Osborne will need even-bigger cuts to stick to his plan

The Chancellor must find £48bn in extra spending cuts or tax rises to meet his main deficit target.

The Autumn Statement is now just over three weeks away and a sense of déjà vu hangs over the scene. In the run up to the same event last year it was plain that poor economic performance meant that the Office for Budget Responsibility (OBR) would be the bearer of bad news for the Chancellor. And so it is again.

After a grotty economic performance in 2011, last year’s Autumn Statement was always going to deliver bad news. The Chancellor announced the need for a £15bn reduction in overall spending by 2016-17 in order to meet the government’s fiscal mandate of eliminating the structural deficit in five years.

But that wasn’t the whole story. Much social security spending is driven by things beyond the government’s control: rising rents push up the housing benefit bill, and retiring baby boomers raise the overall cost of the basic state pension. So to constrain overall spending in the face of a rising benefits bill, the Treasury was implicitly seeking a further £11bn of savings. In total, the plan was then to find some £26bn in spending cuts – since tax rises weren’t part of the plan – by 2016-17 in order to achieve the government’s aims.

Unfortunately, this year things seem depressingly familiar. At the Budget, the OBR predicted that economic growth would be 0.8 per cent this year, but independent forecasters now think it will be more like a 0.3 per cent contraction. As a result, public borrowing is running 10 per cent above the OBR’s March forecast. None of this is great news, but it wouldn’t be so bad if the higher borrowing was a temporary reflection of the weakness in the economy that would resolve itself once things get back to normal. Unfortunately, the Social Market Foundation’s analysis – part of a joint report produced with the RSA yesterday - shows that this doesn’t seem to be the case. At least not according the models the OBR uses.  

Unemployment has been falling for most of this year. While that’s a good news story in itself, it implies that the economy may have moved closer to its capacity. But with less far to bounce back, a bigger chunk of this year’s £122bn underlying annual government borrowing will remain when output finally does reach its full capacity. And the only way to fill that hole is to close the gap between revenue and spending.

Our analysis, using the OBR methodology, suggests that getting the government’s Budget 2012 plans back on track would require a further £22bn of spending cuts or tax rises by 2017-18. The Chancellor has some room to ease up on his plans and still hit his mandate, but whatever way you look at it, the OBR’s models suggest that a lot more fiscal pain is on the way. Combined with the cuts already planned, the total size of the task after 2014 could be £48bn by 2017-18.

If the Chancellor sticks to his plan to keep taxes unchanged and cut £10.5bn from the social security budget, most of the work will be done by cuts in public services. That would require 11 per cent real-terms budget reductions in every department over the first three years of the next parliament. And if health, education and international development spending were to be protected, the impact elsewhere would rise to an eye-watering 23 per cent.

All of this would come on top of the spending squeeze that’s already underway and planned to run until 2015. The consequences of the eight years of cuts would be to decimate spending in some areas, with some departments over 40 per cent smaller once the public finances are back to balance.

It must be hoped that the OBR’s models are wrong in their implications and that the economy is in fact still some distance from its potential level. But if the OBR’s advice follows it past form, the news will be grim, requiring cuts that will run deep into next parliament. Against a background of four years’ unprecedented cuts, a further squeeze on anything like the scale implied by the SMF’s analysis will represent the central issue at the next election, forcing on the electorate stark decisions about the kind of public services we want in the UK.

But we mustn’t have a re-run of the 2010 election, in which the three parties connived in presenting vague plans and disingenuous language to mask the scale of the problem. Osborne made a bold decision in setting up the independent OBR. Perhaps, before the next election he should make another, and require it publicly to adjudicate on the detail and viability of each of the main parties’ plans. If the electorate is to choose, it must be informed.

Ian Mulheirn is director of the Social Market Foundation

George Osborne will deliver the Autumn Statement on 5 December. Photograph: Getty Images.

Ian Mulheirn is the director of the Social Market Foundation.

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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear