For the first time since he became Chancellor, George Osborne arrived for today’s Autumn Statement brandishing unambiguously improved economic forecasts. In the triumphalist manner of Gordon Brown, he boasted of “the largest improvement” at any Budget or Autumn Statement for 14 years. Growth is now forecast to be 1.4% this year (up from 0.8%) and 2.4% (up from 1.8%) next year. Unemployment is forecast to be 7.6% this year (down from 7.9%) and 7.1% next year (down from 8%). Borrowing is forecast to be £111bn this year, £9bn lower than expected in March (although still £41bn higher than expected in 2010), and £96bn next year.
But there was one set of forecasts that Osborne didn’t mention: wages. Unlike every other measure, the OBR now expects earnings growth to be weaker, not stronger, than it did at the Budget. The forecast for this year was left unchanged (at 1.5%), while that for next year was revised downwards by 0.2% to 2.6% and that for 2015 by 0.4% to 3.3%. As a result, after already falling by an average of £1,600 since 2010, wages will continue to lag behind inflation in 2014 and will be flat in 2015.
The danger for Osborne is that even as the UK grows faster than any other G7 country, most families won’t feel the benefits, not least in an economy as unequal as Britain’s. Labour will still be able to warn that this is a “recovery for the few, not the many” right up until May 2015.
For that reason, it is far from certain that the UK’s economic gains will translate into political gains for the Tories. When Osborne and David Cameron accuse Miliband and Balls of desperately trying to avoid talking about the economy, they should remember that, to most voters, living standards are the economy.
Today, in an attempt to show that he is not oblivious to the squeeze on voters’ incomes, the Chancellor offered baubles including a freeze in fuel duty, a reduction in green levies, free school meals for infant pupils and a £1,000 cut in business rates for small firms. But for voters enduring the longest fall in living standards since 1870, that is very small beer.
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