Our five predictions for the Autumn Statement & Spending Review

By November 23, 2015UK

By Alex Mather, Consultant, London

With 70 per cent of Government spending protected and the supposed ‘low-hanging fruit’ having already been cut over the last Parliament, Osborne’s Spending Review and Autumn Statement on Wednesday could prove to be his most difficult set-piece since the self-inflicted troubles of 2012’s ‘omnishambles’ budget. Indeed, Osborne’s personal ratings and Conservative leadership ambitions have been heavily damaged by the tax credits climb-down, with the Chancellor, according to a recent opinion poll, now scoring -17 on satisfaction with how well he is doing his job – the first time he has had a negative net rating since March 2013. Therefore, Wednesday’s combined statement will provide both a personal challenge to Osborne as well as the broader challenge to Government on how to keep its deficit reduction plan on course.

As has become the usual practice with modern set-piece financial statements, a number of Osborne’s key pledges, which will be included in Wednesday’s statement, have been pre-announced. Notably, following the Paris attack, he has agreed with the Home Secretary a 30 per cent increase over the next five years on counter-terrorism, and will add an extra £1.9 billion to the cybersecurity budget by 2020. However, with the Health, International Development, pensions, schools, and Defence budgets all protected, and with October’s worse than expected tax returns further complicating matters, most of Wednesday’s announcements remain uncertain. So, what can we expect from Osborne at the dispatch box? We’ve made five key predictions below:

  1. The police budget will be cut – Despite the heightened security concerns following the Paris attacks, Osborne will reduce spending on the police. However, as already announced, the counter-terrorism budget will be increased.
  2. Victory for IDS: universal credit will be protected, but housing benefit cut – The Work and Pensions Secretary will win in his battle with the Chancellor on the universal credit scheme, following rumours that he threatened to resign over the issue. However, housing benefit will be reduced to soften the impact of the tax credit changes.
  3. Budget boost for broadband – Following the PM’s announcement of a universal service obligation for broadband, and an open letter – signed by over 100 MPs – demanding additional investment in fixed and mobile broadband infrastructure, extra funding will be made available.
  4. ‘Embarrassing! Embarrassing! Embarrassing!’: McDonnell will focus on tax credits and welfare in his response – The Shadow Chancellor will criticise reductions to the welfare budget and is sure to remark on Osborne’s change of position on tax credits (perhaps a little bravely following his recent fiscal charter U-turn). McDonnell will criticise the Chancellor’s approach to deficit reduction, and argue that a strong preference for spending cuts over tax rises will hit the poorest hardest. He definitely won’t repeat the word ‘Embarrassing’ five times…
  5. ‘Security’ and ‘doing more for less’ – Osborne will use these themes throughout his statement on Wednesday. He will hope to contrast himself and the Government with what he perceives to be his opponents’ main weaknesses: economic credibility and national security. He will also claim that his reductions will not necessarily result in worse performing public services.