George Osborne's Autumn Budget Statement promised the UK a bright future. Osborne took the chance offered by predictions of an economy looking more healthy to be a little less conservative with the national finances and drop controversial cuts to the police budget and to tax credits (ITV, 2015).
This time around Osborne is warning of dark clouds and the need to prepare for the worst (BBC, 2016). The Chancellor has been at pains to stress that there will be cuts in order to meet his fiscal targets. There might be some sugar coatings, but the medicine is still predicted to be sour.
However, the Chancellor will surely be hoping to be able, once again, to defy all expectations and match his Autumn reprieves. Yet those reprieves were themselves only temporary. They could only be delays of self-imposed hard choices that Osborne had undertaken to make.
Theresa May stressed that the police would still be expected to find efficiency savings (Travis, 2015) and the dropping of Tax Credit cuts were a diversion, as they were still set to come in later with the Universal Credit (Kuenssberg, 2015). They were also a gamble.
Osborne's Autumn Statement took positive forecasts as an opportunity to not make the unpopular choices, while still working on closing the deficit - betting on the forecasts panning out and with slight tax increases, around the fringes. Attempts were also made to temporarily ease the way for the middle class with the Conservatives' colourfully branded array of saving and house buying assistance - that buys time for much delayed house building (Wright, 2016) by siphoning homes from housing associations, depended on by the least well off, to increase competition in the private markets.
Wednesday's budget might reasonably be expected, by the opposition, to be the overdue reality check for those who voted Conservative last May, with the implementation of all of the delayed austerity measures. All of Osborne's public comments certainly seem to be preparing the ground for the further cuts - 50p in every £100 of government spending as he put it to Andrew Marr on Sunday (BBC, 2016).
Yet its hard to ever be too sure what the Chancellor is planning. Osborne managed expectations in the Autumn towards his plans for cuts to tax credits (Kuenssberg et al, 2015). Yet when the time came, he still found a way to avoid what would have proven a deeply unpopular cut.
This time around, with so much riding on the EU referendum including his own chances of succeeding Cameron as Conservative leader, Osborne is again unlikely to go antagonising voters if it can be avoided. Yet time is undeniably running out to meet his own deadline for eliminating the deficit (Verity, 2016), and small shifts in forecasts could lead to the need for drastically larger cuts to meet those goals.
Hints being dropped about new policies, to be announced on Wednesday, at the least suggest a wish to dampen the impact of announcing cuts. Yet the
proposed new savings top-up scheme for the least well off seems to be little but a thin veneer (Mason,
2016) - as it's only likely to help a sixth of those who are supposed to
be eligible, with Labour criticising the policy for its unrealistic
appraisal of what people can actually afford to save.
Across the floor, Labour's Shadow Chancellor John McDonnell has said he wants to see more investment (BBC, 2016{2}) - putting money into building up domestic industry as a way to rebalance the economy. McDonnell's advisors, like Mazzucato and Stiglitz, have certainly been making the argument that the state has a role to play in rebuilding the economy.
It is certainly hard to see a way forward without a lot of investment from somewhere. Osborne's own hope has been for investment in Britain to come from 'emerging markets', like India and particularly China (The Economist, 2015). For these private and foreign state investments to take the slack and pump money into sectors of the UK economy and infrastructure, according to market needs, so that the Chancellor can cut government spending.
Considering that, while defending the European Union, Osborne argued it was the UK, not the EU, that was responsible for the 'red tape' that puts off investment (Bloom, 2016) - and the Chancellor's desire to stimulate these private and foreign state investments - it might not be a long shot to suggest some sort of deregulation will be included in the budget. It would certainly offer some 'efficiency' cuts in terms of reduced bureaucracy.
If George Osborne has an ace up his sleeve, he has yet to let slip what it will be. The implementation of the National Living Wage (a higher minimum wage for over 25s), very limited savings assistance and the regular increase in the Personal Income Tax Allowance (introduced by the Liberal Democrats), do not amount to much of an offset to the expected large departmental cuts.
Will the Chancellor play some hidden card, or will the full weight of his targets finally begin to fall? He doesn't have much room for manoeuvre. His fiscal deadline is approaching, neither deficit nor debt are under control and his own outlook sees global economic struggles. And yet, after so many other sleights of hand, it would be foolish to rule out the possibility of one more gamble.
Will the Chancellor play some hidden card, or will the full weight of his targets finally begin to fall? He doesn't have much room for manoeuvre. His fiscal deadline is approaching, neither deficit nor debt are under control and his own outlook sees global economic struggles. And yet, after so many other sleights of hand, it would be foolish to rule out the possibility of one more gamble.
References
'Spending Review: Chancellor scraps plans to cut tax credits and police budgets'; on ITV News; 25 November 2015.
'Budget 2016: George Osborne warns of cuts of 50p per £100'; on the BBC; 13 March 2016.
Alan Travis' 'Theresa May to tell police: you've still got years of budget cuts to come - Home secretary will warn senior officers that George Osborne’s recent pledge to protect police funding does not mean a reprieve from further savings'; in The Guardian; 8 December 2015.
Laura Kuenssberg's 'Important to note some cuts to Universal Credit which will replace tax credits have already passed'; from Twitter; 25 November 2015.
Oliver Wright's 'UK housebuilders 'restricting the supply of new houses to keep prices unnecessarily high' - Exclusive: A record half a million homes in England now have planning permission granted but have yet to be built'; in The Independent; 1 March 2016.
Laura Kuenssberg, Robert Peston & Kamal Ahmed's 'Spending Review/Autumn Statement: BBC editors on what to expect'; on the BBC; 24 November 2015.
Andy Verity's 'Budget 2016: Osborne's economic fitness regime'; on the BBC; 14 March 2016.
'Budget 2016: 'We need to invest in the long-term'- McDonnell'; on the BBC; 13 March 2016{2}.
'The Osborne Doctrine: Britain is sleepwalking into a much closer relationship with China'; in The Economist; 26 September 2016.
Jonty Bloom's 'Osborne #BCCConf red tape comes from UK Government, "we look to EU for excuse for our own red tape"'; from Twitter; 3 March 2016.
Chris Mason, in 'Budget 2016: Low-paid workers to receive savings bonus'; on the BBC; 14 March 2016.
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