Kissing Keynes

The Chancellor's autumn statement today sounded more like the budget he should have delivered in June 2010. It was a confident delivery which focused on new investment decisions and support for business. He avoided explaining away the Office of Budget Responsibility report that was far worse than he could ever have imagined during his refusal to entertain any Keynesian notions during his early days at the treasury when deficit reduction and monetarism were his mantras.

Although he claimed that he was faithful to Plan A, and cited the low-interest rates and the confidence of the international markets in his policies, he was suddenly transformed into an animated big spender when giving a long list of infrastructure projects that will get the go-ahead. I tried to spot the equivalent of the Hoover dam but the A12 expressway to Ipswich is the biggest scheme I could find - it could become Osborne's Essex Way. Whilst Osborne is certainly no Roosevelt, who went the whole way and revived the American interwar economy, you sensed that he was at least kissing Keynes.

Ed Balls had been given an open goal and could have welcomed the Chancellor along the lines of "we are all Keynesians now" but sought instead to reiterate the terrible state of the economy quoting the various recent independent bodies. It became a tedious game of which economic policies were best and as we all know economics and consensus are like oil and water. 

Alistair Darling was the one who stood out during the subsequent analysis as someone who was looking at the wider economy and he was prepared to give the Chancellor credit for a number of initiatives.  This gave him the authority to comment authoritatively on why it had taken eighteen months to get back to the recovery plan that he had established and was working well for 2010. More cash for housing, school building, transport and roads, youth employment and early years were all welcomed but we were reminded that they had all been slashed in June 2010 during the so-called emergency budget.  

Recovery cannot be switched on and off and it is slightly worrying that Osborne has started another round of capital spending shortly after Councils and other bodies have just finished a cull of thousands of ready-to-go capital projects made necessary by last year's budget reductions.  They may not have been the prestige projects that make the headlines but they were smaller, properly costed, had planning permission, were ready to roll and usually, the tenders had gone to local companies. The new tranche of projects will be lucky to spend before 2014/15.  

Watching the big construction companies getting excited about the tranche of new projects announced today should remind us what happened to the massive defence and IT projects let by government departments, they have seldom kept to cost or schedule. And who pays, well it looks like the public sector with 1% wage increases next year and another 310,000 jobs to disappear according to the Office of Budget Responsibility. I am not sure that this is George's Marvellous Medicine.