Opinionomics | 29 March 2012

Must read analysis and comment. Featuring Tim Worstall, Ezra Klein, and – yes – pasties.

1. Britain struggles to kick its addiction to consumption (Telegraph)

Jeremy Warner seems confused, arguing that reducing Britain's addiction to consumption is much needed, but that doing so is directly and substantially harming growth. He is unclear whether we should be applauding Osborne for making his decisions with an eye on the long-term, or condemning him for not putting off the "rebalancing" until the more important matter of the ongoing depression is sorted.

2. Not a tax on pasties, but a right-wing tax on heat* (LabourList)

*Not really. Conor Pope argues – perhaps tongue-in-cheek – that liberal atomic motion within cheap savoury snacks will lead directly to the eventual disintegration of the traditional nuclear family

3. Papers I need to read: Do tax cuts really help growth? (Washington Post WonkBlog)

Ezra Klein links to a paper that fairly demolishes George Osborne's argument that tax cuts lead to growth.

4. Spiked on rare earths (Tim Worstall)

Worstall applies his day-job expertise to look at the global market for rare earth metals – not as rare as their nam implies.

5. Scotland’s economy running on empty after Osborne’s Great Stagnation Budget (Left Foot Forward)

Willie Bain MP presents a (partisan, obviously, but) well-researched account of the budget's impact on Scotland

Pasties are left to cool in a shameless tax avoidance scheme. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.