Mehdi's Morning Memo: Triple Dip Or Triple A?

Posted: Updated:
Print Article
GEORGE OSBORNE
PA

The ten things you need to know on Thursday 6th December 2012...

1) BREAKING: GEORGE OSBORNE ON TODAY

Evan Davis has just interviewed chancellor George Osborne on the Today programme, the morning after a gloomy Autumn Statement in which the government's debt target was delayed by another year, to 2016/2017; plans for austerity were extended by another year, to 2017/2018; and the official growth forecast for 2012 was downgraded yet again - to a miserable 0.1%.

Yes, government borrowing, surprisingly, was down, but did the chancellor acknowledge that it would have gone up (see thing 3 below) had he not used the proceeds from the as-yet-uncompleted sale of the 4G spectrum to massage his figures? "No," said a defiant Osborne. "We have scored the 4G receipts in exactly the way the OBR wanted us to do... It's been a red herring over the past 24 hours for the BBC and others." Davis was pretty annoyed by this (non) answer and the interview ("spat" as Nick Robinson later described it), basically, went downhill from there...

"There is a big increase in the personal allowance which goes to help people on low incomes," Osborne said. "There is also the freeze in fuel duty. We want to help people who work hard and want to get on. We are asking more for working age benefits..." The chancellor also claimed that "there is a general equity in our approach".

Towards the end of the interview, Davis asked Osborne whether the Tory jeering and hectoring of Ed Balls' response in the Commons yesterday (see thing 6 below) was a bit inappropriate, given the latter's well-known stammer? "The reason why the House of Commons doesn't take Ed Balls very seriously is nothing to do with his stammer but because he was the chief economic adviser when it all went wrong," replied Osborne. "He was at the scene of the crime."

Hmm...

2) TRIPLE DIP OR TRIPLE A?

As we head for what might be a 'triple dip' recession - the Office for Budget Responsibility (OBR) yesterday forecast negative growth for the fourth quarter of 2012 - or are we on the verge of losing our prized triple-A rating? From the BBC:

"The UK's failure to meet a key public debt target 'weakens the credibility' of its top AAA credit rating, the Fitch ratings agency has said.

"... Fitch said that the Autumn Statement confirmed the scale of the challenge facing the UK.

"In March, it said the UK's AAA rating was under threat.

"A cut to the credit rating would mean that the country is perceived as more risky to lend to, thereby raising the cost of borrowing from international investors."

It would also leave what's left of George Osborne's reputation in tatters.

Yesterday, the HuffPost UK reports, "both Ladbrokes and William Hill were offering... 5/4 odds that the UK's rating would slip before the 2013 Budget".

I'm not sure how the chancellor, who has long fetishised our triple-A credit rating, would survive if such a downgrade were to occur on his watch, two years before a general election...

3) OSBORNE'S 4G 'WHEEZE'

Hold on, did Osborne pull off his much-lauded fall in borrowing - perhaps the only bit of silver lining in his gloomy Autumn Statement - through a sleight of hand?

From the FT:

"A £3.5bn boost has been factored into the government's accounts next year from the long-delayed auction of spectrum capable of carrying 4G mobile broadband signals, even though the process has yet to begin.

"The sale of spectrum to telecoms groups to enable superfast wireless internet will have the largest fiscal impact next year of all the policies unveiled in the Autumn Statement.

"... But the auction has not yet started, and those involved have warned that the process is complex and the outcome uncertain. Ed Balls, the shadow chancellor, accused the Treasury of manipulating the borrowing figures by taking account of 4G spectrum proceeds before the auction."

The TUC's Duncan Weldon told the HuffPost UK yesterday that it was a "wheeze": without the assumed £3.5bn, public sector net borrowing would actually be up this year (by £2bn), not down.

The New Statesman's George Eaton calls it an "accounting trick worthy of Enron".

4) MR ONE PERCENT

From the Independent:

"Most state benefits will rise by only 1 per cent over the next three years to save £3.7bn in a new round of welfare cuts. The Chancellor was accused of demonising claimants as "feckless" and "scroungers" as he contrasted them with "strivers" who worked hard.

"George Osborne said that out-of-work benefits had risen by 20 per cent since 2007, twice as much as earnings. 'That's not fair to working people who pay the taxes that fund them,' he said. 'Fairness is about being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits.'

"From next April, jobseekers' allowance, employment and support allowance for the sick, income support and tax credits will increase by 1 per cent for three years."

Here's the problem for the chancellor: not only will a 1% rise "push more families into poverty", according to Save the Children UK, but the majority of households affected by this move will be working, not workless, households.

From the Huffington Post UK:

"An analysis by the Resolution Foundation thinktank suggests that 60% of the impact of the proposed three-year, below-inflation rise in benefits will hit working households while only 40% will affect those where no one is in work. "It’s completely wrong to say that today was all about helping so-called strivers," said the Foundation's chief executive Gavin Kelly."

Dear Gideon, your pants are on fire.

5) LABOUR'S WELFARE DILEMMA

Meanwhile, the Times reports:

"Ed Miliband will have to decide within weeks whether to back new laws sanctioning sweeping cuts to welfare benefits.

"George Osborne sought to reopen divisions within the Labour Party by announcing that MPs will vote before Christmas on coalition plans to slash £3.7 billion from the welfare budget by 2016.

"The move is designed to reignite a battle within the Shadow Cabinet over welfare. Blairites have been trying to persuade Mr Miliband to go further in cutting back benefits. Although welfare cuts enjoy broad public support, they remain contentious for Labour."

Speaking on the Today programme this morning, Ed Balls reminded interviewer Sarah Montague that the majority of people hit by this change "are in work" - but refused to say whether Labour would vote for or against the move. "We will look at the detail [of the bill]...but I have to say to you that the fairness choice is a choice that George Osborne is failing."

BECAUSE YOU'VE READ THIS FAR...

Watch this mock-up video of Barack Obama singing Springsteen's 'Born in the USA'.

6) OMNISHAMBALLS?

The shadow chancellor's response to the chancellor's Autumn Statement has been mocked and attacked - not least, by the chancellor himself.

"There is only one person in this chamber who is drowning and that is the shadow chancellor," said Osborne yesterday, in the Commons. "That was the worst reply to an autumn statement I have ever heard in this house. If one thing changes as a result of this autumn statement, it might be a shadow cabinet reshuffle."

As the Guardian's Nick Watt notes: "Osborne turned on Balls after he opened his speech by mistakenly claiming that the national deficit was not rising. 'The national deficit is not rising ... is rising, is not falling.'"

The Mail's Ephraim Hardcastle diary says "Ed Miliband looked horrified as Shadow Chancellor Ed Balls fluffed his response to Chancellor George Osborne Autumn Statement". The paper's sketchwriter Quentin Letts writes: "Frogmen were last night diving on the wreck of a Westminster coaster, the high-tonnage Ed Balls, after she (okay, technically 'he') sank in less than a minute with the possible loss of all on board."

"Spluttering Ed goes from bruiser to loser," reads the gleeful headline in the Daily Express.

Two points are worth considering here:

1) Only in the Commons would MPs laugh and jeer at a man who has been fighting a stammer since he was a child. ("Sometimes my stammer gets the better of me when I speak," Balls told the Today programme this morning.)

2) Only the right-wing British press would mock a man (Balls) who has been completely vindicated on the effects of austerity and fiscal consolidation - have you read his prescient 2010 Bloomberg speech? - while giving a pass to a man (Osborne) who has missed his own key debt and deficit targets and is at risk of losing his cherished triple-A rating.

7) FAT FINGERS

Whoops! Did the Lib Dems attack the Tories yesterday "in error"?

From the Huffington Post:

"At 2pm the Lib Dems sent out a press release hailing their moves to cut taxes for 'normal working people' while at the same time attacking the Tories for being on the side of the wealthy... 'The only tax cuts the Conservatives support are ones for the very rich'...

After several journalists expressed surprise at the language, the Lib Dem press office added to the muddle by telling reporters the press release slamming the Conservatives was 'sent out in error' and was based on an old briefing."

As the FT's Kiran Stacey notes: "On such fat-­fingered mistakes hangs the cohesion of the entire government."

8) THE LEVESON BREAKFAST

From the Independent:

"Fleet Street editors yesterday held an unusual breakfast meeting at the Delaunay restaurant, in central London, where they agreed to accept virtually all Lord Justice Leveson's proposals for creating an independent self-regulatory body for the press.

"But while they ticked off their support for almost all 47 of Lord Justice Leveson's recommendations, there remain several obstacles to be overcome if the newspaper industry is to persuade politicians a new press law is unnecessary.

"The editors agreed to a new regulatory system that would have powers to impose fines of up to £1m and the introduction of an arbitration service that would reduce the legal cost of libel actions. But the summit rejected the notion that the standards code of the new system should be taken out of the hands of editors. They felt strongly that the code should be drafted by practitioners, not lay people.

"More significantly, the editors refused to accept any involvement in the new system of the government-appointed media watchdog Ofcom or of any statutory body."

The clock is ticking...

9) EU'RE NOT WELCOME

From the Scotsman:

"An independent Scotland would have to apply to join the European Union if voters back the SNP’s plans to break away from the United Kingdom, officials in Brussels have warned.

"In a significant blow to the Nationalists, the European Commission has written to a House of Lords committee stating that if Scots voters back independence, existing treaties which cover the UK’s EU membership will 'cease to apply', The Scotsman can reveal."

10) ARAB AUTUMN

While we were watching George Osborne tell us how good/bad things are, it was all kicking off over in Cairo. From the Times:

"Two people were reported killed yesterday as Islamist supporters of President Morsi of Egypt clashed with protesters in the escalating battle over his draft constitution.

"Petrol bombs were thrown and gunfire reported as Mr Morsi's supporters fought with demonstrators who had camped outside the presidential palace after a mass rally on Tuesday.

That had been triggered by the President's move to grant himself extraordinary powers."

Check out my column from last week's New Statesman on why we shouldn't lose hope in Egypt - or the Arab Spring.

PUBLIC OPINION WATCH

From the Sun/YouGov poll:

Labour 44
Conservatives 32
Ukip 10
Lib Dems 9

That would give Labour a majority of 120.

140 CHARACTERS OR LESS

@CarolineLucas Osborne really did just have the gall to say "we're all in this together" - and pigs just flew past the window...

@Peston Big econ event in autumn statement is £3.5bn hoped-for proceeds from 4G, which is why borrowing down & pays for future years stimulus

@RosamundUrwin One of Amazon's press team called in the middle of the Autumn statement. I guess they don't need to watch as it doesn't really affect them

900 WORDS OR MORE

Jonathan Freedland, writing in the Guardian, says "the big picture was bleak. The chancellor came to the House of Commons to announce that everything he had once promised and predicted was wrong."

Peter Oborne, writing in the Telegraph, says: "Chancellor George Osborne’s fiscal gutlessness in this budget shows a failure to engage with the enormity of the crisis."

John Cridland, writing in the Times, says: "Business will cheer the Autumn Statement only if its promises are put into action."

Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol