Osborne's Autumn Statement: A pivotal moment for 'Osbornomics'?

Chancellor George Osborne's Autumn Statement marks a turning point in the Coalition Government's economic strategy (which we might term 'Osbornomics'), as he admitted that growth will be weaker and austerity measures more protracted than previously expected.

Here we provide an overview of some of the key points from Osborne's Autumn Statement and the accompanying economic forecasts from the Office for Budget Responsibility (OBR). We also present links to relevant documentation and to reactions to the Autumn Statement.

Budget deficit will not be eliminated by 2015
Osborne used his Autumn Statement - which replaces the Pre-Budget Report - yesterday (Tuesday 29 November 2011) to set out his package of measures to attempt to reboot economic growth (which is currently feeble, but ongoing).

He stated that he will "do whatever it takes" to prevent Britain from sliding back into recession - a scenario which he believes could be about to befall "much of Europe."

But crucially, the Chancellor was also forced to admit that the primary stated aim of 'Osbornomics' - the elimination of the UK's budget deficit by 2015 - will not now be achieved until 2017.

The BBC's James Landale describes Osborne's Autumn Statement as a pivotal moment in the Coalition Government's economic strategy:

The landscape is fundamentally transformed. A government that promised to eliminate the budget deficit by the next election has admitted that it will fail. It now says it needs another two years to meet its deficit target. And what's more, to do that, it needs to inflict yet more pain - a squeeze on tax credits and further pay restraint for the public sector. There will be more spending cuts in the years after the election."

Landale notes that this also transforms the battlefield for the 2015 election:

[T]he battle at the next election will [now] be about which party can best complete the job of fixing the economy.

Osborne's 'bleak news for the public sector'
The Chancellor delivered "bleak news for the public sector", with protracted pay austerity and further job losses in prospect.

XpertHR provides full details of the measures relating to employment set out in Osborne's Autumn Statement, which include the following:

• The state pension age will rise from 66 to 67 from 2026, in order to secure "a long-term future for the basic state pension".
• Public sector pay rises will be capped at an average of 1% following the end of the current two-year pay freeze (which concludes in either April 2012 or April 2013, depending on department).
• The independent pay review bodies will report by July 2012 on measures to make public sector pay more responsive to local labour markets.
• Osborne called for evidence on a range of employment law reforms, including: introducing Compensated No-Fault Dismissals - an idea originating from Adrian Beecroft's leaked report setting out radical measures to boost growth - for micro-businesses with fewer than 10 employees; and a simplified dismissal process, including a revised Acas code of practice. One week prior to the Autumn Statement, the Coalition Government had unveiled a package of proposals comprising what it described as "the most radical reform to the employment law system for decades." XpertHR provides complete details of these proposals.
  

Today (Wednesday 30 November 2011) sees national "day of action" in protest at planned public sector pensions changes  take place. The BBC reports that up to two million public sector workers could go on strike today.

UK GDP growth to slow to 0.7% in 2012, says OBR
Prospects for UK economic growth have also weakened.

Osborne said in his Autumn Statement speech that "if the rest of Europe heads into recession it may prove hard to avoid one here in the UK."

Coinciding with Osborne's Autumn Statement, the Office for Budget Responsibility (OBR) published it latest Economic and Fiscal Outlook report, which includes its predictions for growth. The OBR ascribes the UK's ongoing weak growth to the following factors:

The economy has grown less strongly this year than we forecast in March, primarily because higher-than-expected inflation has squeezed household incomes and consumer spending. Business and consumer surveys point to further weakness in the fourth quarter.

As XpertHR reports:

[The OBR] does not predict a recession in the UK, instead forecasting 0.9% GDP growth in 2011 and 0.7% in 2012. By 2015 and 2016 growth is expected to be at 3%. Key reasons for the reduction in the OBR's forecasts include the effects of unexpected external inflation shocks - energy price and commodity price rises - which "explains the slowdown in growth in Britain in the past 18 months". In addition, the pre-recession "unsustainable boom" was bigger than previously thought and the bust was consequently bigger too.

It must be borne in mind, however, that the OBR's forecasts for UK economic growth are contingent on a satisfactory and swift resolution to the ongoing eurozone debt crisis. The OBR says that its forecasts reflect "the assumption that the euro area struggles through its current difficulties."