PLMR Analysis: George Osborne’s Autumn Statement

With the closest General Election for decades just six months away, PLMR’s cross-party team of consultants have been assessing what the Autumn Statement signals for the Conservatives, Liberal Democrats, Labour and Scotland.

The Autumn Statement 2014 
3rd December 2014

The General Election campaign has begun. The Chancellor announced from the despatch box several key measures aimed at improving the lives of families across the UK, and which he hopes will see David Cameron remain in Number 10 after May 7th 2015.

Osborne answered calls from a PLMR-led campaign on behalf of travel agents, airports and airlines to scrap Air Passenger Duty for under-12s from 1st May next year and for under-16s the following year, giving hardworking families a deserved break.

Stamp Duty on residential property is to be reformed so that rates apply only to that part of the property price that falls within each band, a measure that the Chancellor is keen to point out will benefit 98% of homebuyers. Working people will benefit from a moderate rise in income tax thresholds next April.

Flood defence projects in six English regions, a new garden city in Oxfordshire and a ‘Stonehenge tunnel’ as part of a £2bn upgrade to the A303 spanning between Hampshire and Devon were the pre-event headlines. All of them are a nod to those all-important marginal seats that will decide the direction of the nation for the next five years. “If you vote Tory, we’ll look after you”, was Osborne’s message.

The Chancellor’s plans for an extra £2bn for the NHS and a review of business rates will have an impact on a host of industry sectors including health and social care, retail, life sciences, and energy, to name a few.

With the closest General Election for decades just six months away, PLMR’s cross-party team of consultants have been assessing what the Autumn Statement signals for the Conservatives, Liberal Democrats, Labour and Scotland.

Conservatives: Cutting the deficit or cutting tax – what matters most in the run-up to the General Election?
Zoe White
Zoe White is an Account Executive at PLMR, focusing mainly on health & social care, sport, transport and the third sector. She was recently shortlisted for the PRCA’s Douglas Smith Prize for Young Public Affairs Practitioner, was the Conservative Future Representative for the Mid-Dorset and North Poole Conservatives between 2012 and 2014, and a Conservative council candidate in the 2011 local elections in Dorset.

Little of today’s Autumn Statement came as a surprise. With so much of it leaked beforehand, Osborne was left with little opportunity to pull the proverbial rabbit out of the hat. Still, the Statement played on the fallout of the ‘White Van Man’ tweet during the Rochester and Strood by-election, with many of the announcements clearly aimed at those all-important ‘hard-working families’.

In a largely robust Autumn Statement for the Government, Osborne opened by saying that the UK is the “fastest growing of any major advanced economy”, with growth forecast for the next five years.

As the final Autumn Statement before the public go to the polls next May, this was a tour de force from the Chancellor, who took the opportunity once again to try to show the electorate why he is better suited to the role than Labour’s Ed. Today’s performance is one Conservatives across the country will be proud of.

It was not just the Government which was keen to ensure that its voice was heard. With the election just around the corner, Conservative backbenchers are keen to make their mark before voters go to the ballot box, as demonstrated by the number of backbench MPs who spearheaded the call to abolish air passenger duty on children’s plane tickets, which came to fruition this afternoon.

Tax cuts such as this, on top of the reform of Stamp Duty, means that the Autumn Statement largely amounted to more public spending than the deficit reduction measures that defined Osborne’s first couple of years in the Treasury. Despite emphasising that the deficit is half what the coalition inherited, Osborne has received, and will continue to receive, criticism from those who say that not enough has been done to reduce the deficit further, and that the heralded ‘long-term economic plan’ has not been fulfilled.

Striking a fine balance between cutting a deficit and cutting tax is a difficult thing to do, and regardless of what is achieved, criticism will always be forthcoming from some direction. You can’t please all of the people all of the time.

The General Election is just six short months away and it’s crucial for the Conservatives to be seen to be doing two things; giving hard-working people a break, and encouraging long-term economic growth. “The economy, stupid” will decide whether it’s Cameron or Miliband who walks into Number 10 on the morning of 8th May 2015.

Labour: Ed Balls – what a difference a year makes
Kevin Craig PLMR
Kevin Craig is the founder and Managing Director of PLMR. He has served ten years as an elected Labour Councillor in London, is a former Labour Parliamentary Candidate and was a member of the 2001 Labour General Election PR Team.

“Every target missed. Every test failed. Every promise broken.”  This was the Shadow Chancellor’s cutting summation of George Osborne’s Autumn Statement in the chamber this afternoon.  A year ago, after what was considered by many a disastrous performance at the despatch box, the same accusation could have been levelled at Ed Balls.  This year the transformation was huge, and the relief amongst Labour supporters is palpable.

Let no-one be in any doubt; today’s Autumn Statement was the opening skirmish in a heavyweight contest over who is best placed to hold the reins of the economy – a battle that will run until the  General Election in the spring.  The economy is still the fundamental issue on which huge numbers of people will decide on who to vote for, and for Labour it remains the single largest hurdle to overcome if the party is to return to Government in 2015.

Regardless of one’s political allegiance it’s difficult to dispute the fact that George Osborne has really grown into the role of Chancellor, as evidenced by another polished performance today.  In 2010 the Labour faithful were gleefully predicting he would be a terrible Chancellor and Ed Balls would make short work of him.  He wasn’t, and it was Balls who stumbled terribly last year.

This year, knowing that the stakes are even higher, the Shadow Chancellor rediscovered his mojo.  He waited patiently for the Speaker to intervene when the barracking became too loud, rather than losing his composure as he did 12 months ago.  He carefully picked apart the figures in the Chancellor’s announcement, and in the accompanying OBR Report when a hard copy was finally given to him mid-speech.  He highlighted inconsistencies and teased out embarrassing figure after embarrassing figure, all designed to call into question the Chancellor’s stewardship of the economy – Government borrowing up this year by £4.9 billion; predicted to rise next year by £7.6 billion. Total Government borrowing over the term of the Parliament a whopping £290 billion higher than the Chancellor said it would be in 2010.

This was Ed Balls back to his best and it was vital that he was on top of his game.  Last year he was ridiculed on social media – Lord Ashcroft famously took to Twitter to plead with Ed Miliband to keep Balls in his post – and Labour could not afford a repeat performance.  This year the feedback has been very positive, with praise for his ‘forensic’ dissection of the figures and his measured approach to the task at hand.

Labour’s narrative remains clear – the Tories’ economic recovery is only helping the rich and continues to punish the poor.  Not only that, but the swingeing austerity measures are still not effectively tackling either the deficit or Government borrowing, in fact borrowing is on the up.  Whether the electorate believes that Labour can do it better is still the $64,000 (or accounting for inflation the £290 billion) question.  But, based on today’s performance the Shadow Chancellor is very much back in the ring.

LibDems: The race is on for Clegg and Alexander to claim credit for today’s announcements
Zoe White
Steven Gauge is a Senior Consultant at PLMR and spent the last two general elections on the road managing media events in battleground seats for Nick Clegg and Charles Kennedy. 

Autumn Statements and Budgets have run a largely similar course for the Lib Dems in government. During the 45 minutes or so George Osborne is speaking, Nick Clegg and Danny Alexander sit slightly uncomfortably on the frontbenches and then quickly strap on their sandals for the scramble to get in front of as many cameras and behind as many microphones as possible, and grab as much credit as they can for all the ‘good’ coalition policies.

So, where we had free school meals for infant school pupils last year, read £2 billion in extra funding for the NHS this time around. When, in the Budget, the Lib Dems claimed victory in raising the personal tax allowance to £10,500, please see today’s announcement of The National Infrastructure Plan.

When it comes to big infrastructure announcements, the Quad (Cameron, Clegg, Osborne and Alexander) are always keen to pull rank and grab the media opportunity from more junior ministers. On Tuesday of this week, Nick Clegg had a mad dash to Wiltshire to announce the decision to build a tunnel under Stonehenge. In spite of this being the biggest thing to happen to Stonehenge since the stone age, I hear that the Deputy Prime Minister was disappointed, but not entirely surprised to discover that the local Liberal Democrats in the area were opposing the tunnel.

With the Stronger Economy, Fairer Society mantra ringing in Lib Dem strategists ears, the party is keen to position itself on the left of Osborne when tough decisions have to be made on the deficit. Speaking on Radio 4 Nick Clegg has made it clear that the party want to see tax increases for the better off rather than more austerity cuts. The problem for the Lib Dems however is whether anyone is listening to them. Low poll ratings would suggest that they are not just at the moment.

Talking amongst themselves however, the Lib Dems are quietly proud of what they have achieved in Government. Norman Lamb, the Lib Dem Care Minister called for extra funding for the NHS. His intervention, coming in the wake of a report which called for radical changes to the health service, has helped to seal today’s announcement that there will be an extra £2 billion every year until 2020 for the NHS. Danny Alexander has been beavering away in the Treasury on The National Infrastructure Plan, which will see 300,000 homes built and £15 billion made available for new roads. The internal communications within the party, however has been keener to emphasise the £241 million going into cycling.

So the sandals are on. From now until May next year, Clegg, Alexander, Lamb et al will be working flat out to claim some credit for their successes in the coalition and retain as many of their parliamentary seats as they can.

Scotland: The impact of the Autumn statement post-Smith Commission recommendations
Kevin Craig PLMR
Lynn McMath heads the PLMR Scotland office in Edinburgh. She was a former press advisor to the Scottish Shadow Cabinet, working closely with them on the Better Together campaign.

Increased powers for Scotland following the independence referendum have rarely been out of the pages of national newspapers since David Cameron announced Lord Smith of Kelvin would chair the commission the morning after the historic vote. With the UK government agreeing to the principles of the new settlement for Scotland, subject to certain clauses to be unveiled early in the new year, The Scottish Parliament will have substantial new powers over tax and welfare going forward.

The benefit to Scotland from the announcements made in the Autumn statement will mainly come in the form of increased Barnett consequentials through the existing formula. The additional £2 billion for the NHS up to 2020 will likely see around 10% of the total allocated to Scotland, with the same principal applied to the new funding for UK wide GP services. As monies through the formula are not ring fenced it will then be a decision for the Scottish Government on whether to pass the funding on in exactly the same way as George Osborne, whether to use it elsewhere in the Scottish National Health Service, or whether to allocate it to a different area altogether.

The decision to review stamp duty will have no direct implications for Scotland as this tax was devolved as part of the Scotland Act 2012 and new arrangements are being rolled out from April 2015. The Land and Business Transaction Tax (LBTT) will work slightly differently to the new proposals and is viewed as more progressive than the current system as it will be less of a slab like tax and have less impact on house buyers at the lower end of the property market. LBTT in Scotland will see a ten per cent tax on properties between £250,000 and £1 million increasing to 12% for million pound plus homes and it will be lower for properties beneath £250,000. It’s hoped that the change from stamp duty will help more people onto the property ladder but there is concern that the market for premium homes will stagnate as the tax payable in Scotland will jump dramatically.

Scrapping air passenger duty (APD) for children’s flights is a fantastic result for the A Fair Tax on Flying coalition which PLMR has been integral in campaigning for. One of the key recommendations of the Smith Commission on further devolution for Scotland was to fully devolve APD in line with the Highlands and Islands airports which are already devolved and have had the tax scrapped. In their independence referendum White Paper the SNP said they would half APD from all flights in an independent Scotland and so it would seem likely that, barring any clauses the UK Government applies to the Smith recommendations, the First Minister, Nicola Sturgeon, will make changes to APD as quickly as she can.

The devolution of Corporation tax in Northern Ireland will no doubt have piqued the interest of the Scottish Government who campaigned on an agenda of a reduction in the tax as part of their referendum pledges. Opposition parties suggested it may lead to a race to the bottom and increase competition between Scotland and England for inward investment but it is likely that Nicola Sturgeon will continue to call for the tax to be devolved now that it is being taken forward from Belfast.

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