pre-Budget report

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"]

 

Lord Mandelson is in charge of the Labour election campaign but, in reality, he has little choice but to work to Ed Balls’ playbook. The truth is that when the Tories promised to reverse part of the National Insurance tax rise, it turned this election into a big test of the Balls vision of British politics.

The origins of this lie in the November Pre-Budget Report, which set the cornerstone of the Labour message. Spending on schools went up in real terms, a great triumph for Balls at a time public sector cuts. The downside was that National Insurance had to rise. 

Jim Pickard

It was all just a dream.

You may have thought that the Tories were the party of fiscal probity. You may have thought that they were the ones who were going to get a grip on Britain’s desperate public finances. They were the ones who would prevent the loss of the UK’s AAA credit rating and keep interest rates low. Etc, etc, etc. 

Sometimes it seems like the only trusted voice in politics is that of the Institute of Fiscal Studies. In Westminster, IFS papers have the weight of something like a Papal edict. Here’s our selection of the best slides from their latest presentation on the PBR. Hats off to Gemma Tetlow and Stuart Adam.

 

There is at least £730m of “reprioritised” spending in the PBR, covering new pledges on mortgage support, support for the unemployed, scrapping boilers, “strategic investment funds” etc.

The point is that Darling has decided that it is better to spend savings on new commitments, rather than paying down debt. It is an attempt at sugar coating what was always going to be a grim run down of the public finances. 

There is relatively little detail on where the cuts will come in various departments. But some blood is spilled on pages 109-110. This £5bn of additional savings comes from areas ranging from bus passes to cutting skills budgets. Here’s a selection:

– £1.4bn from withdrawing the “jobs guarantee” for young people from 2011 

Three FT experts give their views on Alistair Darling’s pre-Budget report. With Chris Giles, Nick Timmins and Patrick Jenkins

 

One moment of political theatre in this PBR was the raid on City bonuses to pay for increased support for unemployed youth. “This additional money will be used to pay for the extra measures, already announced, like help for the young and older unemployed to get back into work,” Darling said. But if you look at the PBR fine print, the pledge is not as simple as it seems.

Bringing forward the “jobs guarantee” for young people from a year to 6 months costs about £355m in 2010. But a footnote in the PBR notes that this is “funded by Department for Work and Pensions underspend”. No mention of the banker tax. 

We’ve just returned from the Treasury briefing and there is plenty of fascinating detail to turn over in the PBR. But first it is worth highlighting one of the big strategic choices. While the package is broadly neutral, Alistair Darling has changed the fiscal mix in his plans to tackle the deficit: this PBR increases spending by raising taxes.

This balance between whether taxes or spending should carry the heaviest burden in terms of reducing the deficit is one of the most important decisions a chancellor can make. As we reported earlier this week, a recent Treasury study reviewing successful fiscal consolidations around the world gave ministers some sound and simple advice: the best way to close the fiscal gap is 80 per cent through spending restraint and 20 per cent through taxes. 

UPDATE: Summary of the main points of the pre-Budget speech

The following is a summary of the chancellor’s pre-Budget report; most recent statements at the top:

[Chancellor sat down at 1.18pm]

Raise starting rate on National Insurance to ensure that no one earning less than £20,000 will pay extra

All National Insurance contributions up by 0.5 per cent from 2011

Spending on overseas aid will rise to 0.7 per cent of gross national income by 2013

Further £2.5bn for military operations in Afghanistan

All public sector pay rises to be capped at 1 per cent from 2011 

We will have live coverage of the PBR here from 12.30pm.

In the meantime, here’s the latest on Alistair Darling’s speech: