Osborne called out for holding "two Budgets" a year

The Autumn Statement was never meant to become a "second Budget" but Osborne has made it one. And the Treasury Select Committee is right to say so.

It's easy now to forget that George Osborne scrapped the pre-Budget report (introduced by Gordon Brown in 1997) in the belief that major decisions on tax and spending should be reserved for the Budget itself. The new slimmed-down Autumn Statement was designed to include little more than the OBR's latest forecasts on growth, borrowing and jobs. But confronted by the failure of his economic plan, Osborne has turned it into a second Budget in all but name. His most recent statement, for instance, included a freeze in fuel duty, an increase in the personal allowance to £9,440, a cut in corporation tax, a reduction in the tax-free pension allowance and the abolition of national pay bargaining for teachers.

So it's good to see the Treasury Select Committee calling the Chancellor out on his U-turn. In its report on the 2012 Autumn Statement, the committeee, which is chaired by Conservative MP Andew Tyrie, notes:

The OBR is required by statute to issue two economic and fiscal forecasts a year. The Chancellor’s own Autumn Statement, however, has now grown to be virtually a second Budget. There are good reasons for having a single substantial annual review of  the fiscal and economic state of the country, not least to enable the subsequent  presentation to Parliament of proposed tax measures and of Estimates of expenditure.  The Treasury should  re-establish the annual Budget as the main  focus of fiscal and economic policy making.

Tyrie said: "The autumn statement is not, nor should it be, a second budget. In recent years it has come to read like one.

"The case for two budgets is weak. An additional one can create uncertainty and carries an economic cost. Only in an emergency would it be likely to carry long-term benefit. The primacy of the budget as the main focus of fiscal and economic policy making should be re-established."

OBR forecasts "biased to over-optimism"

Another concern raised by the committee is that the OBR's forecasts so far have been "biased to over-optimism". It states: "This would not be a cause for concern but for the fact that the OBR’s forecasts have implications for decisions on public policy. This is because the fiscal mandate is defined with direct reference to a forecast, and because the OBR’s is at present the only official forecast against which the fiscal mandate can be measured."

Osborne reliant on "uncertain" 4G and Swiss tax windfalls

MPs also criticise Osborne for placing so much reliance on the anticipated windfall from the sale of the 4G  mobile spectrum and Swiss tax repatriation to meet his borrowing forecasts. 

The sums expected from the sale of the 4G spectrum and Swiss tax repatriation represent the majority of the additional receipts the Treasury intends to offset against the tax reductions and investment announced in the Autumn Statement for 2012–13 and 2013–14. Both are subject to uncertainty. In the case of the tax repatriation from Switzerland, the proceeds may not meet expectations if assumptions about the potential tax liabilities and expected behaviour of those affected prove not to be valid. 
As I noted at the time of the last Autumn Statement, it was only Osborne's inclusion of the expected £3.5bn receipts from the 4G auction that allowed him to claim that borrowing would fall this year, rather than rise (the boast that famously threw Ed Balls). If we strip out the £3.5bn, the forecast deficit for this year is £123bn, £1.4bn higher than last year.
 
And with borrowing currently £7.2bn (7.3 per cent) higher than at the same point last year, it's no surprise that Osborne was so keen to bag the 4G receipts early.
George Osborne poses for photographers outside 11 Downing Street before presenting his annual budget to Parliament on March 21, 2012. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

To the Commonwealth, "Global Britain" sounds like nostalgia for something else

And the former colonial subjects have a less rose-tinted view of the past. 

Earlier this month, Boris Johnson became the first British foreign secretary to visit the Gambia since independence. His visit came a few days before the inauguration of the Gambia's new President, Adama Barrow, who has signalled his intention to re-join the Commonwealth - an institution that his dictatorial predecessor had left in protest at its apparent "neo-colonialism".

Accusations of neo-colonialism, regrettably, seem to be of little concern to the foreign secretary. After Johnson committed himself to facilitating the Gambia's Commonwealth re-entry, he declared that "the strength of our partnerships show that Global Britain is growing in influence and activity around the world". 

His comments are the latest example of the government's Brexit mission-creep in its foreign engagements. Theresa May mentioned "Global Britain" no fewer than ten times in her Lancaster House speech last month, reminding us that Britain "has always looked beyond Europe to the wider world" and emphasising the UK's post-referendum desire to "get out into the world". Ministers' repeated subsequent referencing of Global Britain has almost come to the point of re-branding Great Britain itself. But now the government seems to be directly equating Global Britain with the Commonwealth, the organisation comprising most of the former territories of the British Empire. If the Commonwealth is wooing back former members and seemingly growing in stature, that must mean Global Britain is doing the same. The Gambia's proposed re-admission to the Commonwealth is reconfigured as a victory for British clout and prestige in the face of the Brexit naysayers.

But the Commonwealth cannot be a vehicle or front for Global Britain, on either a technical or political level. The Commonwealth emphasises that it is an organisation of 52 equal member states, without any preference in decision-making. India (population 1.26bn) and Tuvalu (10,000) are treated the same. The organisation is headquartered in London, receives the most money from Britain, and its members share elements of history, culture and political systems; but it is not a British organisation and will not take orders from the British government. Commonwealth states, particularly poorer ones, may welcome UK political, financial and developmental support, but will reject the spectre of neo-imperialism. Diplomats remark that their countries did not leave the British Empire only to re-join it through the back door. 

And yet, shorn of influence following the decision to leave the EU, and the single market so instrumental to British jobs and prosperity, the government is desperate to find an alternative source of both power and profit. The members of the Commonwealth, with their links of heritage and administration, have always been touted as the first choice. Leading Brexiter Dan Hannan has long advocated a "union with the other English-speaking democracies", and Liam Fox has been actively pursuing Commonwealth countries for trade deals. But the Commonwealth cannot replace the EU in any respect. While exports to the EU account for just under a half of Britain's total, the Commonwealth receives less than 10 percent of our goods. The decline of UK trade with the Commonwealth was taking place long before Britain joined the EU, and it has in fact revived in recent years while being a member. The notion that Britain is restricted from trading with the Commonwealth on account of its EU membership is demonstrably false.  

The EU, the beloved scapegoat for so many ills, cannot fulfil the role for much longer. Indeed, when it comes to the Commonwealth, 48 of the 52 members have already completed trade deals with the UK, or are in the process of negotiating them, as part of their engagement with the EU. Britain could now be forced to abandon and re-negotiate those agreements, to the great detriment of both itself and the Commonwealth. Brexiters must moreover explain why Germany, with a population just 25 percent larger than ours, exports 133 percent more to India and 250 percent more to South Africa than we do. Even New Zealand, one of Britain's closest allies and a forthcoming trade-deal partner, imports 44 percent more goods and services from Germany, despite enjoying far looser cultural and historical ties with that country. The depth of Britain's traditional bonds with the Commonwealth cannot, in itself, boost the British economy. The empire may fill the imagination, but not a spreadsheet.

The British imperial imagination, however, is the one asset guaranteed to keep growing as Brexit approaches. It is, indeed, one of the root causes of Brexit. Long after the empire fell into history, the British exceptionalism it fostered led us to resent our membership of a European bloc, and resist even limited integration with it. The doctrine of "taking back control" for an "independent Britain" speaks to profound (and unfounded) anxieties about being led by others, when in our minds we should be the ones explicitly leading. The fictional, if enduringly potent victim narrative that we became a colony of someone else's empire, has now taken hold in government. The loss of our own empire remains an unacknowledged national trauma, which we both grieve and fail to accept. The concept of being equal partners with like-minded countries, in a position to exert real, horizontal influence through dialogue, cooperation and shared membership of institutions, is deemed an offence to Britain's history and imperial birthright.

The relentless push for Global Britain is thus both a symptom and cause of our immense global predicament. Through an attempt to increase our power beyond Europe, Brexit has instead deflated it. Britain has, in truth, always been global, and the globe has not always been grateful for it; but now the government preaches internationalism while erecting trade barriers and curbing migration. After empire, Britain found a new role in Europe, but with that now gone, Global Britain risks producing global isolation. Despite the foreign secretary's rhetoric, the Commonwealth, geopolitically and economically, has moved on from its imperial past. It is not waiting to be re-taken.

Jonathan Lis is the deputy director at British Influence.