UK Autumn Statement – improving economy, improving Tory prospects?

In the UK, we had the Autumn Statement from George Osborne, the Finance Minster (Chancellor of the Exchequer) this morning.  He presented a picture of a rapidly improving UK economy, with employment rising and the annual deficit still huge but falling. Over the next few years, he announced that Government departments will face a further squeeze, so we can expect continued pressure on budgets, and focus on public sector procurement performance too.

But Osborne also announced some tax reductions and populist moves such as free school meals, and a clampdown on tax evasion- even if today’s kids are going to have to work until they are 70 to get their state pensions.

So this was really about setting the scene for the 2015 election. Labour, the opposition party, are now likely to face an improving economic situation, and claims that they messed up last time they were in power, whilst the current coalition government has successfully got the country back on track.

Meanwhile the problems of the French Government (currently the economic “sick man of Europe”) show that  policies to tax more and hit the rich might appeal to lots of people, (frankly, at times, they appeal to me) but actually they tend to result in economic disaster. Unless France improves rapidly, their situation is going to be used as a dire warning against voting Labour in May 2015.

However, it is too soon to risk your life savings betting on the Tories (and you can still get decent odds) to be the largest party post next election.  Global economic matters might yet drag back the UK.  Other issues, such as the introduction of Universal Credit, the new benefits system, might become major issues of competence for the current government.

And perhaps most interestingly, there is some evidence that people feel safer voting for a more left-wing party when times are good. “We can afford to take the risk on these nice people, who are going to be kinder to the poor, just because the economy is strong”, might paraphrase the feeling. It would be ironic if better economic performance led to the government losing the election – and that is why you are going to hear constant reminders of what Labour did last time they were in power over the next 18 months, along with the mantra, “don’t let them mess it up again”.

That is quite a powerful slogan, I feel, particularly if Ed Balls remains the Shadow Chancellor. He is a constant reminder of that track record, fairly or unfairly. If he were replaced by Alastair Darling tomorrow, I would make Labour favourites for the election. As it is, I think the odds are marginally back towards the Tories – although very likely still in a coalition.

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  1. Ian Taylor:

    But wait Peter till the details of the OBR report get properly analysed. Growth boosted by an artificially inflated housing market, and the under-priced flotation of Royal Mail (you’ll have missed that one given your shares track record….) is not stable and vulnerable to world economic swings. the OBR according to the BBC doesn’t feel the real economy and the public finances are that strong. Plus we need to understand the details of the extra £3bn Whitehall cuts and whilst they say there is no further cut to local government – the recent history indicates that will not actually be true. So what does that mean for procurement? No let up on the relentless pressure on local government, NHS, blue light and Whitehall budgets. Les and Vincent at the PAC probably face more pressure than P/M Hodge fired at them and the Universal Credit story looks difficult (is Dave Smith writing the UC Blues as we speak….). AND it was our banks – Nat West yours and Les’, HBOS, mine, Lehman’s – who knows – that destroyed the western economy and are still getting away with murder (allegedly). Oh heck that sounds like a diatribe but the overriding impression I had of the Autumn statement was a real mixture of smoke and mirrors.

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