George Osborne's Autumn Statement: 10 things to look out for

Including, when will living standards start to rise, will there be new money for the NHS and how much more austerity is Osborne planning?

George Osborne will deliver his Autumn Statement at 11:15am today but, as so often with these events, it feels as if much of it has already been announced. The imposition of capital gains tax on foreign property owners, the freeze in business rates, the scheduled rise in the state pension age to 70 (in the 2060s) and the scrapping of employers' National Insurance for workers under 21 have all been pre-briefed to the media. 

One reason for this is that Osborne wants as much attention as possible to be focused on the OBR's improved forecasts for growth, employment and borrowing. Having responded to Labour's cost-of-living offensive by reducing green levies on energy customers, his other main aim is to shift the debate back towards the deficit and austerity, issues on which the Tories continue to out-poll Miliband's party. This being Osborne, he'll also have held at least one headline announcement back to triumphantly flourish at the end of the speech. And there's much more to look out for too

1. When will living standards start to rise? And by how much?

At present, while the economy is growing at its fastest rate for six years (and faster than any other G7 country), real wages, as Labour relentlessly points out, are still in decline, with earnings growth of just 0.8% in the most recent quarter compared to inflation of 2.2%. The Treasury's hope and expectation is that this will begin to change next year. How strong the OBR expects earnings growth to be will do much to determine the extent of any pre-election feelgood factor. 

2. More money for the NHS?

With ministers suffering sleepless nights at the prospect of a winter A&E crisis, one persistent rumour in Wesminster is that Osborne will announce additional money for the NHS. As well as helping to prevent the health service from collapse, this would offer the Chancellor a chance to reaffirm his party's commitment to the NHS and to (falsely) allege that Labour would be cutting it. 

3. How big is the output gap? (How much more austerity is needed?) 

One wonkish measure worth keeping an eye on is the output gap: the difference between actual and potential growth. The size of this will determine how much more austerity will be required to eliminate the structural deficit (the part of the deficit that exists regardless of the level of economic output) in the next parliament. 

4. Benefit cuts for under-25s

At every Budget and Autumn Statement he delivers, Osborne always finds a way to put welfare centre stage and today is likely to be no exception. One issue on which the Chancellor is expected to give more details is the coalition's plan to remove benefits from under-25s who are not "earning or learning". 

5. What's happening to income tax threshold?

Having already announced that the coalition's pledge to raise the personal allowance to £10,000 will be met by next April, there's room for Osborne to go further. Nick Clegg has urged him to raise it to at least £10,500, while David Cameron is said to be eyeing a £10,750 threshold. Osborne may well choose to keep his powder dry until the Budget but look out for a hint of further action today. 

6. When will a budget surplus be achieved?

The most significant announcement in Osborne's Conservative conference speech was his pledge to run a budget surplus by the end of the next parliament. With the OBR's updated forecasts, we'll find out when this might be achieved (today's FT suggests 2018-19). Expect Osborne to use this as his essential test of whether Labour is prepared to be fiscally responsible and as a signal of when greater tax cuts may become possible. 

7. Will Osborne halve the deficit by the election? 

Despite borrowing billions more than expected, Osborne is fond of reminding us that the deficit has still fallen by a third since the general election (from £159bn in 2009-10 to £115bn in 2012-13). If the numbers fall right today, he may well boast that he'll have halved it by the time of the general election (the Darling plan, in other words). 

8. Another cut in corporation tax?

Osborne has used almost every one of his Budgets and Autumn Statements to announce that he'll be cutting corporation tax by even more than expected (it is currently due to fall to 20% in 2015-16 from its 2010 level of 28%, giving the UK the joint-lowest rate in the G20). Today he'll publish new Treasury research showing that, in the next 20 years, the cuts are forecast to add around 0.7% to GDP (merely suggesting, as Richard Murphy puts it, that Osborne has finally discovered the multiplier), so it would be unsurprising if he chose to combine this with an annoucement that the rate will fall even further - to 19%. 

9. More public sector job losses?

As well as publishing new forecasts for growth, inflation and borrowing, the OBR will release its new estimate of how many public sector jobs will be lost over the course of the austerity programme. In the most recent Budget, this figure was put at 1.2 million but with Osborne planning further spending cuts to pay for tax cuts and benefit increases (free school meals), it could rise today. 

10. A cut in fuel duty?

The Chancellor has already vowed to freeze fuel duty for the remainder of this parliament but with the improvement in the public finances will he go further and deliver an outright cut? If Osborne is looking for a headline announcement designed to show that the government is not indifferent to the "cost-of-living crisis" this is the most likely candidate. 

George Osborne inspects material during a visit to AW Hainsworth and Sons on October 25, 2013 in Leeds. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR