Osborne and Balls clash over fate of the nation
Chancellor George Osborne yesterday delivered his economic plan to MPs and a disdainful opposition. But what do the complicated figures and bold promises in the Autumn Statement mean?
For an Autumn Statement, it was delivered on a very wintry day. As he stood up in Parliament to announce his economic plan for Britain, Chancellor George Osborne was under pressure to bring positive news.
The Office for Budget Responsibility has predicted that Britain’s economy will have contracted by 0.1% in 2012. National debt looks set to increase for much longer than the government hoped. And after revelations of tax avoidance by huge corporations, the public mood was sour.
What to do when faced with this grim outlook? For Osborne, the first response was to focus on the positive – the UK is on track, for example, when it comes to cutting the deficit. The second was to remain doggedly optimistic.
The forecasts, he argued, show the road will be long and hard – but also that Britain is headed in the right direction. The only path to prosperity, he says, is to stick with ‘Plan A’.
Yesterday, the Chancellor described what that would mean. Businesses will lead the way in restarting the economy, so corporation tax will be reduced to 21%, showing the world Britain is ‘open for business’. The amount small companies can invest in things like new equipment without paying tax will also be increased tenfold.
The coalition plan for recovery also means cutting spending. Osborne will put up many welfare benefits by only 1% per year: since that is less than inflation, it will mean an income dip for poorer people – but a government saving of £4 billion.
This, Osborne claimed, is the route to prosperity. But when the man currently at the helm of the Treasury finished, his rival had a ready response.
Unemployment and inequality, argued Ed Balls, is the real problem: instead of squeezing welfare, the time has come to ramp up taxes on the rich. Labour policies include taxing the largest incomes at 50%, and funding jobs for the long-term unemployed by taking money out of bank bonuses. The current government, Balls argued, has failed the economic test: ‘Unfair, incompetent and completely out of touch’.
Winter of discontent
Both Conservatives and Labour vocally condemn the economic policies of their rivals. For one side, a small state and freedom to make money is the way; the other say the wealthiest must pay to fuel growth through public spending and improve life for the worse off.
Is one faction correct? It is possible that one route might lead to greater prosperity – and that the other really is a dangerous path.
But there is another basis for the differing views. Neither party, some say, actually knows what might result from its policies. Balls and Osborne are drawn to their politics because they believe in ideals like greater equality, or, alternatively, the freedom to rise above the rest. These ideas are motivated by belief systems, not facts.
- Which party do you back when it comes to the Autumn Statement?
- Is economics an objective science, or is it based on more abstract values and ideals?
- Make a poster that shows the headline announcements of the Autumn Statement – and explains what they mean for normal people.
- Create a political cartoon that demonstrates visually the differences between George Osborne and Ed Balls.
Some People Say...
“Political parties are all the same.”
What do you think?
Q & A
- All this political squabbling doesn’t interest me.
- But it will affect you. Along with the annual spring Budget, the Autumn Statement allocates money to things like health care, and sets how much tax people pay and the support they get from the government.
- That affects me... how?
- It will have an impact on your family’s finances. One of Osborne’s popular moves, for example, was scrapping a rise in fuel duty, which would have increased outgoings for all households with a car, no matter how rich or poor.
- What about spending?
- Osborne also announced that £1 billion is being put aside for schools.That will fund 50,000 extra places – although some experts say that is not nearly enough.
- Office for Budget Responsibility
- The OBR was created after the general election in 2010, when the coalition came to power. It developed from an idea that an organisation independent from the government should provide economic forecasts, and draws up its predictions as a background to the UK Budget being put together.
- Cutting the deficit
- The deficit is the gap between government spending and income that the government collects in taxes. As that gap is filled by borrowing money, the national debt will also grow. This year, the deficit is 6.1%, by 2018, it is expected to fall to 1.6%.
- Less than inflation
- In a healthy economy, wages and the prices of goods rise slowly, in a process called inflation. Normally, the two should increase in tandem. When wages or welfare payments do not grow as fast as everything else, that means their value is reduced in real terms, because the money will not go as far.