PLMR RESPONSE: THE 2012 AUTUMN STATEMENT

PLMR

The Chancellor of the Exchequer, George Osborne, today delivered his Autumn Statement on the economy and Government spending.

Unveiling a fiscally neutral package that sought to balance targeted tax cuts against modest tax rises (for wealthy savers) and further government savings, the Chancellor delivered a strong performance at the despatch box that distracted from the patchy performance of the UK economy and mixed Government record on debt and the deficit.

Kevin Craig, Managing Director

KEVIN CRAIG – LABOUR WILL SAY “THE POOR WILL GET POORER”
Kevin Craig is Managing Director of PLMR, a former Parliamentary Candidate in the 2005 General Election and for nine years a Councillor in the London Borough of Lambeth.

The Autumn Statement is a relatively young innovation designed to provide a mid-session tweak of things that a Government isn’t totally happy about.   But what of Her Majesty’s Opposition, the Party currently ahead by ten points in most Opinion Polls, a position that would lead to an immediate return of a Labour Government?   Labour were feeling quite bullish before today.  Three Westminster by-election wins had put MPs in a very buoyant mood. There is a confidence in Labour ranks that the foundations for the longer term, and a victory in 2015 have been established.  So what of the Autumn Statement that finished moments ago?

The Chancellor George Osborne described Ed Balls’ performance as “the worst reply to an Autumn Statement that I have ever heard in the House”.  Was it that bad?  No.  Certainly though it is the case that the Chancellor George Osborne gave a much better than anticipated performance and was visibly buoyed by doing so.  Plus the pre Autumn Statement leaks from the Coalition have been minimised compared to 2011, which made Ed Balls’ job that much harder.  It must be said that Labour’s Shadow Chancellor did not have his best day at the office with a slightly shaky start, mistiming a key sound bite on the nation’s debt and then taking care to repeat it so as to provide grabs for the evening’s broadcasters.   It is of course an incredibly difficult job to respond on these set pieces with so little chance to meaningfully prepare.  But the mood of the House communicated to me in the last half hour by MPs from both the Labour and Conservative Benches is that Osborne won comfortably today.

Ed Balls made a number of key assertions.  He didn’t major on attacking the banks as much as he could have.   The economy is contracting he said.  The national debt is not under control – wasn’t that what this Coalition was supposed to be about?   Government borrowing has been revised up for this year, next year and the subsequent years he implored.  Relentless highlighting of the fact that borrowing is forecast to be well above previously expressed levels is clearly going to be a major Labour plank of attack. Balls also maintained, once he had established some sort of flow, that this Government was failing to make the rich pay the most and ensure the vulnerable are protected.    The economy has flat-lined since the 2010 Spending Review said Balls, whilst vigorously stressing that George Osborne has today officially downgraded growth projections for years to come.

It is not clear that any overwhelming message came out of the Shadow Chancellor’s reply. He focussed on some specifics – saying the Chancellor has smashed the PM’s Pledge to “balance the books” – now not due until 2018. More borrowing than ever before, a u-turn on fuel duty rises, no regional pay bargaining in the NHS all of these were mentioned by Ed Balls but overall the lack of time that the Shadow Chancellor had to prepare clearly limits the effectiveness of the response – especially when against the expectations of many the Chancellor raised his game. There were some lighter moments for Balls – for example when he quoted Nadine Dorries MP calling the PM and Chancellor “a couple of posh boys who don’t know the price of milk” – and he also managed to crowbar in references to realty TV with his “I’m the Chancellor, get me out of here” quip.

The residual questions that Labour will seek to overlay onto voters are those of fairness and of economic competence. Below inflation benefit rises will be the story for many Labour Party members though and will be stressed again by many third sector voices. Labour will need clarity on what it proposes on benefit cuts. Politically the contrast between tax breaks for higher earners against the plans for the most vulnerable on middle and lower incomes is going to be a key discussion point.

But interestingly the squeeze on incomes which was borne out by the recent Parliamentary by-elections is a fact. I know that a lot of people are really struggling. PLMR Director Valerie Burgess spent three hours packing bags for shoppers on a till in an Asda in London yesterday to raise money for Trinity Hospice and it’s so clear – many people are thinking long and hard about what they can actually afford to buy. Whether Labour can tap into that ennui will not be decided by today’s Autumn Statement – but the Autumn Statement and the conversations and spinning that follow off the back of it are going to colour the long term decision making made by voters over the two plus years to come. Many people are hurting and it is in the communicating outside of the House of Commons that Labour will have to focus in the coming hours under a theme of the “poor will get poorer”. For now Osborne has scored a presentational success. Watch out for a relentless Labour attack on debt levels, the deficit, and tiny growth forecasts – Labour will focus on the three of these relentlessly in the coming 24 to 48 hours to try and gain back the ground given in a set piece political moment today that is unavoidably skewed in favour of an incumbent Chancellor, who took full advantage.

 

Steven Gauge, Political ConsultantSTEVEN GAUGE – LIB DEMS IN A SPIN OVER STARBUCKS

Steven Gauge is a Senior Consultant at PLMR and spent the last two general elections on the road managing media events in battleground seats for Nick Clegg and Charles Kennedy. He has been a local councillor, award winning election agent, parliamentary candidate and was also Chief Executive of the Suzy Lamplugh Trust.

For Liberal Democrats the Autumn Statement is all about the spin. Can they get     credit for any of the good news like shifting £5 billion from Whitehall bureaucrats into capital infrastructure investment cuts whilst avoiding the blame for the bad stuff like missing the deficit reduction targets? Tricky when it’s not one of your own party who gets to stand at the dispatch box and deliver the speech. During the Budget earlier in the year, Lib Dem MPs were forced into carefully choreographed order paper waving to highlight the bits they wanted to claim credit for.

Starbucks has been caught in the crossfire of the pre-statement skirmishes with their imaginative approach to tax accounting coming under scrutiny. Both Danny Alexander and Vince Cable were sending out clear signals in advance of the Autumn Statement that the Chancellor needs to wake up and smell the corporate tax dodging coffee if he wants to retain their support. The only sign of life from an otherwise stony-faced Nick Clegg during the statement was when the Chancellor started talking about and introducing new anti-avoidance rules but he swiftly reverted to a sad face when the idea of a Mansion Tax was ruled out.

With Liberal Democrats polling badly and struggling to hold on to deposits in by-elections, it remains to be seen whether their strategy of attacking the Government from within will deliver electoral dividends. Divided governments tend not to get re-elected, so Nick Clegg will be working hard behind the scenes to keep his cabinet colleagues united behind George Osborne’s autumnal plan.

James Ford, ConsultantJAMES FORD – CHANCELLOR WORKS HIS MAGIC ON AUTUMN STATEMENT 

James Ford was an aide to Mayor of London Boris Johnson (2010-12), specialising in transport, environment and digital policy. Prior to joining City Hall he worked in the Square Mile as Public Affairs Manager for the London Chamber of Commerce and Industry (2004-10).

The Autumn Statement was make-or-break for the Chancellor’s reputation after the “omnishambles” that unfolded following his Budget. Whilst there was no single show-stopper of an announcement the Chancellor still proved himself to be quite the political conjuror, pulling several tricks out of his red box. Unveiling a fiscally neutral package, the Chancellor was effectively relying on sleight of hand by funding his tax cuts through a combination of benefit cuts, increasing efficiency savings from government spending and increases in the tax-take from cracking down on tax avoidance and tax evasion.  The Chancellor has even turned u-turns into a political art, with his cancellation of the 3p fuel duty rise likely to play well with the tabloids. Whilst his raid on pensions will sit uneasily with some in the Conservative party, the potential damage is limited as the changes announced will only affect the top 1% of those contributing to private pension pots. Tax cuts were targeted at businesses and growing the economy, with an increase in infrastructure investment, further cuts to corporation tax and the extension or increase of various business allowances.

Perhaps the Chancellor’s greatest trick was managing expectations ahead of his statement. By announcing that the government was ‘on course’ to meet its deficit reduction targets, he pulled the rug out from Shadow Chancellor Ed Balls, who was left flailing at the despatch box as he tried to respond. The Chancellor has also left the Labour Party with a puzzle of their own – whilst Labour would have liked to have seen tax credits, jobseeker’s allowance and other benefits rise in line with inflation, will they be able to bring themselves to vote against the proposed 1% rise that was unveiled or commit to reversing the Government’s welfare reforms?  The Chancellor leaves the Chamber today with his personal stock rising at long last.

SECTOR ANALYSIS        

HEALTH & SOCIAL CARE
The Chancellor made scant reference to health in his Autumn Statement other than to point out that waiting lists were down. He did issue a commitment that efficiency savings within the NHS would be ‘recycled’ to protect frontline spending.

Those in the care sector will be disappointed that, once again, there is still no indication as to how, when or even if the Government will fund the Dilnot recommendations for long term care for the elderly. As Jeremy Taylor Chief Executive of National Voices, the coalition of health and social care charities said “Waiting for Dilnot is like waiting for Godot.”

ENERGY & ENVIRONMENT
The Chancellor said that the Energy Bill (published last month) will provide certainty to investors in the hope of bringing forward up to £110 billion of investment in new infrastructure to meet the UK’s future energy needs. The Government’s Gas Generation Strategy will set out its view of the expected role for gas in the coming years. The Government expects up to 26 gigawatts (GW) of new gas capacity could be required by 2030 on current carbon budgets. Support available for low carbon electricity investment through the Levy Control Framework up to 2020 will be capped at up to £7.6 billion per year (in 2012 prices) in 2020-21 – more than triple the £2.35 billion available in 2012-13. According to the Treasury this will allow generators from both renewables and gas to invest with confidence and provide protection for consumers.

PROPERTY & PLANNING
Some of the increased capital spending is being directed to transport projects that will either support planned building and regeneration projects or serve as a catalyst to developers bringing forward plans. This includes the £1 billion loan guarantee to support the extension of the Northern Line to Battersea. The Chancellor also unveiled a ten-fold increase in the tax-exempt amount firms can spend on plant and equipment each year, a measure that is likely to be of particular help to smaller construction firms and contractors as well as manufacturers.

Although not addressed directly by the Chancellor in his statement, Treasury documents reveal that the Government is providing a further £683 million through capital grants and financial transactions to support both housing and commercial development and support growth and jobs. In England, the Government will invest £474 million in local infrastructure on a recoverable basis. Around £60 million of this will be made available to support infrastructure in a limited number of Enterprise Zones. Around £225 million will be used to accelerate delivery of large housing sites, supporting around 50,000 homes. Around £190 million of the funding will be used to de-risk public sector land and enable the quicker disposal of surplus sites for new homes. Alongside this, the Government will provide £100 million to bring forward public sector sites for development.

SCIENCE & TECHNOLOGY
The £5.5bn of extra capital spending unveiled today includes additional money for broadband expansion in major cities and the countryside, with a special boost for twelve medium sized urban areas: Brighton and Hove, Cambridge, Coventry, Derby, Oxford, Portsmouth, Salford, York, Aberdeen, Perth, Newport and Derry.

There was also £600 million for investment in Research Council infrastructure, and facilities for applied research and development. According to the Treasury: “This investment will support the development of innovative technologies and strengthen the UK‘s competitive advantage in areas such as big data and energy efficient computing, synthetic biology and advanced materials. This extra £600 million of investment builds on previous decisions to increase capital investment in science and innovation made at fiscal events since Spending Review 2010 totalling £925 million.”

The Government also announced a consultation on allowing investment in SME equity markets, such as AIM, to be held directly in stocks and shares ISAs. This could provide vital additional finance to high growth potential SMEs and provide a boon to the UK’s world leading Knowledge Economy.

EDUCATION & SKILLS
The Chancellor announced that £1 billion of the £5.5 billion of extra capital spending unveiled in the statement would be spent on education, with £270 million for Further Education colleges, money to expand good schools and funding to build 100 new free schools. However, whilst the Chancellor rowed back from previous Government statements in support of regional pay in the public sector, he did announce that schools would be given more freedom over staff pay.

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