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.

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PMQs review: Theresa May shows how her confidence has grown

After her Brexit speech, the PM declared of Jeremy Corbyn: "I've got a plan - he doesn't have a clue". 

The woman derided as “Theresa Maybe” believes she has neutralised that charge. Following her Brexit speech, Theresa May cut a far more confident figure at today's PMQs. Jeremy Corbyn inevitably devoted all six of his questions to Europe but failed to land a definitive blow.

He began by denouncing May for “sidelining parliament” at the very moment the UK was supposedly reclaiming sovereignty (though he yesterday praised her for guaranteeing MPs would get a vote). “It’s not so much the Iron Lady as the irony lady,” he quipped. But May, who has sometimes faltered against Corbyn, had a ready retort. The Labour leader, she noted, had denounced the government for planning to leave the single market while simultaneously seeking “access” to it. Yet “access”, she went on, was precisely what Corbyn had demanded (seemingly having confused it with full membership). "I've got a plan - he doesn't have a clue,” she declared.

When Corbyn recalled May’s economic warnings during the referendum (“Does she now disagree with herself?”), the PM was able to reply: “I said if we voted to leave the EU the sky would not fall in and look at what has happened to our economic situation since we voted to leave the EU”.

Corbyn’s subsequent question on whether May would pay for single market access was less wounding than it might have been because she has consistently refused to rule out budget contributions (though yesterday emphasised that the days of “vast” payments were over).

When the Labour leader ended by rightly hailing the contribution immigrants made to public services (“The real pressure on public services comes from a government that slashed billions”), May took full opportunity of the chance to have the last word, launching a full-frontal attack on his leadership and a defence of hers. “There is indeed a difference - when I look at the issue of Brexit or any other issues like the NHS or social care, I consider the issue, I set out my plan and I stick to it. It's called leadership, he should try it some time.”

For May, life will soon get harder. Once Article 50 is triggered, it is the EU 27, not the UK, that will take back control (the withdrawal agreement must be approved by at least 72 per cent of member states). With MPs now guaranteed a vote on the final outcome, parliament will also reassert itself. But for now, May can reflect with satisfaction on her strengthened position.

George Eaton is political editor of the New Statesman.