A Strong Voice for Croydon Central - Gavin Barwell MP
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Reflections on the Autumn Statement
08/12/2012 21:46:00


On Wednesday, the Chancellor gave his annual Autumn Statement on the state of the economy.

He had mixed news to report.

The economy is headed in the right direction - the deficit has fallen by over a quarter and is predicted to carry on falling each year; employment is rising and unemployment is falling, with 1.2 million private sector jobs having been created since the last Election; exports to the major emerging economies have doubled over the same period; and interest rates are at an historic low.

But it is not improving as quickly as he or any of us hoped - growth is lower than predicted and as a result it is going to take longer than planned to tackle the deficit.

The key question is why? Is it, as Labour claim, because the Chancellor has "cut too far, too fast"? Or is it, as the Chancellor claims, because of international economic conditions - uncertainty about how America will deal with its fiscal problems, lower than expected growth in China and most of all problems in the eurozone?

Obviously I’m biased but you no longer have to rely on what politicians tell you - thanks to this Government, we now have an independent Office for Budget Responsibility that produces the economic forecasts that the Chancellor has to base his figures on and explains the reasoning behind them. They say:

“the weaker than expected growth can be more than accounted for by over-optimism regarding net trade”.

In other words, it’s because of international conditions as the Chancellor claims. The strategy is working, it’s just taking longer than expected because of the situation in the world around us. Changing direction now - spending more and borrowing more as Labour suggest - would be a disaster. If those who lend us money lose confidence in our determination to pay back our debts, they will charge us higher interest rates and that will mean much higher repayments for anyone with a mortgage, which would have a devastating effect on the economy.

But while the Government’s overall strategy may be right, there’s no room for complacency. The Chancellor needed to take action to encourage growth and to help hard-working families struggling with the cost of living. And that’s exactly what he did.

On growth, he:

- increased spending on UK Trade & Investment, which works with UK-based businesses to ensure their success in international markets and encourages the best overseas companies to look to the UK;

- announced a further cut in the rate of Corporation Tax;

- extended business rate relief for small business;

- introduced a grace period before empty properties have to pay business rates, which should encourage developers in Croydon who haven’t identified a tenant in advance to start building; and

- increased Government capital spending on things like schools, roads, railways and new homes, which should provide a boost to the economy. The Government has cut current spending but capital spending as a percentage of national wealth is now higher than the average level under Labour.

And on helping people with the cost of living, he made two really welcome changes.

He said that he was cancelling Labour’s planned three pence increase in fuel duty, something which many of my constituents have been lobbying me about.

And he announced a further increase in the personal allowance (the amount of money we can earn before we start paying income tax). This is a tax cut for anyone who earns more than £9,205 a year but proportionately it benefits those on lower incomes the most. Someone working full time on the minimum wage has had their income tax cut in half by this Government. These are the people we are passionate about helping - people who are doing the right thing, working hard for not very much money rather than claiming benefits, not the wealthy. Ah, you say, but you cut the top rate of tax for the very wealthy from 50p to 45p. Yes we did because very high rates of tax are bad for the country - they discourage wealthy people from locating and they encourage people to manage their financial affairs in a way that minimises the tax they have to pay. Labour know this. That’s why for nearly all of the 13 years they were in government the top rate of tax was only 40p. Gordon Brown only increased a month or two before the Election when he knew he was likely to lose and that we would then have to do something about it, at which point Labour could attack us for cutting taxes on the wealthy. So the next time you hear Labour accusing us of cutting taxes for the rich, remember this: the wealthy will pay a higher proportion of income tax in every year of this Government than in any of the 13 years when Labour were in government.

But given the size of the deficit, these tax cuts and spending increases to encourage growth and help people with the cost of living have to be paid for by tax increases and cuts elsewhere. And the way in which the Chancellor chose to pay for them tells you everything about whose side this Government is on.

First, he reduced tax relief for those with very large pensions.

Second, he took further action to tackle tax evasion and aggressive tax avoidance.

Third, he is asking government departments to make some further savings.

And fourth, and most controversially, he said that he would increase most benefits (but not those for the disabled or carers) by just one per cent, which is less than the rate of inflation. Over the last five years, benefits have risen twice as fast as salaries. It simply isn’t fair to ask those who work hard to pay more tax so that those on benefits enjoy a bigger increase in their income than most people are seeing in their salaries. It was wrong of the Government to increase these benefits by five per cent last year and I am pleased to see the Chancellor hasn’t repeated the mistake.

If the Conservative Party wants to win an overall majority at the next Election, it must be unambiguously on the side of those in work on low and medium incomes - people who are doing the right thing but finding it really tough at the moment. The Chancellor doesn’t have much room for manoeuvre - he can’t cure our economic problems overnight - but he needs to show these people that he understands what they are going through and that he is on their side. That’s what he did on Wednesday.

Comment on this blog


Readers' Comments

On 09/12/2012 05:05:00 wayne nelson wrote:
Are you having a laugh? Employment is rising? No, you just cook the figures, move people from one benefit to another so they don't come under JSA anymore. Are there any MPs out there that actually do the job because they want to help either the community they live in or Great Britain as a whole? I personally would say no, you're out to line your own pockets, make policies that big business tells you to make and then make a fortune when you leave Parliament as an adviser. No one government is repsonsible for how our country is today, every government since the 1950s onwards has let our country down to line their own pockets, They don't make policies for the people, they make them for big multi-national businesses. They are what truly run our country.
On 12/12/2012 23:35:00 Jim wrote:
It really is a pity that some of the measures in the last budget got abandoned. Why shouldn't pasties have VAT on them? Why should people be able to opt out of large amounts of tax by donating to their favourite charities.

But I'm really disappointed. We need MASSIVE cut backs in the state sector. We still have public sector "workers" on automatic pay increments. What happened to the bonfire of the quangos? The debt is still rising. 45p income tax is crazy. Excuse me, I'd like to keep my own money and decide who to give it to. Why on earth are we increasing the DFID budget? Why does it take years of inquiry before deciding on London airport expansion? £4M on Leveson, setup by Cameron, and he's going to ignore the main finding anyway. Osborne needs to cut faster and deeper. The civil servants have got the better of him.

No more "work life balance days". No more paternity leave. No more work place pensions. Free up businesses.

The government is so wasteful, I believe Starbucks is merely performing its civic duty in avoiding paying tax. The government clearly can't spend hard earned cash wisely. How many civil servants fired over the rail franchise fiasco?

Gavin writes "capital spending as a percentage of national wealth is now higher than the average level under Labour." - sounds like a reason to vote Labour to me!

"increased Government capital spending on things like schools, roads, railways and new homes, which should provide a boost to the economy." ie blunt the economy as the state sucks in more wealth.

Schools don't need fancy new buildings. We need chalk'n'talk. How about actually teaching kids something useful. Scrap "citizenship" and teach Chinese.




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