Cuts, Brexit and the political battles to come

The crucial judgement on the Autumn Statement will be does what we heard from Chancellor Jeremy Hunt on Thursday amount to making a bad situation a little less bad or does it make it worse?

Here’s the problem for the government: even if a set of ideas makes a grim situation a little less grim, it is still a grim situation. And it’s likely ministers will get the blame for that.

The coming political argument will be all about who is judged to be the competent and trustworthy stewards of very, very difficult times.

Here are a few things that stood out for me from the various interviews on Friday morning:

Labour accept the size of the financial “black hole” set out by the Office for Budget Responsibility.

So the terms of trade between the Conservatives and Labour on this match up.

But then there are the policy choice differences between them, and the other parties.

Take one example: Labour would go after so-called non doms, Mr Hunt told BBC Radio 4’s Today programme he has chosen not to.

Then there is income tax.

The government chose to make the best paid pay more.

And they chose that, over time, more people should pay income tax and pay more of it.

That is the consequence of freezing the levels, the thresholds, at which you start paying it or pay more, as earnings increase over time.

Labour, meanwhile, are determined to say, for now at least, as little about income tax as possible.

Have a watch here of a little clip from the latest BBC Newscast, where I tried, and failed, to get the Shadow Chancellor Rachel Reeves to set out her instincts on income tax.

You have to wonder how long that position of saying nothing on income tax will hold.

One other thing: Brexit.

Neither the Conservatives nor Labour want to fundamentally alter the UK’s relationship with the EU.

Jeremy Hunt said on Today that “unfettered trade” was “very beneficial” to growth but rejoining the EU single market would not be “the right way to boost growth” because voters had demanded Brexit in order to get rid of freedom of movement, unlimited migration from and to the EU.

In other words, he appeared to tacitly acknowledge rejoining the single market would help with growth, but it was politically unpalatable.

And Labour agree – they don’t want to reopen the argument about the single market or the customs union, the two big economic structures of the EU.

Instead, Rachel Reeves said there were other elements of the Brexit deal “we can fix” as she sees it – pointing to a veterinary agreement with Brussels and the mutual recognition of professional qualifications, for example.

And finally, a word about cuts. When is a cut a cut, and when isn’t it a cut?

The following thoughts come courtesy of Peter Barnes, the BBC’s senior political analyst.

The Autumn Statement set out a plan for the government to generate £55bn from a combination of tax rises and spending less than they had planned to.

So, by the year 2027-28 the overall effect of the policy decisions announced, excluding energy, is expected to be a net gain to the Treasury of £55bn.

That’s made up of £30bn from spending policy decisions and £25bn from tax policy decisions.

The £30bn squeeze in public spending is a cut compared to what had previously been planned. It is not a cut compared to current levels of spending.

As the chancellor said: “Overall spending in public services will continue to rise, in real terms, for the next five years”.

But it will rise less quickly than planned from 2025-26, so the Treasury is saving money compared to what was expected.

It’s also true that the very limited growth in overall public spending above inflation will almost certainly mean actual cuts for many departments.

Defence and overseas development spending are protected, and it seems inevitable that health will continue to eat up a disproportionate share of the extra money.

So that means real term cuts compared to current levels of spending elsewhere.

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