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Tetra’s Take: Cheers On All Sides

Chancellor’s outlook

It’s a good job that the Chancellor’s parents didn’t call him Robert – because Mr Osborne bore the ‘builder’ badge with pride during the Autumn Statement. The last Parliament, he claimed, had been about restoring the country; this one would be about rebuilding it.

To that end there were plenty of announcements about new homes, rail projects, roads, science centres, new museum galleries and much, much more. Clearly the Chancellor has an eye on the feel good factor for later in the Parliament when there will not just be a general election, but a more important leadership election shortly before.

But in the meantime there were also some tricky issues to deal with. And he did so decisively by taking the risks off the table. Tax credit cuts were axed; the police budget preserved – two issues that had threatened to do a great deal of damage to the Government’s reputation and made ministers vulnerable to defeat in both the House of Commons and the House of Lords.

So how could he afford it? Well the Treasury must have been toasting the independent Office of Budget Responsibility in the last week when their forecasts for increased tax receipts and reduced borrowing costs gave him an extra £27 billion to play with. But to give himself more wriggle room, the Chancellor also increased taxes in subtle ways, businesses will be levied for apprenticeships, local government will levy a social care tax, nurses will pay for their tuition and second home owners and buy to let landlords will pay extra stamp duty – collectively adding up to many more billions.

Welfare savings of £12 billion will still be reached, but by the end of the Parliament – which means that the Chancellor could also announce that he is still set to meet his promises to eliminate the deficit and run a surplus of £10.1 billion by 2020.

If the plan reaches fruition – that is to say that the economy keeps growing as predicted by between 2.3-2.5% over the Parliament – then the Chancellor’s leadership ambitions will be greatly burnished. Some will still want to taunt him for his u-turn on tax credits, but things that don’t happen are never as potent as those that do. Possibly more important among Tory MPs will be the fact that by the end of this decade Mr Osborne will have presided over a £100 billion consolidation of the public finances with relatively little blow back. And for most Tories, the fact that the state will then spend just 36% of the nation’s income as opposed to the 45% share they inherited in 2010 will be quite a badge of honour.

That at the same time as being the only country in the world to meet the UN commitment to spend 0.7% of national income on foreign aid and the NATO commitment to spend 2% of national income on defence, can only put a spring in the Tories steps as they look forward to a Christmas break after quite a tumultuous year.

View from the opposition benches

If today was about a Chancellor on top form after five years in the job, and delivering his first Spending Review for a majority Conservative Government, it was more a case of ‘under new management’ from the Labour Party. This was the Chancellor that roared. The rhetoric rang loud around the House of Commons: a £10 billion budget surplus by 2020, better than expected public finances and a focus on security.

Shadow Chancellor John McDonnell MP relished his opportunity to respond to the Spending Review setting out a much stronger anti-austerity message from Labour than has been seen in recent years. Whilst George Osborne heralded One Nation Conservatism, the Shadow Chancellor set out his stall that no recovery involving one million people turning to foodbanks could be seen as a success. Although McDonnell failed to live up to his promise to publicly vomit if the Chancellor repeated his mantra about fixing the roof whilst the sun was shining (which he did only once), he did not let observers down by instead quoting from communist Chairman Mao’s Little Red Book.

Labour’s approach was about cutting the deficit effectively and fairly. There is merit to Labour’s case. In 2010, George Osborne announced that the government would eliminate the deficit by 2015, but here he was at the Despatch Box again making a similar promise. This time the Government says it will be in surplus by 2019/20. Labour also made hay from the fact that the coalition added more to Britain’s national debt in five years than they did in 13 years. There were big climb-downs from Osborne over his plans to cut tax credits for low-income earners and to cut the police budget, both of which were dropped. The Chancellor also acknowledged the pressure facing adult social care budgets, something Labour has been campaigning on, but handed responsibility over to local government with a new power to raise council tax by an extra two per cent to pay for local services.

Ultimately though this was not Labour’s day. The party is still recovering from a major election defeat and the results of its leadership election. George Osborne will be hoping today set the course for his own leadership ambitions; Labour that it was another step on the road back to recovery.

@TetraStrategy