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.