Maitland Political Insight: Autumn Statement 2014

Transcription

1 ` Maitland Political Insight: Autumn Statement 2014

2 The key points from the Autumn Statement ECONOMIC FIGURES Borrowing set to fall from 97.5bn in to 91.3bn in , projected to reach surplus in 2018 National debt as a share of GDP forecast to rise from 80.4% this year to a peak of 81.1% next year, before falling every year to Economic growth forecast to be 3% in 2015, 2.4% in 2015 and 2.2% in 2016 Unemployment set to fall to 5.4% by 2015 Inflation forecast at 1.5% this year and 1.2% next year TAX Residential property stamp duty reformed to only be charged on the part the property price to fall within the band, not the whole value of the house Bands set at 0% for the first 125,000 then 2% on share of value up to 250,000, 5% to 925,000, then 10% to 1.5m and 12% on any price beyond that 25% tax on profits generated by multi-nationals that are moved away the UK Air Passenger Duty abolished for under-12s from May 2015 and under-16s from May 2016 ISAs to be transferable to partners tax free Research and Development tax credit increased for small and medium-sized businesses SPENDING An extra 2bn of funding for health services across the UK, made available from budget underspend 2.3bn of funding to 1,400 flood defence projects, aimed at protecting 300,000 households 2bn of funding for road improvements across the country, including a 1.8 mile tunnel to make the A303 by Stonehenge a dual carriageway 45m of funding to support exports to emerging markets GP services to get an extra 1.2bn in funding from bank foreign exchange manipulation fines New carriages for Northern Rail and Trans-Pennine Express to replace old pacer carriages Fuel duty to be frozen OTHER ANNOUNCEMENTS Government backed student loans extended to cover postgraduate study Sovereign wealth fund for the North of England from proceeds of shale gas exploration 90,000 charge for non-doms resident in the UK for 17 of the past 20 years Bank profits which can be offset by losses for tax purposes to be capped at 50% Tax free annuities for dependents of people who die under-75 World War One debt to be repaid Autumn Statement analysis The facts of the announcements are clear and the speeches have been made. But what does this all mean for the political parties, as they the campaign for the General Election gets under way? The Maitland team analyse the impact and next steps for their respective parties. 2 P a g e

3 CONSERVATIVES James Drewer Chancellor George Osborne s message from the dispatch box today was that his party s long-term economic plan is working but financial tightening must continue. Stamp duty reform is the headline announcement, with the abolition of the old slab system in favour of a more progressive approach. The move will likely go down well with certain Tory voters, as the Chancellor sought to position this as the Conservative s alternative to the mansion tax. For the 2015 general election campaign Conservatives will want the debate to centre on the economy, as polling continues to be favourable to Cameron and Osborne on this issue. The extra 2bn of NHS funding, found from a combination of budget underspends and banking fines is designed to help bolster Conservative credentials on healthcare, an issue Labour seems keen to put front and centre of their election campaign. Mr Osborne was keen to emphasise his desire to create a northern economic powerhouse, announcing the creation of a shale gas sovereign wealth fund for Northern England, pointing to the number of new jobs created in the region and highlighting the devolution of power to Manchester. A desire to boost the economic prosperity of the region has been a political cause of the Chancellors from before he came to office. It is hoped that the announcements will go some way to boosting Conservative support in the North, an area in which they have not been particularly successful at recent elections. Details of the Autumn Statement already known last week, such as the 15bn road scheme over the next 5 years, look to place the Conservatives as a party of more than one term and a driver of Britain s prosperity. The Sunday Times labelled this year s Autumn Statement as the Heineken budget which looks to reach parts of the UK yet to feel the recovery. With just one more set piece economic announcement to be made (the 2015 budget) the Chancellor will be hoping the proposals outlined later today will chime at the ballot box. LABOUR Pete Bowyer With the general election in sight, Labour are focusing on two main areas of criticism of the Autumn Statement. First, the coalition government s handling of the economy has not benefitted ordinary people whose real wages have been squeezed by inflation and low wage growth. Shadow Chancellor Ed Balls will have been encouraged by a poll reported in the Daily Mirror that shows that 72% do not feel better off. This fits with Labour s longstanding themes of fairness and the cost of living crisis that ordinary families have suffered under this government. Balls criticised the coalition for letting the cost of living crisis escalate, highlighting that people are 1,600 a year worse off, whilst millionaires got a tax cut. Spelling out his alternative Autumn Statement he highlighted that the Labour party would raise minimum wage, expand free childcare for working parents, tackle the housing crisis by building more homes and cutting business rates for small business. This would deliver a recovery for the many, not the few. The second economic theme was the Conservatives central message at the last election: that they would eliminate the deficit by the end of this Parliament. In fact, all the coalition has achieved is what Alistair Darling, Labour s Chancellor in 2010, proposed back then: a halving of the deficit over the course of the Parliament. By cleverly quoting directly from the OBR s report during his response to the statement, Ed Balls revealed that borrowing this year and next has been revised upwards whilst growth is forecast to decline after 2016, leaving a clear chink in the armour of the Tories on the economy. Balls attacked the Prime Minster and Chancellor, stating David Cameron and George Osborne have now failed every test and broken every promise they made on the economy asking why voters should ever trust them again. He has also argued that this demonstrates that the Conservatives have stifled growth and caused the cost of living crisis, which in turn has led to lower revenue for the Government. He will have been buoyed by the fact that the polls have shown that the consistent lead George Osborne and the Conservatives once had on the economy has started slipping. More broadly, Labour has been leading on an issue where the voters have consistently put them ahead of the Conservatives in terms of who they trust to look after it: the NHS. The controversial Andrew Lansley reforms allowed Labour to reinforce its own standing on health and Shadow Health Secretary Andy Burnham has been setting the narrative. Osborne has tried to reclaim some of this with extra investment in the NHS, but thiswas soon criticised as a large part of it was not new health expenditure, unlike what Labour have pledged. Balls reiterated the announcement made at Labour party conference that the Labour party would raise an extra 2.5billion a year to deliver 20,000 more nurses and 8,000 GPs a commitment the Tories refuse to match. 3 P a g e

4 LIBERAL DEMOCRATS Henk van Klaveren Liberal Democrats are in a difficult position during the big set pieces of Government, such as the Autumn Statement. With the Chancellor fronting the speech, the focus is naturally on the Conservative half of the Government. Yet if the Liberal Democrats want to ensure their strategy of setting out that they combine both economic credibility and fairness, as stated in their slogan A Stronger Economy in a Fairer Society', they need to be credited with the announcements and the economic recovery more broadly. That continues to be a challenge for the party. A YouGov survey for the Times last August showed that 52% of people thought the Coalition deserves credit for the recovery but of those, 65% said the credit should go to the Conservatives, with only 35% giving it to the Lib Dems. That is a serious concern for the party, hence Chief Secretary Danny Alexander told the Sun on Sunday during the most recent party conference that it really p*sses me off" that the Conservatives are taking credit for the recovery. So for the Lib Dems the aftermath of the Autumn Statement is all about taking ownership of certain aspects of it. That is why they made a number of demands ahead of the Autumn Statement, such as extra investment in the NHS, which has now been included. The Lib Dems will also be promoting tax measures that focus on the rich paying their fair share, such as the reforms to stamp duty and the new diverted profits tax (the Google Tax ), to show they are ensuring Government is taking a fair approach to its budget strategy. In fact, they will say that without the Lib Dems in government the Conservatives would have taken a less fair approach. Locally too they will be taking credit for the announcements made in the last few days, as part of the Lib Dem strategy to their existing seats into fortresses. Business Secretary Vince Cable joined local MP Sir Alan Beith and campaigners in Berwick to highlight the dualling of the A1, whilst Deputy Prime Minister and Lib Dem Leader Nick Clegg tweeted congratulations to his MPs in the South West for securing funding for road projects and flood defences in the region. In fact, Clegg did not even attend the Autumn Statement in the Commons: he was out campaigning in Cornwall. UKIP Laurence Garfield For UKIP the Chancellor s Autumn Statement marked a symbolic milestone: their first set-piece event as full participants on the Westminster political scene. Fresh from doubling their Commons contingent at the Rochester and Strood by-election, Nigel Farage s party has taken a relatively low-key approach to the economic debate in recent weeks, a possible symptom of an ongoing lack of considered policy development. Instead, UKIP has preferred to exploit the government s problems on the more favourable battlegrounds of immigration and the European Union. This meant that their response lent heavily on criticism of the Chancellor s broken promise to restore the public finances and a restating of an alternative package of cuts pledged at September s conference. The first salvo was fired by Clacton MP Douglas Carswell, who took to his blog to accuse Osborne of emulating the worst excesses of Gordon Brown by failing to get a grip on the deficit and accumulating even more debt. This, Carswell claimed, was in reality Brown s eighteenth budget, with a cloud of statistics obscuring the true state of the economy. Steven Woolfe MEP, financial affairs spokesman and something of a rising star, toured the TV studios putting the case for an accelerated programme of deficit reduction. UKIP, he said, would make substantial savings by exiting the EU and through a raft of aggressive spending cuts: scrapping HS2, slashing foreign aid and further squeezing departmental budgets. This was echoed by Economics spokesman Patrick O Flynn in his post-statement reaction, who urged the Chancellor to forge ahead with his central mission regardless of public opinion: when it comes to getting rid of the deficit by making radical savings he should, to coin a phrase, Just Do It. Events such as this often shine a light on opposition parties, who are expected to propose detailed alternatives. Yesterday was no different and demonstrates the challenge facing Farage as he takes his party into the most important general election campaign in its history. With the manifesto due to be published in March, UKIP will have to move quickly to ensure they can present a sober, comprehensive and fully costed set of policies to the electorate. 4 P a g e

5 Maitland Political Orion House 5 Upper St Martin s Lane London WC2H 9EA T: +44 (0)