The autumn statement is a political ritual without economic relevance
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Version 0 of 1. George Osborne never lacks confidence. But even the Conservative chancellor of the exchequer might be a little taken aback when he rises to deliver his autumn statement in the Commons today, to realise that he is only doing so because of a law drafted by Tony Benn, which the veteran Labour leftist proudly told MPs was a socialist measure. Before 1976, when Denis Healey became the first chancellor to deliver an autumn statement, no chancellor of the exchequer went through the end-of-year ritual that Osborne will undertake for the fourth time today. Celebrated chancellors such as Gladstone, Churchill, Cripps and Macmillan only ever made one great set-piece speech to the Commons each year – the budget, normally delivered in March or April. Back then, the event we know today as the autumn statement simply did not exist. That changed in part because of the oil-price shock of the mid-70s, which finally threw the British economy off the post-imperial rails on which successive chancellors had battled to keep it in the postwar years. From 1973 – when an Arab oil embargo brought western economies to their knees, triggering a stock market crash, soaring inflation and high unemployment – it became difficult for any chancellor to simply set the dials in the spring budget and then leave them alone for the next 12 months. More frequent tinkering became necessary. But the impact of the oil crisis also helped drive large parts of the Labour party to the left, so that when Benn came into government in 1974 he began to promote a policy of state intervention and investment that climaxed in the once hugely controversial 1975 Industry Act. This established the now largely forgotten National Enterprise Board and promised – in spite of Harold Wilson's waterings-down – what Benn described as "far-reaching democratic socialist reforms". The NEB is long gone, but the effects of schedule 5 of Benn's act still remain, still requiring the Treasury to publish twice-yearly forecasts of GDP, unemployment, the balance of payments, retail prices index and average earnings to parliament. Today's ritual is Benn's parliamentary grandchild. But it is now also a parliamentary waif without a home or useful purpose. The very fact that today's event, though officially dubbed the autumn statement, is occurring once again – like seven of the last 11 – in December, which is not in autumn at all, is a sign that the statement's formal function has become fuzzy. It suggests that the ritual is taking place because it has done so in the past. That feeling is enhanced by the way the date of the statement was so casually changed less than a month ago in order to allow David Cameron to complete this week's trade mission to China. Such an indignity would not have happened to the budget. But that is because today's event has little or no serious economic purpose at all. Many years after leaving the Treasury, Healey pointed out that the trouble with government economic forecasts is that they are almost always wrong. "Like long-term weather forecasts," he wrote, "economic forecasts are better than nothing, but their origin lies in extrapolation from a partially known past through an unknown present to an unknowable future, according to theories about the causal relationships between certain economic variables which are hotly disputed by academic economists and may in fact change from country to country or from decade to decade." Forecasts are still as haphazard today. In short, there is nothing of importance that Osborne will say today that is either unknowable from other sources or Treasury statements, or that can be relied upon as a crystal-clear statement about the economy. The substantive economic irrelevance of today's proceedings is further underscored by the fact that the government's public expenditure plans, which under Margaret Thatcher's chancellors became the raison d'être of the autumn statement, have all been signed and sealed long ago. In addition to his March budget, Osborne announced the results of the latest spending review in June. This took the government's overall and departmental spending plans up to spring 2016. So, unless he is planning to rewrite the spending review, Osborne can have little of significance to say on spending. The autumn statement long ago became a wholly political confection, not a serious economic policy milestone. It is an opportunity for a chancellor to command another big parliamentary occasion, not a genuinely significant scene-setting event for the economy. Gordon Brown certainly saw the occasion in that light. His so-called pre-budget reports – he abandoned the old name before Osborne reintroduced it – were designed to burnish his image as the master chancellor, gazing far-sightedly into the future. Osborne does not enjoy Brown's luxury of a long global boom. But he is every bit as political about these events as Brown, whom in so many ways he so closely resembles. For the Conservatives, today is about redefining themselves – in the face of a run of seriously disappointing polls – as the party that feels the voters' pain over energy prices, house price inflation, wind farms or payday loans – while still, boosted by yesterday's strong economic surveys and the possible return of the UK's AAA rating, managing a recovering economy more soundly than Labour. For the Liberal Democrats, it is about using the run-up to the statement to articulate different priorities – Ed Davey on green energy or Danny Alexander yesterday on infrastructure spending. Few of the announcements are new or economically significant. Today's autumn statement is 1% about the economy and 99% about election politics. As long as we all understand that, we won't go far wrong. Our editors' picks for the day's top news and commentary delivered to your inbox each morning. |