A large slice of humble pie for Osborne - but was it really a game changer?

An extra £111bn of borrowing over the next five years. A fresh squeeze on public spending. No prospect of any tax cuts before the next general election.

It is easy to see why many commentators have described Tuesday’s Autumn Statement by Chancellor George Osborne as a ‘game changer’ in British politics.

Here we have a government that was elected in order to sort out the nation’s finances and eliminate the budget deficit by 2015 admitting that it will fail in that central objective.

Far from the being able to fight the next election on the sunlit uplands of fresh economic growth following the hard years of austerity, it will now have to do so against a continuing backdrop of cuts.

As the BBC’s James Landale put it on Tuesday evening: “Just as the facts have changed, so must the politics.”

“Until this morning, the assumption had been that the election would be about which party was best placed to use the proceeds of an incipient recovery – what taxes would they cut and what spending would they increase. That debate is now for the birds.”

And yet, and yet…I wonder if the Chancellor’s statement really has altered the terms of the underlying political debate about the country’s economic prospects all that much.

Despite all the economic doom and gloom, and the large slice of humble pie that the Chancellor has been forced to swallow this week, nothing has yet happened to demonstrate beyond doubt either that the government’s prescription is mistaken, or that a better alternative exists.

On the face of it, Labour’s narrative ought to be a compelling one. It is that an incipient recovery that was already under way by the time of the last election was then choked-off by a combination of spending cutbacks and “austerity rhetoric.”

But the public remains to be convinced that Labour’s more limited ambition to halve rather than eliminate the deficit in four years would not have landed us with a different set of problems.

There is also, still, a powerful residual feeling that Labour is really to blame for the country’s economic plight, even though history will surely show that Gordon Brown’s actions at the height of the banking crisis in 2008 saved us from a far worse fate.

This is a large part of the reason why, for all Mr Osborne’s difficulties, the opinion polls continue to show that Ed Miliband and Ed Balls are still less trusted on the economy than their Conservative counterparts.

A real political game changer is the kind of event which transforms the fortunes of the key players involved almost overnight.

Sadly for Mr Brown, his decision not to hold an election in the autumn of 2007 was one such example. After that self—inflicted humiliation, the public never saw him in the same light again and nothing he did was able to reverse that negative perception.

For the Tories, the ejection of the UK from the Exchange Rate Mechanism in 1992 is the one that sticks in the mind, destroying in one fell swoop the party’s hitherto prized reputation for economic competence.

I’m no apologist for George Osborne, but I don’t think being forced to downgrade the growth forecast for 2012 from 2.5pc to 0.7pc or even up the public sector borrowing requirement by £111bn quite falls into the same category.

For all the talk of game changers and transformed political landscapes, I actually find myself wondering whether this week’s events might not help the Conservatives in the longer-run.

If history is any guide, it suggests the answer might be yes. While voters appear to have a habit of ditching Labour governments at times of economic difficulty (1979, 2010) they seem more inclined to stick with Conservative ones (1983, 1992).

The Tories will of course hope that some of the pro-growth measures announced this week – for instance bringing forward £5bn of spending on infrastructure improvements – will have made at least some impact by the time we come to go to the polls again, even if few in this part of the world will have been fooled by the reannouncement of some old money for the Tyne and Wear Metro.

But if not, they could find that their most potent message come 2015 could well be that familiar old refrain: “Keep hold of nurse for fear of something worse.”

Osborne's date with political destiny

‘Make or break’ is doubtless an overused term in politics. Many are the times when it is said that a politician needs to make the “speech of his life” on such and such a day, only for the same old cliché to be trotted out again the next time he makes one.

Yet for Chancellor George Osborne, this Tuesday’s autumn statement on the economy is genuinely shaping up to be one of those dates with political destiny.

For years, Mr Osborne has been the man with the plan as far as the Tory Party is concerned, and his plan on taking over at No 11 Downing Street in May last year was straightforward and simple.

It was: sort out the deficit in the first couple of years, wait for economic growth to start kicking in again, sprinkle some carefully-targeted tax cuts around, and then win the next election hands down.

But it’s all gone horribly wrong. Far from providing a platform for new growth, 18 months of austerity measures have pitchforked the economy back towards the ultimate horror of a double-dip recession.

As such Mr Osborne’s masterplan for economic recovery – and outright Tory victory in 2015 – now looks hopelessly optimistic.

And of course, it is not just the fate of the economy and the government that is at stake here, but Mr Osborne’s own chances of succeeding David Cameron as Tory leader.

If recovery comes and the Tories win an overall majority next time, there will be nothing to stand between him and No 10. But if they lose – or are forced into another five years of coalition - it will be Mr Osborne who gets the blame.

All of which make Tuesday’s statement if not quite the “speech of his life” then certainly the most important he has made since that Tory conference address of 2007 which frightened Gordon Brown off from holding an election.

To succeed, he must somehow manage to reconcile two seemingly contradictory goals.

Firstly – and this almost goes without saying - he must manage to reassure the markets that the government remains serious about tackling the deficit.

But equally, he now needs to reassure an increasingly sceptical public that the government has a plan for growth – if not a ‘Plan B’ as Labour still insists on calling it, then at least a Plan A-Plus.

It is already clear from several strategically-placed leaks that switching more spending into capital investment in infrastructure is going to be central to Mr Osborne’s plans.

It all seems a far cry from the days when Margaret Thatcher commented sniffily: “You and I come by road or rail, economists travel on infrastructure” – but no matter.

Chief Secretary to the Treasury Danny Alexander gave an insight into the government’s thinking in a speech to the National Association of Housebuilders on Wednesday.

"We are shaking the Whitehall tree to make sure no-one is stockpiling capital that can be put to good use today. That's why next week's announcement will switch funds to capital spending plans,” he said.

This is all of a piece with Mr Cameron’s speech on Monday setting out measures to boost the housing market, both by encouraging the construction of more homes and by helping first-time buyers obtain mortgages.

And yesterday Deputy Prime Minister Nick Clegg got in on the act by pre-announcing a £1bn scheme to help the young unemployed, apparently to be paid for by further savings in other areas.

The risk for the government is that it will all be too little, too late to counteract the chilling effects of 18 months of what Labour leader Ed Miliband this week called “austerity rhetoric.”

But if he can use Tuesday’s statement to get the economy moving again at last, then it may yet all come right – for the coalition, for Mr Osborne, and most importantly for the long-suffering British public.

Lost North jobs still seen as a 'price worth paying'

Youth unemployment topping 1m. An additional 129,000 people out of work in the past month. The overall number of jobless at its highest level since 1994. This week’s unemployment figures told their own story.

If people were not already sufficiently well-appraised of the dire state of the British economy, Wednesday’s figures, coupled with more downbeat forecasts from the governor of the Bank of England, will surely have removed any lingering doubts.

Yet in the North-East, as is customarily the case when the economy as a whole is struggling, the picture is even bleaker still.

As The Journal reported on its front page the Monday before last, this region has seen a staggering 32,000 public sector jobs lost in the past year, while, public spending cuts notwithstanding, the number in London and the South East has actually risen by the same amount.

It is now more than a decade since the launch of The Journal’s original Case for the North campaign aimed at closing the economic divide with the South.

At the time, it was estimated that if economic growth continued at the same rate, it would take around 30 years to bridge the gap – a state of affairs which many of the region’s MPs and other political leaders regarded as intolerable.

I have to confess I don’t know whether any subsequent analysis has been carried out as to how long it would now take, but I don’t find it easy to hazard a guess as to how many more decades might have been added to that figure.

Back then, I wrote that the North-East cannot be expected to tolerate as a matter of course systemic imbalances in economic growth between regions, but in fact that has since become the unspoken policy of the British Government under both Labour and Tory administrations.

All of which makes the continuing debate over the direction of the economy perhaps more pertinent in this region than in any other.

For months, this debate has been stuck in a kind of stasis in which Labour endlessly and increasingly fatuously calls on the Government to adopt a ‘Plan B’ while the Government equally stubbornly insists it must stick to its course.

But this is now becoming more than just an arid intellectual battle between rival economic theories. People’s jobs, businesses and livelihoods are at stake.

The plaintive tone of Labour leader Ed Miliband’s speech to the Social Market Foundation on Thursday certainly conveyed the sense that a crisis point has been reached.

"Austerity at home, collective austerity abroad is no solution to the problems of jobs, growth or the deficit,” he said.

“Don't believe those who will tell you that any change in course will make us like Greece. The markets are as worried about the lack of growth in the economy as they are about debt levels.

"Knowing what we know now, about our economy, about growth prospects, about unemployment, about higher than expected borrowing, it would be the height of irresponsibility for the government to carry on regardless.

"I urge David Cameron: change course now, change course for the sake of our young people, change course for the sake of the country."

As it is, Mr Miliband is pushing at a partially open door in seeking a shift in the Government’s emphasis from deficit reduction to growth.

Chancellor George Osborne is understood to be working on a package of pro-growth measures to be unveiled in the autumn statement later this month.

They are likely to include a new job-creation initiative for the young unemployed, incentives for private companies to invest in big infrastructure projects, and a scheme to under-write mortgages for first-time buyers.

There may also be a rebate for high-energy using industries to alleviate the impact of green taxes, blamed by RTZ Alcan for Thursday’s decision to close its plant in Northumberland.

Some of that will doubtless help the North-East, as will Thursday’s announcement that Virgin Money, newly-enlarged with the acquisition of Northern Rock, will have its headquarters in Newcastle.

But it scarcely amounts to a regional economic policy, still less a strategy for tackling the enduring North-South divide.

Thirteen years ago, lost North-East jobs were seen by the then governor of the Bank of England as an “acceptable” price to pay for preventing the South-East economy from overheating.

Now it seems they are once again being viewed as a price worth paying.