The economic figures are looking good, the recovery is more or less on track, and George Osborne allowed himself a mini-gloatette in the Commons yesterday when he made his autumn statement.
I was reminded strongly of a previous chancellor, who also painted a picture of Britain in glowing, sun-drenched colours. When you listened to Gordon Brown, you felt that we lived in a new Arcadia, a land where happy folk, secure in their jobs and incomes, look forward to a golden future, compared to the miserable wretches who live elsewhere.
Why, according to George, our growth rate was predicted over the next few years to be higher than Germany, France, Japan, the US, the eurozone and the EU as a whole. While we will be living in palaces and eating caviar as a mid-morning snack, those other countries will be wandering down trains with a mangy dog and a paper cup, begging for the price of a cup of tea.
What was more, his figures were from the OBR, the office of budget responsibility – an independent body! They happen to have painted the same lush landscapes Gordon Brown used to depict.
Mr Osborne got, perhaps, a little carried away. As the deficit went down, we were going to save £19bn more than had been forecast. That was £19bn that wouldn't be going to private bond-holders and foreign governments. (Boo, hiss, bond-holders and foreigners. British debt for British debtors!). The theme was that the government had done everything right at exactly the right time. They had taken "decisive" action; I lost track of how many times he used that word. There was a slight problem, in that he had followed the Irish course while, over the past few years, lavishly praising the Irish government. He adopted a cunning response to MPs who pointed this out. He ignored them.
"The plan is working!" he cried. He sounded like Goldfinger. You half-expected him to add: "And you, Mr Bond, will be dead. Now if you will excuse me, I have important business in hand."
Alan Johnson, who followed, was rumbustious and effective. Mr Osborne had taken an "unprecedented gamble". "The chancellor is in the casino, but he hasn't spun the wheel yet!" he said. Things were not looking up. Instead they were looking down. Estimates of growth might be good, but not as good as they had been.
"Growth is going south!" he barked. And the rise in VAT would increase unemployment by 250,000.
But if he was pessimistic, Andrew Tyrie, who chairs the Treasury select committee, was positively glum. The savings ratio had halved, he said, miserably. Never invite this man to your party. He would arrive in a black cape, halt the merrymaking, and announce that a team of traffic wardens was working outside. And that more than one unit of alcohol during the evening would cause lasting health damage. source
Office for Budget Responsibility boosts government with optimistic growth prediction and says it has more than 50% chance of achieving deficit goals
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Firefighters at a meeting of the Fire Brigades Union in November, to discuss concerns over public-sector cuts. Photograph: Oli Scarff/Getty Images
Public-sector job losses under the government's deficit-cutting plans will be much less punishing than first feared, according to Britain's fiscal watchdog.
The Office for Budget Responsibility (OBR) said details of the government's four-year spending review, published last month, had enabled it to slash its estimate of public-sector job losses to 330,000 from 490,000. However, it believes that the government's policy to freeze public spending in 2015-16 could lead to further job losses of 80,000 that year unless welfare spending is cut further.
"We expect employment growth in the market sector will more than offset cuts in the public sector just as it did in the consolidation of the early 1990s," said the watchdog, which was set up by the chancellor, George Osborne, when he took office in May. It delivered a further boost to the coalition government by saying that the probability of it achieving its deficit-cutting goals had increased since June.
The OBR cut its growth forecasts for coming years, although it remains markedly more optimistic than other forecasters, including the Organisation for Economic Co-operation and Development. As expected, the OBR upgraded its forecast for growth this year to 1.8% from 1.2% in June, reflecting the economy's surprisingly strong performance in the summer. This matches the OECD's latest prediction.
But for next year, the independent OBR cut its growth estimate to 2.1% from 2.3% – which is far more bullish than the OECD's prediction of 1.7%, and City economists' forecasts. When the OECD, the respected Paris-based thinktank funded by 30 countries, recently revised its estimates, it said the UK government's austerity measures would increase the "headwinds" facing the economy and "hamper growth".
The OBR, headed by Robert Chote, the former Institute for Fiscal Studies chief, is also significantly more optimistic about 2012 when it expects Britain's economy to grow by 2.6%, revised lower from 2.8% in June. This compares with the OECD's prediction of 2% growth. Hetal Mehta, UK economist at Daiwa Capital Markets, said: "As expected, the recent run of upside surprises on GDP growth has led the OBR to revise up its forecast for 2010.
"The downward revision to 2011 growth is apparently thanks to consumers bringing forward their spending from the first quarter ahead of the VAT hike, although this was known at the time of the June forecast. In any case, it brings the OBR somewhat closer to the consensus, but we feel this is still on the optimistic side at over 2%. We expect growth of 1.6% in 2011," she said.
Douglas McWilliams, chief executive of the Centre for Economics and Business Research, echoed those comments. "We think the OBR is particularly over-optimistic on the consumer-side of the economy ... The key problem – one that seems to be pervasive in Whitehall to judge by these forecasts – is that people in government have no idea what is going on in the real world of business.
"They seem to think that a degree of economic momentum will continue regardless of the circumstances."
The OBR left its estimate for net borrowing this financial year virtually unchanged at £148.5bn (compared with £149bn in June). However, it said the coalition government now had a greater than 50% chance of achieving its deficit goals. "The government has a slightly wider margin for error in meeting the mandate than appeared likely in June," it said.
It now sees borrowing as a percentage of gross domestic product at 10% this fiscal year, falling to 1.9% by 2014-15. Previously, it had seen the deficit at 10.1% of national output this year, dropping to 2.1% in the next four years.
The body was sanguine about the British contribution to the Irish bailout. "The only element that would score in the public finances would be the £3.2bn bilateral loan," it said. However, this would not affect Britain's borrowing position. "Any profit (on the interest) would reduce public-sector net borrowing. As the timing, duration and interest rate on the loan have not been announced, we could not score it in the current forecasts, but clearly the sums involved are too small to have any material effect on the outlook." source
George Osborne, centre, told the Commons that he would 'stick to the course' on the economy. Photograph: Reuters
George Osborne vowed yesterday to press ahead with spending cuts and tax rises, despite concerns that a report by the government's fiscal watchdog showed the recovery was delicately balanced and could be derailed if exports faltered or unemployment went up faster than expected.
The chancellor, who was accused of not having a plan B, told the Commons he would "stick to the course" following a report by the Office for Budget Responsibility (OBR) that provided both ministers and opposition MPs with ammunition as they debated the fate of the economy.
Osborne said the OBR's independent forecast backed his view that the UK was likely to avoid a double-dip recession next year and grow steadily over the life of the parliament. It said the economy would grow by 1.8% this year – a substantial increase on the 1.2% previously expected, and greater than forecasts by international groups such as the OECD. Osborne told MPs: "This is an uncertain world but the British recovery is on track.
Employment is growing, one million more jobs are being created, the deficit is set to fall, the plan is working. So we will stick to the course. That is the only way to help confidence to flourish and growth to return."
The OBR report, made in response to the government's comprehensive spending review, also backed projections by the Treasury that the UK's annual budget deficit would be reduced from one of the highest in the G20 to one of the lowest following five years of austerity.
Osborne said the UK would avoid the fate of Ireland, which has agreed to accept an £85bn bailout, with £7bn from the UK.
The OBR also revised downwards its forecast for the number of job losses in the public sector, from 490,000 to 330,000, after a switch from cuts in Whitehall spending to cuts in welfare payments over the next five years.
But the OBR said growth over the next two years would be less than expected, giving support to opposition claims that austerity measures would hurt the recovery. Critics of the tax and spending plans said the coalition was gambling that exports would rise and businesses would dramatically increase employment to drive Britain out of recession. Several business groups and City analysts joined the shadow chancellor, Alan Johnson, in calling the OBR's forecasts "overly optimistic" when the world economy was slowing and continental Europe was in the grip of a debt crisis.
Johnson characterised Osborne's approach as a "reckless gamble" that relied too heavily on exports and could lead to a "jobless recovery". He said the chancellor was attempting fiscal tightening at a rate that had only been attempted twice in living memory – both times by countries benefiting from strong growth.
Douglas Alexander, the shadow work and pensions secretary, will warn in a speech today that "In the current economic crisis, no country other than Ireland has attempted to cut so deeply, so quickly," he told MPs. "The chancellor has chosen to take an unprecedented gamble with people's livelihoods and the country's future, and he has done so on the basis of a fundamental deceit that when he assumed office the public finances were worse than expected. …
" The reckless gamble that members opposite support is still to come. The chancellor is in the casino, but he hasn't spun the wheel yet."
Osborne's austerity drive will make the return to pre-recession levels of employment "slower and more painful" than many people expect. With the dole queue shrinking by just 15,000 since the coalition came to power, it could take 15 years before numbers claiming out-of-work benefits drop below one million if present trends continue, he will say.
Most economists have spent the last three months downgrading forecasts for next year after surveys showed a slump in confidence among consumers and businesses. With house prices falling and much of the rise in employment attributed to part-time workers, consumer spending is expected to weaken.
The OBR forecast growth would moderate next year from 2.3% to 2.1%, as exports and business investment slowed.
According to analysts at Cambridge Econometrics, even this forecast was optimistic, while David Kern, chief economist at the British Chambers of Commerce, warned the economy would struggle next year and unemployment was likely rise above the 8% predicted by the OBR.
The TUC general secretary, Brendan Barber, said Osborne "must have missed the forecast showing unemployment little better than static for the next three years". He added: "What is the point of economic policy if it does not include getting people back to work? And while the OBR report is full of uncertainty [about the economy] … George Osborne does not have the plan B any sensible chancellor should."
Osborne, who used his response to the OBR report to announce a review of corporation tax, said borrowing this year was expected to be £1bn less than forecast in June. He added: "On the OBR's central forecast, we will meet our fiscal mandate to eliminate the structural current budget deficit one year early, in 2014-15. And the same is true for our target to get debt falling as a percentage of GDP." Over the forecast period, Osborne said £19bn would be saved in interest payments on the national debt. source
Students protest over tax avoidance and education cuts, outside a London Topshop, part of the group owned by Sir Philip Green, now also David Cameron's efficiency adviser. Photograph: Christian Sinibaldi for the Guardian
Sir Philip Green, the retail billionaire and efficiency adviser to the government, is to become the target of a nationwide campaign by protesters opposed to government cuts and alleged tax avoidance.
High street stores belonging to the businessman's group, including Topshop, Dorothy Perkins and Miss Selfridge, will be among those that protesters focus on in the run-up to Christmas.
Plans to disrupt Arcadia Group stores were devised by UK Uncut, a fast-expanding group of activists who have closed down more than 30 Vodafone shops in the past six weeks by mobilising through social networks.
UK Uncut's Twitter hashtag, #ukuncut, has become the rallying point for opponents of the government's austerity cuts. It was used widely by protesters who this month clashed with police during two large demonstrations against the proposed increase in student tuition fees.
The group started up when activists decided to target Vodafone on 27 October, claiming that the company had avoided £6bn in tax, an allegation denied by Vodafone. The protest, organised through Twitter, went viral and over some weeks more stores closed.
About 20 UK Uncut activists met several times before deciding to make Green a target. They plan to call on activists to approach shops in the Arcadia Group, as well as Vodafone, from Saturday. They intend to start by congregating at Green's flagship store, Topshop, in London's Oxford Circus. In a sign of UK Uncut's expanding popularity, they have secured the backing of the Jubilee Debt Campaign, and of War on Want, two mainstream anti-poverty campaigns with almost 30,000 supporters between them.
Activists hope a campaign against Green's retail empire will drive a wedge between David Cameron, who selected him to review efficiency in Whitehall, and the prime minister's Lib Dem partners, who are calling for action against tax avoiders.
Green's document, published in October, reported "shocking" wastage in the government's procurement strategy. However, his suitability as a government adviser was questioned because of his alleged tax avoidance. The businessman banked the biggest pay cheque in corporate history in 2005 when his Arcadia fashion business, which owns Topshop, paid a £1.2bn dividend. The record-breaking payment went to his wife, Tina, who lives in Monaco and is the direct owner of Arcadia. Because of this arrangement no UK income tax was due on the gain.
Richard Murphy, director of Tax Research UK, estimated Green saved £285m by paying the dividend to his wife.
Arcadia's holding company is Taveta Investments, which paid £71m in tax in the last financial year. Beyond Taveta, based behind Oxford Street, London, the ownership trail goes offshore via a Jersey-based investment vehicle called Taveta Ltd.
Arcadia has declined to comment about the planned protests or alleged tax avoidance. Green previously said the tax issue was not "relevant" to a discussion about his suitability to lead a government spending review. "I contribute tens of millions of pounds [to the exchequer]. I employ 45,000 people and pay tens and tens of millions of pounds of tax," he said.
Tax avoidance has been estimated by the TUC to have lost exchequer about £25bn in revenue, including £13bn attributed to individuals.
"Philip Green is a tax avoider, and yet is regarded by David Cameron as an appropriate man to advise the government on austerity," said UK Uncut's spokesman, 26-year-old Daniel Garvin. "His missing millions need to be reclaimed and invested into public services not into his wife's bank account." source
Police tonight arrested several people outside Lewisham town hall in south-east London as demonstrators tried to gatecrash a meeting where councillors were voting to cut the council budget by £60m.
Officers had to call for help from the Metropolitan police's Territorial Support Group as 100 protesters tried to force their way into the building.
"Police have made a number of arrests for criminal damage and public order offences," the Met said in a statement. "A number of police officers were treated for minor injuries." Sue Luxton, a former Green party councillor who was returning home from work at 6.45pm, said she saw 200 to 300 protesters, including a large number of students from Goldsmiths College.
"People were angry because the council had arranged for only 40 people to attend the meeting, although many wanted to be there," Luxton said. "About 100 people tried to rush in. I think the police were little overwhelmed. There were police with riot shields and police horses. The area was cordoned off – buses couldn't get through."
A YouTube video showed much pushing and shoving outside the town hall as police barred protesters holding "fight the cuts" placards and who were chanting: "Let us in." Darren Johnson, a Green councillor, said he voted against the cuts along with two Conservatives. The Labour majority voted in favour while the Liberal Democrats abstained. "There are better ways of doing these rather deep cuts in frontline services," Johnson said. "I spoke of the importance of reducing high salaries of officers and cutting budgets for consultants, PR and marketing. These cuts will mean the closure of an early learning centre and less street cleaning."
Local councils face large budget cuts after the coalition government significantly reduced local government funding in October's comprehensive spending review. Lewisham has to find savings of £60m in its annual £271m budget over the next three years. Mike Harris, the Labour vice-chair of the council, said: "Lewisham gets 82% of its income from central government. After the CSR, we expect our budget to be reduced by 29% which will have an absolutely devastating effect on local services. Tonight, protesters set off flames and attempted to storm the town hall. The sad thing is, people will get increasingly angry as the cuts begin to bite on the very poorest in society." source
Police detain demonstrators in Whitehall, following a student protest against plans to raise tuition fees. Photograph: Anthony Devlin/PA
The coalition's planned reform of university funding will limit social mobility and see almost two-thirds of graduates paying much more for a degree, according to an analysis of the proposals published today. The report argues that its analysis undermines the government's claim that the changes are progressive.
The "triple whammy" of higher fees, real interest rates for loans and a longer period before the debt is written off is likely to represent a bad deal for taxpayers, argues million+, a university lobby group. The changes will leave between 60% and 65% of graduates worse off, with middle-income earners hit the hardest, it says.
Allowing universities to charge fees of up to £9,000 a year, with a basic threshold of £6,000, will result in many women ending up in debt for most of their working lives, while pupils from poor families will be put off applying, and mature students may also be deterred, it says. A male primary school teacher from a middle-income home could find himself between £15,000 and £25,000 worse off than today, the analysis found. On average, graduates will be approximately £5,000 worse off, the thinktank argues, based on economic modelling carried out by international consultancy London Economics.
Million+, which represents 28 former polytechnics, said the findings discredited the coalition's insistence that the moves were progressive and would boost social mobility. The report points out that, although ministers will raise the amount graduates must be earning before they start repaying loans – from £15,000 to £21,000 – the higher figure refers to earnings in 2015-16, when it will be worth less than in today's money.
And it claims that the changes – which will also see state funding for university teaching cut by 80% by 2014-15 – will leave taxpayers worse off because the government will have to borrow more to fund higher loans and pick up a bigger bill for debts that are written off after 30 years. Write-off costs are likely to rise from 27.5p in the pound to at least 36p, it estimates.
"It is difficult to see how the proposals provide a long-term, sustainable framework for the funding of higher education and universities in England," the report says.
It also accuses the government of using simplistic measures to define social mobility, such as the number of students on free school meals who go to Oxford, rather than assessing whether a having degree helps those from deprived backgrounds get better jobs.
An Ipsos Mori poll last week found that fees of £6,000 a year – the coalition's proposed basic threshold from 2012 – will lead to a dramatic fall in the number of students from disadvantaged families going to university.
"There is undoubtedly a real risk that participation in higher education and, in particular, participation by those from lower socio-economic groups and mature students will be undermined," the million+ report says.
Professor Les Ebdon, who chaired the group, said the findings showed there were "no real winners" from the proposals.
"Even where graduates benefit from making lower monthly repayments than at present, many more of them will never repay their loans," said Pam Tatlow, the chief executive of million+.
"The 25% of students who enter university in their 20s and as mature students are particularly adversely affected. A women entering employment as a primary school teacher at the age of 30 would … never repay and would still have outstanding debts of more than £21,000 at the end of the 30-year write-off period."
Dr Gavan Conlon, of London Economics, said: "There has been a very narrow focus on the loan system when considering progressiveness. What matters to students and their families is the total cost associated with participation in higher education."
Aaron Porter, the president of the NUS, said: "Rather than seeking to steamroller proposals through parliament without proper scrutiny, ministers should rethink this reckless approach and tackle the number of serious questions that require answers." SOURCE
Pressure mounts on 57 Lib Dem MPs in coalition as Labour forces issue on plan to raise tuition fees to £9,000 a year
Nick Clegg has written to the NUS president arguing the new system is fair, ahead of the third tuition fees demonstration. Photograph: Martin Argles for the GuardianRuctions in the government over plans to raise university fees will be forced into the open today when Labour triggers a vote in the House of Commons that could bring about the first rebellion of the coalition.
MPs will debate the plan to raise tuition fees to £9,000 a year as students stage their third and largest national demonstration against the plans. Last night the deputy prime minister, Nick Clegg, wrote to the head of the National Union of Students appealing to students not to distort the debate over fees, saying that many believe wrongly that they will have to pay fees immediately instead of when they graduate. Clegg warned of potentially "tragic" consequences whereby the poorest would be put off applying at all.
Coalition MPs are under a three-line whip to attend the opposition day debate on a Labour-authored motion that falls short of opposing higher fees, but calls for the white paper on the future of universities to properly explain the plans before the Commons votes on the fee cap. It is carefully worded so that Liberal Democrats in the coalition could vote against the rest of the government without ultimately killing off the planned increase in fees. If they do rebel, it could aid behind-the-scenes efforts to win concessions before the plans are voted on in parliament within the next two weeks.
John Denham, the shadow business secretary, said: "What we're trying to achieve is to show that parliament is being railroaded into a decision just on the fee cap when there are crucial questions on how the policy would work that haven't been answered with a proper white paper."
The Labour move comes amid mounting pressure on all 57 Lib Dems in the coalition. Yesterday a petition signed by 104 former parliamentary candidates for the Lib Dems, essentially representing the party's grassroots, called on Clegg to abide by the pre-election pledge to vote against higher fees. Research published today suggests that the higher fees will profoundly damage social mobility.
One option the leadership is considering is organising a mass abstention to avoid any damaging splits. A party source said that Clegg was still in "listening mode" while also pressing for more concessions and trying to avoid a full-scale rebellion. Clegg's letter to Aaron Porter, president of the NUS, argued that the proposed system was fair because it ends upfront fees for part-time students and raises the repayment threshold to when a graduate is earning £21,000. He warned it would be a "tragedy if we inadvertently allowed our debate about the methods to damage our shared goal" to encourage more students from poorer homes to go to university.
Analysis by the lobbying group representing new universities, Million +, suggests the reforms will limit social mobility and see almost two-thirds of graduates paying much more for a degree than they do now. The "triple whammy" of higher fees, real interest rates for loans and a longer debt write-off period is likely to represent a bad deal for taxpayers and will leave between 60% and 65% of graduates worse off, with middle-income earners hit hardest, according to the study.
Allowing universities to charge £9,000 a year will result in many women spending most of their working lives in debt, while pupils from poor families and mature students will be put off applying, it said.
Million+, which represents 28 former polytechnics, said the findings discredited the coalition's insistence that the moves were progressive. It claims the changes will leave taxpayers worse off because the government will have to borrow more to fund higher loans and pick up a bigger bill for debts written off after 30 years. Write-off costs are likely to rise from 27.5p in the pound to at least 36p, it estimates. SOURCE
The largest of this month's three protests against education cuts is expected as thousands sign up for direct action around the UK
Students on Oxford Street, London, protest last week against cuts in higher education spending and the salary of Topshop owner Sir Philip Green, now a government adviser. Photograph: Christian Sinibaldi for the Guardian
Tens of thousands of school, college and university students are expected to protest against education cuts tomorrow, in the third day of demonstrations this month. By this evening, over 5,500 people had signed up for a day of direct action in London alone, where the national campaign against fees and cuts has organised a march on parliament, and where last week thousands of school pupils and students were "kettled" by police for several hours.
Some 32 universities are still being occupied following last Wednesday's protests, with most planning to keep a small group in the seized buildings while fellow students march. Around 60-70 occupants from Newcastle University intend to join students and pupils from local sixth form and further education colleges on a marching through the city centre, with some 1,700 had signed up to the Facebook page for the event yesterday, with the demonstration planned to culminate in a mass snowball fight.
Hundreds of students occupying the administrative headquarters of Cambridge University were issued with a possession order this evening, which could force them to leave the building. Talks were in progress last night, as the students planned to meet with cohorts and around 900 school pupils near the university today to march through the city in protest against cuts. Students occupying Appleton Tower at Edinburgh University said they would be joined by school and college pupils for a march from Bristo Square to the Scottish parliament at Holyrood, with "hundreds" expected to join the protest.
While the protests were mainly peaceful, the London demonstrations saw a police van vandalised after thousands of students were 'kettled' by police on Whitehall, in central London, and later protesters were subjected to repeated charges by officers on horseback. An NUS-organised protest against increases in tuition fees two weeks earlier saw a minority of protesters break into the Conservative Party's headquarters at 30 Millbank.
Simon Hardy from the national campaign against fees and cuts, said he met with the Metropolitan police today[mon] to discuss plans for the protest. Thousands of students are expected to gather in Trafalgar Square before marching on Parliament, where they will hold a rally. "What I'm concerned about is overreactions by the police," Hardy said.
"It's the position of the National Campaign against fees and cuts that there has been no violence from the protesters. "There's been vandalism, that's true, smashing a police van and smashing the Tory Party HQ windows, but the violence has overwhelmingly come from the police – there was batoning of students, there was a horse charge on Whitehall on the 24th.
"We're going to have stewarding to keep ourselves safe and maintain our right to protests, and we're not going to accept violence from the police as they try to intimidate people or to bully or harrass them, which is effectively what the actions were on Whitehall on the 24th."A spokeswoman for the Metropolitan police said there had been a lack of communication ahead of last Wednesday's protest, but insisted police were "more than happy to allow peaceful protests".
"As regards our tactics and the actual plan itself, the plan is flexible and its adaptable to what happens on the ground," she said.
"Containment remains a tactic that is open to us. We only use it if its appropriate and if its proportionate to what's going on on the ground.
"While we hope we don't have to use it, if the circumstances happen we may again have to consider it and use it."
But the head of the Metropolitan police's public order branch, Commander Bob Broadhurst, warned: "Schoolchildren have as much right as anyone else to protest, but young people are more vulnerable and likely to be injured if violence breaks out.
"We would ask parents to talk to their children and make sure they're aware of the potential dangers, as there is only so much police officers can do once they are in a crowd of thousands."
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