Attention in Westminster last week turned to the Chancellor’s Autumn Statement – George Osborne’s ‘half-term’ report on the nation’s finances.
The news on Britain’s economic performance was unremittingly grim. For the fourth time, Mr Osborne was forced to tell a hard-pressed nation that his original forecasts were optimistic, that Britain’s deficit (the difference between what Britain brings in and what it spends) and its debt would continue to grow - more in the five years of this government than it had in the entire 13 years of a Labour government - and that we will all have to pay more for longer.
He also engaged in some trickery that would have made even a Starbuck’s accountants blush by factoring in revenue generated by the sale of the 4G spectrum – which hasn’t even happened yet!
Britain’s growth figures also made for grim reading. Growth under this government was 0.6% - way lower than Germany, the USA and our key foreign competitors.
The government are fond of likening the nation’s debt to a family credit card, which, whilst an alluring image, is economically illiterate. Britain’s finances must balance over the long term, but in the short term the capacity to borrow and pay off enables us to balance out the peaks and troughs of economic turbulence.
No-one should be in any doubt: Britain must reduce its deficit. The big political debate is how. There are two ways of achieving this; a) raise more revenue, or b) spend less. Most expenditure cuts lead to a reduction in revenue, and whilst there is a place for this (public spending constraint would have happened to a degree under any government) it is a limited strategy.
With fast growing economies in India, China, Brazil and Russia and huge increasing demand in Asia, a shrinkage strategy not only misses out on the global opportunities of tomorrow but it costs us jobs and revenue growth today. That’s why we’re falling behind our major competitors in the G8.
A case in point can be seen in capital allowances for businesses. When Labour lost power, businesses were able to claim a tax allowance for up to £100,000 of capital spending, encouraging firms to invest in equipment and machinery, and providing a boost for our manufacturing sector.
At the first budget Mr Osborne cut the allowance to £25,000, leading to a reduction in corporate spending. At this budget, to great fanfare, he put it up again- the right policy but after two wasted years of slow growth.
Whilst the original cuts were too far and too fast, choking off growth, the investment appears to be too little, too late.
Independent figures suggest we’re still years away from a balanced budget. People struggling with rising prices and frozen wages will fear that their personal finances can ill afford further economic failure, so I hope that the pressure to go for growth and follow One Nation enlightened governments like Germany and the US will become so unanswerable that even our Chancellor will bow. Future generations deserve nothing less.
by Toby Perkins, MP