Morning Call: pick of the papers

The must-read comment and analysis from today's papers.

  1. Downgrade is Osborne's punishment for deficit-first policy (Guardian)
    "Without a tangible increase in the nation's annual income until after the next election, George Osborne's hopes of finding the money to cut the UK's £1tn of debt are in shreds", reads the Guardian's leader.
  2. The AAA downgrade may benefit Britain (Telegraph)
    If what we get is realism, then the price will be worth paying, says Thomas Pascoe.
  3. The UK is very European – in its mistakes (Financial Times)
    The delay in addressing economic problems is deepening them, writes Adam Posen.
  4. With this tax dodger list the Revenue shames only itself (Guardian)
    By singling out barbers and pipe fitters, HMRC shows it takes care of the little people, while Amazon looks after itself, writes Marina Hyde
  5. The politicians are losing in Eastleigh (Telegraph)
    Some in the press are calling this the most important by-election for 30 years. But important to whom?
  6. Weaker pound is welcome but no panacea (Financial Times)
    The challenge is to connect monetary and fiscal policy to promote demand while enhancing supply, writes Martin Wolf.
  7. Long live shopping. But the shop is dead (Times)
    Retail parks are already the past, doomed like high streets and markets. The internet changes how we buy and think, writes Matthew Parris
  8. Is downgrade bad news for Osborne? (Financial Times)
    "After the US was downgraded in 2011, US bond yields tumbled", says the Short View column.
  9. Sorry to harp on, but the horrors of Mid Staffs just won’t go away (Telegraph)
    The Prime Minister acknowledges the shame of the Amritsar massacre in India, but many more died on the NHS’s filthy wards, writes Charles Moore.
  10. Downgrade: good news for UK (Financial Times)
    All of the country’s problems are well documented, says Lex.

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

Photo: Getty Images
Show Hide image

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.