When he delivered his Autumn Statement the Chancellor was forced to admit he had failed.
Far from securing the recovery, he had to admit that not only has the economy flatlined over the last two years but is set to shrink this year. Growth forecasts were downgraded yet again for this year, next year and every year up to 2016.
And the result of that failure on jobs and growth is that on the one test he set himself – balancing the books and getting the debt down by 2015 – he has also failed. Two years ago he said he needed five years to balance the books. After two years of painful tax rises and spending cuts he says he needs another five years. Over the course of this parliament the government is set to borrow £212 billion more than planned two years ago. Plan A has proved self-defeating as borrowing and debt figures have been revised up this year, next year and for every year in this Parliament.
But instead of changing course the Chancellor is trying to distract attention from his failures with cynical spin and political games. He said borrowing was down this year, but that’s only the case by adding in money from the sale of the 4G mobile spectrum, which has not even happened yet. And he did not include the £270 million which was this week added to this year’s borrowing total from mistakes at Northern Rock – even though the Treasury knew about this back in October.
He said austerity was necessary to compete with our global competitors. Yet, over the 24 months since his spending review in 2010, the UK economy has grown by just 0.6 per cent, whilst the US grew 4.1 per cent and Germany grew 3.6 per cent in the same period. Far from making us more competitive, Osborne’s plan has put us in the slow lane and we are falling behind in the global race.
Using divisive language, the Chancellor claimed his cuts were targeting the work-shy – those with ‘their blinds down’ as others go out to work in the morning. But the reality is it is hard-pressed families, trying to do the right thing, who are being forced to pay the price for David Cameron and George Osborne’s failure.
The Resolution Foundation has revealed that six in ten households who will be hit by his real terms cuts to tax credits and benefits are actually in work. It is effectively a strivers tax on working families. And the Institute for Fiscal Studies says that on average a one earner family with children will lose £534 by 2015 as a result of the autumn statement measures, including the changes to the personal allowance. Taking into account all of this government’s measures, not just those announced last week, that family is even worse off.
George Osborne was laughing smugly after the autumn statement. He thinks he has pulled the wool over our eyes, hiding his failure to meet his own fiscal targets by attacking families on low and modest incomes. Over the coming months, we will not let the Chancellor get away with it.
Rachel Reeves is the Shadow Chief Secretary to the Treasury
Note: Another version of this article will appear on Left Foot Forward.