War is peace. Freedom is slavery. Ignorance is strength. Conservative is Labour.
That last line doesn’t appear in the George Orwell novel 1984, but it seems to fit that list now.
That is, if you’ve read the Institute for Fiscal Studies’ reaction to the Autumn Statement.
They say Chancellor Philip Hammond has pretty much copied the borrowing targets Labour proposed ahead of the 2015 election.
As IFS’s director puts it, “it wouldn’t be far from the truth to say that the new fiscal plans aren’t Osborne’s, they are Balls’s.”
Is it fair to say the Conservative government has now nicked Labour’s plans, which they previously called ‘irresponsible’?
Well, no not really.
It’s certainly a bit curious, but the truth is that Britain isn’t in the same position it was before last year’s election.
Labour wasn’t going to hold a referendum on the EU so the policy wasn’t necessarily drafted to tackle the same challenges. In that sense comparing one with the other doesn’t seem totally fair.
But the easiest way to show Hammond’s plans couldn’t pass for Labour policy is by simply looking at where the money for fiscal stimulus has to come from.
Lower income families will be hit once again with the bottom third seeing their income fall in the years ahead according to think tank Resolution Foundation.
This despite May previously claiming she’d help the ‘just about managing’ families. It seems she’ll be merely paying lip service to that objective.
The government’s plans are also set to increase so-called intergenerational inequality, the IFS reckons. People aged 22-30 can expect a 7% fall in living standards, while people aged 60 or over see their incomes improve by 11%.
It means May’s government won’t tackle Britain’s inequality gap. If anything, its policies might make it worse and this could have huge consequences for the economy.
Since the crisis the top 20% have increased their wealth by 20% while the bottom fifth have seen it drop. A lot of money is concentrated in a small circle of people without an incentive to spend it.
The reason the economy hasn’t grinded to a halt yet is because the shortfall in demand is matched by borrowing, Professor Colin Crouch of the University of Warwick told an inequality forum at the British Academy.
Global debt levels have only increased since the global financial crisis. It’s one of the reasons Pentagon adviser Jim Rickards believes the next collapse will be even bigger.
Another implication of this year’s Autumn Statement is that Hammond has given himself more fiscal policy tools to stimulate the economy.
The government’s following through with its announced infrastructure spending spree and this was welcomed by David Stevenson in this week’s issue of Strategic Intelligence.
“From 2020, the government says it plans to spend between 1% – 1.2% of GDP on economic infrastructure,” David writes.
“The Chancellor’s new projects include: £4.7bn on science & innovation including £2bn a year extra on R&D by 2020-21, £2.6bn on transport networks, £450m on digital signalling, £390m on low-emission vehicles and £1bn on digital infrastructure.”
Infrastructure spending could boost confidence in the UK economy amid uncertainty about the country’s future. In that sense I view it as a positive thing.
However, I do think it’s disappointing that the money once again seems to have to come from the people hit hardest by the previous government’s austerity policies.