I talked about the big picture here
and here,
but as ever there is a lot of interesting detail. Here are five
thoughts that I have not seen expressed elsewhere.
1) Tax credits. As people gradually began to twig, the U-turn on tax
credits is only temporary: most tax credits will become part of
Universal Credit when it is introduced, and the cuts there remain. As
the Resolution Foundation show,
those at the lower end of the income distribution are eventually
going to be made a lot worse off.
But it’s still a big victory for those opposed to the tax credit
cuts, for two reasons. First, a few years without the cuts are worth
having. Second, and perhaps more importantly, Osborne wanted the cuts
to come in early so that their memory would be diminished by the time
of the next election. That will no longer happen, which might mean
that when the time comes they too will be dropped/delayed.
2) Apprenticeship levy. One of the problems economists have with
budget/autumn statement commentary is incidence - it is generally
assumed that a tax on business is different from a tax on wages. But
as the OBR point
out, the evidence suggests that higher payroll taxes (‘taxes on
jobs’), which this levy essentially is, will be largely met by
firms paying lower wages. But if the Chancellor had raised the same
amount of money by increasing employees NICs, everyone would be
making much more fuss about this tax increase (particularly as he had
pledged not to do so).
One point I didn’t hear mentioned is that we used
to have an apprenticeship levy - it was abolished by Mrs. Thatcher.
3) Democracy. I’m occasionally told that I’m too critical of
this government, and some even suggested on Wednesday that this
Autumn Statement represented a move to capture the centre ground. But
the Statement included a 19% cut in money provided to opposition
parties. The Treasury said
it was “time for political parties to pull their weight in
difficult times.” I think the chief executive of the Electoral
Reform Society was nearer the mark when she said it was “bad news
for democracy”.
4) Labour. Talking of opposition, there was a lovely moment at the
end of Osborne’s speech
where he noted that Labour had suggested maybe a 10% cut in money for
police was appropriate, only to announce no cut at all. It was just one more example of how timid Labour has become. Would it have dared
increase the stamp duty on second homes/buy to let by so much? And
then of course there was the higher minimum wage in July.
I normally try to avoid watching/reading political speeches, and only
turned the TV on to see how John McDonnell performed. As I have said
before, many on the left are their own worst enemies when it comes to
the issue of political spin. They despise it, which is healthy in
itself, but they actually need to be far better at it than their
opponents because of media bias. Of course some things are so
blindingly obvious …
5) Fragile fiscal forecasts. The thing I really dislike about
occasions like this is all the emphasis on the aggregate fiscal
numbers. Some people seemed surprised that the OBR should make such a
big change to its tax take forecast, but as a one time forecaster it
did not surprise me a bit. Macro forecasts are very unreliable
anyway, and one of the hardest macro numbers to forecast is the
budget deficit. Yet people obsess over small changes to the deficit
in future years, as if this mattered. It does not.
One final comment on comments. This end of austerity meme is silly.
Here is a chart.
