Yesterday’s Autumn Statement marked the unofficial launch of the general election that will be held in the summer of 2015. It might seem a long way off and there’s a great deal still to happen – not least the Scottish independence referendum – but the Chancellor’s speech signalled the mobilisation of the Government’s tanks and laid out a preliminary strategy for the Tories.
George Osborne’s goal is to secure an outright victory for the Conservative Party without the Liberal Democrats. On the evidence he presented Labour must remain favourites to win, but so long as Ed Miliband persists with Ed Balls as the shadow chancellor then the Conservatives’ chances will continue to improve.
In what was possibly Osborne’s best performance, both in delivering what is a half-yearly account of the nation’s finances and for fun content in his mauling of Ed Balls afterwards, Osborne was at last able to confirm the recovery is not just a welcome blip but an established trend that is growing faster than even he or his independent forecasters thought. Osborne and the Office of Budget Responsibility can be criticised for getting their predictions for growth wrong in the past, but at least we now know why – it’s official, Labour’s recession was worse than anyone realised.
True, the OBR has had to correct the figures it issued in March, but this time it can be forgiven for erring on the right side of caution and has changed this year’s economic growth from 0.6 to 1.4 per cent, and next year’s from 1.8 to 2.4 per cent with it staying above two per cent until 2018 – the best growth forecast for 14 years. The pace of the recovery is also the best of any advanced economy in the world even though the eurozone economy is shrinking, socialist France is contracting and the US remains sluggish.
The employment statistics are especially welcome with “The Highest Number of People in Employment – Ever” (sounds like a Christmas CD), thanks in part to some 400,000 new jobs this year. Meanwhile, the unemployed benefit claimant figure has dropped by 200,000 – the largest fall in 16 years. By 2018, unemployment is expected to be only 5.6 per cent.
Why, even the annual deficit is expected to become a surplus by 2018 – three years later than Osborne had said back in 2010 – but as I reported earlier, nobody (and especially not Labour) realised just how bad a mess the country had been put in by Brown, Miliband & Balls plc.
So nobody, but nobody, could be other than pleased by this news – other than Ed Balls, whose face became bright red as he sought to ignore Father Christmas sitting opposite him and unwittingly played an ungrateful and mean-spirited Ebenezer Scrooge.
One point to notice was how Osborne called it the “Great Recession”, no doubt with the intention of placing in the public’s mind the fact that the recession was really bad, so bad it has taken longer than he or anyone else thought to recover from. The next stage in this messaging will come when he calls the period between 2008-2010 “Labour’s Great Recession”. If a bookie would take a bet I’d put a decent wager on it.
The point of such language is to give a context to what Osborne is now seeking to do – and that is to dispel the Labour attack that the recovery is only for the rich and that as a result the rest of us are all suffering a “cost of living crisis”.
There are two points to consider here. The first is the reason why there is a squeeze on disposable income – it’s simple, in the past during a recession our inflexible labour market would shed expensive jobs rather than workers take a cut or freeze in salaries or a reduction in hours. It meant those that stayed in work kept their incomes high but the unemployed suffered badly.
Nowadays we’ve woken up to the fact that it’s better to stay in work and share the pain than let some lose their jobs and risk never getting them back again, or one as good. This is a good thing . . . what would we prefer – high unemployment and worse public finances?
The other point is that while the public is prepared to believe Labour’s argument that times are tough and the recovery is not being universally felt, that perception can change. Forecasting shows earnings will overtake inflation in 2015 – the year of the general election – so undermining Labour’s mantra. More so, the Tories can point to cuts in fuel duty (20p a litre) and a big tax allowance rise for the lowest paid (now £10,000 tax free) and a council tax freeze in England.
Also, we can expect Osborne to do more and deliver further benefits to blue collar voters that wrong-foot Labour – making the electorate think instead of a “Cost of Labour Returning Crisis”.
For Ed Miliband it will become his Cost of Keeping Ed Balls Crisis – and he’s welcome to it.