05/12/2012 03:18 GMT

Mehdi's Morning Memo: Lots Of Pain, Not So Much Gain

The ten things you need to know on Wednesday 5th December 2012...


Poor ol' Gideon. He can't even get his seasons right. This afternoon, in the midst of a pretty cold and icy winter, the chancellor of the exchequer will stand up in the Commons to deliver his long-awaited Autumn Statement.

And, as the Guardian points out this morning, it's expected to be

"a day of bad news on growth, borrowing, debt, taxes and broken fiscal rules – and with the chancellor acknowledging there are 'no miracle cures' to the country's economic strife".

Here's the paradox: austerity seems to have well and truly failed yet the "age of austerity" is far from over. The chancellor is likely to extend his deficit reduction programme, of spending cuts and tax rises, by another year - to 2018. "Insanity," Einstein is said to have once remarked, "is doing the same thing over again and expecting different result."

What began as a five-year plan becomes an eight-year plan. And Osborne will also have to concede that the second target in his cherished 'fiscal mandate' - that the national debt should be falling as a proportion of GDP by the end of this parliament – will now not be met.

Meanwhile, the independent Office for Budget Responsibility (OBR) will downgrade growth forecasts for 2012 and 2013 - again. I'm not sure why they bother any more...

“It’s the permanence that’s the real problem in terms of the public finance," the IFS' Paul Johnson told the Today programme this mornig. "Back in March the Office for Budget Responsibility thought the economy would grow by about 0.8% this year, not very much but at least positive. The average of independent forecasters is now that it is actually going to go down this year."

The Telegraph leader says "the Chancellor must be much more open and honest about the scale of the challenge facing the public finances, and set out a clearer set of objectives and sanctions for ensuring that it is adequately faced up to".

The Times leader says: "Mr Osborne’s dilemma remains to combine necessary retrenchment with encouraging the conditions for long-term, sustainable growth."

Remember: John Major's surprise victory in the 1992 general election campaign was based on the slogan: "Yes it hurt, yes it worked". The key part of that sentence is the second part: the pain has to produce gain. So far, it hasn't.


The chancellor's plans to invest an extra £5 billion in new 'free schools' and other 'shovel-ready' capital projects over the next couple of years will "make a difference" to the country, according to the prime minister.

Osborne plans to fund the extra investment in schools, transport, science and skills by further cutting day-to-day spending by other Whitehall departments. So perhaps we should lose the word "extra".

According to the Treasury, this new round of capital spending will mean that overall capital spending will be, on average, higher in the 2010-15 parliament than in any of Labour's three terms in office, between 1997 and 2010.

According to the Guardian, however, all is not as it seems:

"A similar £5bn switch was announced in last year's autumn statement. But research by the Guardian shows that more than half of the new capital investment announced in that autumn statement has not yet been spent on buying goods and services or paying wages, while projects have taken months to be ready and to process the money, awaiting planning permission or other hold-ups."


When he stands up in the Commons today, the chancellor will have to be ultra-careful as to how he refers to the NHS budget. His boss, the PM, and cabinet colleague Jeremy Hunt, the health secretary, can tell him why.

From the Telegraph:

"David Cameron and Jeremy Hunt have been ordered to stop claiming that NHS spending has increased after the official statistics watchdog found health funds had fallen.

"Mr Hunt, the Health Secretary, should “clarify” claims that expenditure on the NHS had risen in “real terms” every year under the Coalition, the UK Statistics Authority said.

"The chairman of the authority, Andrew Dilnot, issued the rebuke after upholding a complaint by Labour about statements by the Prime Minister and other senior Tories.

"... Labour complained to the UK Statistics Authority about various statements made by the Prime Minister, Mr Hunt and the Conservative Party claiming “real-terms”, above-inflation increases in spending on the NHS under the Coalition.

"In a letter to Mr Hunt, which was copied to the Cabinet Secretary, Mr Dilnot said a detailed analysis of the best-available Treasury data suggested that real-terms health spending was lower in 2011/12 than in 2009/10."



From the Times:

"George Osborne will announce he is to raise taxes on banks for the fifth time today as he sets out the need for deeper and longer-lasting spending cuts in a bleak mini-budget."

Forgive me if I don't believe this piece of pre-Statement spin. This is a chancellor, after all, who has refused to bring in a bonus tax or a financial transaction tax, and who has slashed taxes on banks/bankers (through his cuts to corporation tax and the 50p top rate of income tax).


From the Guardian:

"George Osborne has been given a black eye on the eve of his autumn statement by employers almost universally rejecting his plan to offer workers company shares in return for abandoning many of their employment rights.

"The chancellor plans to announce on Wednesday that he will press ahead with the proposal, with some small adjustments.

"It was one of the centrepieces of Osborne's speech at the party conference in October but a government consultation has revealed his proposal has won the full support of fewer than five of the 209 organisations that responded."

Five out of 209? Ouch.


Watch this clip of Fox's Bill O'Reilly claiming Christianity is not a religion (!), while interviewing the president of 'American Atheists'.


The director of the respected National Institute for Economic and Social Research, Jonathan Portes, lays into George Osborne in an interview with me for the HuffPost UK.

Portes, a former Cabinet Office chief economist, who has been a longstanding critic of the coalition's austerity mania, accuses the chancellor of trying to discredit him, by linking him to Ed Balls and the Labour Party, for "ideological" reasons:

** “The chancellor said some things in parliament about me that seemed to me designed to paint me in [a negative] light but they were simply wrong. He said things that were untrue. And he has undertaken not to repeat them.”

** "I think that the Treasury lacks an economic strategy."

** "Are we in danger of being stuck at persistently low growth relative to where we should be? Yes.”

Depressing stuff.


One group that isn't too pleased about the boost in capital spending, at the expense of departmental spending, is the Police Federation.

From PA:

"And concerns were raised over the impact on services like the police and social care of cuts to current spending amounting to 1% (£950 million) in 2013/14 and 2% (£2.5bn) in 2014/15.

"The chairman of the Police Federation of England and Wales, Paul McKeever, said forces were already having to cope with 'crippling' 20% budget cuts before the 'flabbergasting' announcement.

"'We all accept these are austere times and savings need to be made but the police are already stretched to capacity,' said Mr McKeever."

This is the first Tory-led government in my lifetime to repeatedly pick fights with the police. Weird, eh? Shadow home secretary Yvette Cooper must be delighted...


From the Times:

"David Cameron is ready to give voters the chance of rejecting Britain’s membership of the European Union in a landmark referendum.

"In his gamble, Mr Cameron would urge the public to support a looser relationship with Brussels that he hopes to negotiate over the coming years. But he is ready to give the country the chance to say 'no' to such a deal, a result that would effectively be seen as a vote to quit the EU, at least on the proposed terms.

"... Until recently No 10 had hoped to sketch out a referendum for the next parliament in which voters would be given the choice between a looser relationship and the status quo.

"Mr Cameron has been persuaded that the promise of such an 'in-in' vote would be torn apart by Tory eurosceptics and UKIP as a phoney referendum that denied voters a real choice."

"It remains unclear how he will pitch such a vote in his speech, the delivery of which is likely to slip into the new year."

Yesterday, as the Times goes on to note, "Boris Johnson called on Mr Cameron to all but pull out of the EU".

Is the mayor of London deciding the government's EU policy? Setting the agenda? Tory backbenchers would like to think so...


From the BBC:

"Newspaper editors are to meet later to try to agree proposals for a new press watchdog that would be independent of publishers and politicians.

"The gathering on Wednesday comes after editors met the prime minister on Monday to discuss the Leveson report.

"David Cameron warned newspaper editors "the clock was ticking" for them to avoid a system set up by law, as recommended by Lord Justice Leveson.

"He told them to "urgently" draft plans for an independent press regulator.

"And the press's proposals "absolutely" had to meet the report's requirements, he added."

Let's see if they listen to him. The PM, however, slightly undermined his own negotiating position by coming out so forcefully ("rubicon", etc) against Leveson's core proposal on 'statutory underpinning' in the Commons last week.


The final "vs" of this morning's Memo comes from Tim Montgomerie's column in today's Times:

"The one big danger for [Osborne] is deteriorating relations round the Cabinet table. He is getting a reputation for being aloof and sometimes a bully. Some of his one-time biggest allies, such as Justine Greening and Philip Hammond, are now estranged.

"In Cabinet discussions he hasn’t appeared simply to win arguments with the likes of Iain Duncan Smith, Maria Miller and Eric Pickles, but almost to belittle them.

"If the economy doesn’t start to become a positive for the Tories he may need more than the patronage of No 10 to keep him in place. He could do with investing in relations with his Conservative Cabinet colleagues."

Good luck, George!


"[W]e would conclude that expenditure on the NHS in real terms was lower in 2011-12 than it was in 2009-10." - Andrew Dilnot, chair of the UK Statistics Authority, tells health secretary Jeremy Hunt his pants are on fire in an official letter yesterday.


From the Sun/YouGov poll:

Labour 44

Conservatives 30

Lib Dems 11

That would give Labour a majority of 128.


@mrjohnofarrell Just got the family one of those George Osborne Advent Calendars. All the windows are boarded up.

@David_Cameron I've just spoken to newspaper editors in No.10 - telling them they need to set up an independent regulator urgently.

@giles_fraser Late night thought. If its twins and a caesarian, does the doctor (who pulls them out) decide the heir to the throne? Just asking.


Daniel Finkelstein, writing in the Times, says: "Today the Chancellor must make the public appreciate that the gain from making cuts is worth the pain."

Seumas Milne, writing in the Guardian, says: "Blacklisting is the scandal that now demands action."

Ian Birrell, writing in the Daily Mail, says: "What the NHS needs even more than money - a dose of kindness."

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