Two features of George Osborne's Autumn Statement today overshadow all others. The 'headline grabber' will inevitably be his unexpected climb down over tax credits. Just as important however are the figures revealing the reduction in state spending during his period in office. It now accounts for just 35% of the total UK economy. It was 50% when he became Chancellor in 2010.
Faced with widespread opposition over his proposal to cut £4.4 billion from the benefits paid to top up the wages of low paid workers, including criticism from scores of his own backbenchers, this aspirant Prime Minister abandoned his plan altogether. His decision says more about his own political ambitions however than any change of heart by the Tories. They still intend to slash £12 billion from other welfare provisions most noticeably Universal Credits and housing benefit. They will also proceed as planned with £20 billion of cuts to transport services, climate change provisions and justice budgets.
Over the last 5 years the Tories have systematically slashed UK state spending. They are committed as George Osborne again made clear today 'to a high wage [sic], low tax and low state spending economy'. This means passing more and more responsibility for providing social services will be passed to the private sector. And more of the real wage bill will be passed on to private employers and not the state.
So how can Osborne reconcile his u-turn on tax credits with his commitment to lowering the national debt? The Office of Budget Responsibility can provide some of the answer. He has benefited from low interest rates for paying back government debt says the OBR and higher than expected tax returns in the year ahead. But the OBR has also concluded that his borrowing will go up not down from now until 2020. So Osborne's decisions today were as much about his own political ambitions as economic 'prudence'
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