The Autumn Statement has turned into a right dog’s dinner. It is not delivered in autumn and it is no longer a statement.
It is quite right that we have got away from the once-a-year shock of the annual Budget where items were sprung out of the blue and it was considered a hanging offence for a Chancellor to leak the contents and give the markets and the economy a chance to adjust.
That movement towards gradualness and forward guidance is the one thing that Gordon Brown got right in his long years at the Treasury. However, the downside is that the autumn statement, originally intended to be a halfway-through-the-year summary of how things are panning out, has become a hybrid with Budget measures thrown into the mix.
Add in a large dose of electioneering (either refighting the previous election in the first couple of years and squaring up for the following one in the second half of the parliament) and the whole thing becomes the sort of Punch and Judy show that David Cameron once vowed to put an end to.
Watching Chancellor George Osborne perform in front of the cameras, I felt that he is just as bemused at why the economy is suddenly performing so much better as he was when it was all going so badly.
However, I have long formed the opinion that Chancellors who have little grasp of economic theory are preferable as they are too scared to take the sort of decisive action that brings recovery to a shuddering halt or makes a bad job worse.
Gordon Brown new more about economic theory than any modern Chancellor. Unfortunately he knew more about economics than he did about the economy. Equally unfortunately, his prime minister did not dare to get rid of him and one fears that Labour leader Ed Milliband is falling into the same trap with Ed Balls, who rather destroyed his own case by beginning his riposte with the accusation that Osborne is in denial.
Osborne did one or two things that will help the economy. Freezing the fuel tax once again, with the implication that automatic rises have been abandoned completely, will cut business costs (or to be more accurate, not increase them) and remove an inbuilt boost to inflation. This gesture will not cost all that much, as increased use of fuel will offset some of the lost tax revenue.
His decision to remove stamp duty on exchange traded funds as a boost to the financial sector is welcome but curious. Why remove the impost on derivatives while continuing to penalise the real thing? Don’t tell me – abolishing stamp duty on shares would be too expensive.
Clamping down on tax dodgers, as long as it is handled better than the stupid offshore accounts deal with Switzerland that gave the rich time to close their accounts and move elsewhere, is a belated step in the right direction. Already there are bleatings about people leaving the country but if they are not contributing they will not be missed. Anyone making profits here will not be tempted to cut their noses off to spite their faces.
Otherwise Osborne has done what Chancellors do best, which is make a complicated tax system more complicated. Thus we have the scrapping of National Insurance for under 21s, which will encourage employers to sack anyone reaching that age and replace them with another school leaver, and tinkering with the business rates system. He has also succumbed to pressure to mess about with income tax allowances in a way that compounds the injustice of the removal of child allowance by further penalising women who dare to earn as much as their husbands.
Switching earnings allowances will probably baffle low earners but will help high fliers who can afford an accountant and don’t need their partner to go out to work.
Let us be thankful, then, that the Chancellor has not done anything too drastic so the recovery can continue. This is a recovery that is not fully reflected in shares prices, with the FTSE 100 index stubbornly refusing to move above 6,800 points. It sank several times this week below 6,500 points.
There is no sign yet of a Santa Claus rally but there is still time. As always, buy on the dips and make it sooner rather than later. Some time next year the FTSE 100 will set a new record.
Gold Not the Safe Haven it Seems
What happened to all the talk about gold being a safe haven? The price is now down to £750 an ounce and still falling. When I say buy on the dips, that does NOT apply to gold. Don’t buy until it hits £600 – and only then on the way back up.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.
