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Was George Osborne’s Autumn Statement a case of rearranging the deckchairs on the Titanic or a bold attempt to try to boost growth and shelter Britain from the Eurozone storm? A bit of both, I would say.
The big message was that growth prospects have deteriorated. We knew 2011 was a tough year. Now we know that 2012 will be at least as tough, at least if the government’s Office for Budget Responsibility is right. It predicts growth of 0.7% in 2012, after 0.9% in 2011.
More than that, the OBR has taken a gloomier view of the amount of spare capacity in the economy, and hence its ability to grow out of the present troubles. That means the budget deficit is even more of a problem than we thought, and will take longer – into the next parliament – to sort out.
The chancellor unveiled a series of growth measures, as I suggested last month. Were they the damp squib I feared they would be? That would be a little harsh. Within the constraints he was under, credit easing went further than expected.
This, a new effort to get lending into credit-starved small and medium-sized firms with the turnover of up to £50m, will provide up to £40 billion of loan guarantees, increasing the supply and cutting the cost of such credit. The clever bit was to draw on a £50 billion asset purchase facility held at the Bank of England originally established by Alistair Darling in 2009, only £10 billion of which had been used.
There was also a welcome recognition of the importance of the infrastructure in fostering growth and competitiveness. £30 billion over a few years - £10 billion of which will be diverted from current spending by government, £20 billion from pensions funds and other institutions – is not a huge sum. It is rather less than annual capital spending by government now, even in these straitened times.