Can Osborne really take credit for Glaxo's move?

It was a 2009 Labour announcement, not Osborne's Budget, that persuaded Glaxo to invest.

For George Osborne, who declared that his Budget "unashamedly backs business", GlaxoSmithKline's announcement of a new biopharmaceutical factory in Cumbria [its first manufacturing facility in the UK for 40 years] couldn't have come at a better time. In his interviews this morning, the Chancellor didn't miss an opportunity to take credit for the decision:

You have GlaxoSmithKline, one of the world's biggest companies, one of the great British success stories, saying the budget has changed their view of Britain as a place to invest.

They're going to create 1,000 jobs here. Now, surely my responsibility as the country's chancellor is to get the economy moving, to get jobs created, and when big companies say that about Britain, people should sit up and notice that we are changing the British economy for the better.

It is rather misleading, however, for Osborne to claim it as an overnight success. The main reason for GSK's move is the introduction of a "patent box" [which introduces a lower rate of corporation tax on profits generated from UK-owned intellectual property], a measure previously announced by Alistair Darling in the 2009 pre-Budget report. As Labour has highlighted this morning, yesterday's Budget document even admitted as much [see Table 2.2, p.53].

In his statement, GSK chief executive Andrew Witty made it clear that the patent box was the ultimate pull factor:

The introduction of the patent box has transformed the way in which we view the UK as a location for new investments, ensuring that the medicines of the future will not only be discovered, but can also continue to be made here in Britain. Consequently, we can confirm that we will build GSK's first new UK factory for almost 40 years and that we will make other substantial capital investments in our British manufacturing base.

In fairness to Osborne, however, Witty also cited further cuts to the general rate of corporation tax, which will fall to 24 per cent next month, having stood at 28 per cent when the coalition took office. Of interest, then, is the timing of GSK's announcement. The company's press office has confirmed to me that the decision was taken several days in advance of the Budget. To some, the conveniently timed announcement by Witty [who was knighted in 2012] has a whiff of corporatism about it.

George Eaton is political editor of the New Statesman.

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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.