’s decision to chair it is a serious political coup for George Osborne. But the real shake-down is hidden in the small print.

Osborne said Hutton’s interim report in September will look at the “the early steps we can take to save costs”. The full remit goes a bit furtherRead more >>

Some political points have a short shelf life and David Cameron’s lament on debt interest is one of them. The trouble is that if he keeps on complaining about the terrible £70bn burden facing the country, people may actually think he can do something about it.

Take this typical comment at prime minister’s questions, which is being trotted out as standard Coalition creed: Read more >>

There seems to be a growing appetite to cut the cost of public sector pensions. A year ago, it was basically off the cards — no party would have dared take the political risk. But the coalition are now slowly making the case. There is a strong chance of a levy being imposed, if the government holds its nerve.

The stats in the OBR report today, which for the first time breaks out the annual cost of public sector pensions until 2015, are genuinely concerning. Read more >>

The next chancellor’s spending cuts will have an impact on growth. One of the worries in the Treasury is lower than expected growth will then up the ante on the cuts required to tackle the deficit. It is an horrible negative feedback loop.

If you want a sense of the scale of the challenge, take a look at Chris Giles fascinating piece on the impact of the deficit reduction plans using a replica of the Bank of England’s economic modelRead more >>

Politics for the next five years will be dominated by painful public spending cuts. But in this election every time a politician speaks, it seem to be in order to protect one more benefit perk. So far, in terms of new spending guarantees vs new cuts, the campaign score is at least £25bn to 0.

Take the appearance of Liam Byrne and Philip Hammond on Newsnight last night, which turned into the most expensive interview of their political careers. Without blinking, the two would-be guardians of the public purse ruled out means testing child benefit.

Price tag? Around £5bn to ensure millionaires (in fact anyone family earning more than £25,000) can still pick up their benefit perk. That’s roughly the size of the defence equipment budget.

Any cuts to match that? Of course not. If you try our Deficit Buster online tool, you’ll see that means testing child benefit is one of the easiest of a horrible set of choices. The public surely deserve to know where the Tories and Labour will find that £5bn. Read more >>