Fairy Tales

The real story of the Autumn Statement

“Just a little further to the right”

If Jeremy Hunt had told the truth on Wednesday he would been dismembered by the MPs sitting behind him. They are desperate, frustrated by an apparently immovable deficit in the polls, and they wanted a fairy tale to cheer them up. He did, at least, have a choice of fairy tales. It was suggested in advance we’d get a really gory one in which benefits for already destitute families would be cut further in order to reduce inheritance tax for the wealthiest households. I suspect that was briefed in order to make the fairy tale we got seem like a relief.

The one Hunt told wasn’t as scary. The tax cuts – full expensing and NICs – were ones that have a shot at boosting growth. Benefits were uprated with inflation, though this should just be the norm, not a matter for celebration. Housing benefit, which had fallen way below reasonable levels given rent costs, was given a one-off boost, though will be frozen again the next year. There were positive sounding measures about planning and infrastructure reform, though we’ve been promised that many times before. All in all it could have been a much less pleasant story.

But it was still a fairy tale. It was premised, as readers of my series on the public finances will know, on completely implausible spending cuts. Every penny of the “headroom” against his fiscal rules that Hunt spent on tax cuts came from not uprating public spending in line with inflation. There is no new growth; as expected growth projections for future years were cut. It’s all illusionary. This is clearly stated in the OBR report and was amplified by the big economic think-tanks: the Resolution Foundation and IFS.

So in this post I’m going to dig a bit deeper into the consequences of persisting with this fantasy. What does it mean for the future of the OBR and their relationship with the Treasury? The tensions between the two are very apparent. Hidden away in the small print are some very telling rows. What political problems does it solve and create for Sunak and Hunt? And, most importantly, what does in mean for Labour’s options in government?