The UK's Autumn Budget Statement.

Shortly after taking power in 2010 the UK's Conservative government unveiled an emergency budget that outlined an ambitious program of austerity that was designed to completely eliminate Britain's fiscal deficit (the amount the government borrows each year) and bring about economic growth of 2.5% by fiscal year 2014/15. Today the Chancellor of the Exchequer announced his half yearly budget progress report known as the autumn statement.

This revealed that Britain has comprehensively failed in it's economic plan. After being in recession for most of 2011/12 Britain managed to only record growth of 1% in the third quarter of 2012 with that figure being heavily massaged by things like the inclusion of Olympic ticket sales which actually took place 12 month previously. Therefore Britain's growth estimates have been sharply downgraded to 1.2% in 2013, 2% in 2014 and 2.3% in 2015. However with the government having missed every single growth prediction since the 2010 emergency budget there is little faith that Britain will achieve even these revised targets.

Progress on the deficit has been even worse with the UK government borrowing £108 billion (USD162bn) in 2012 meaning that all hope of eliminating the deficit by 2015 has now been abandoned. The plan is now to bring the deficit down to £31bn (USD47bn) by 2018. This is likely to be an underestimate because with the COP/CMP trying to get a replacement for the Kyoto Protocol agreed by 2015 for implementation in 2020 Britain didn't want to give any signal that it could be supporting any further moves to limit greenhouse gas emissions as the USA did with it's announcement yesterday of a mission to Mars in 2020.

The UK's response to these failures is equally odd and seems to be driven by a genuine fear that without bribes to the middle classes the current government faces a demolition at the 2015 General Election. The plan now seems to be to cut taxes and increase spending which is never a recipe for deficit reduction. Lead amongst the tax cuts will be a raising of the minimum income tax threshold from £9205 (USD13807) to £9440 (USD14160) and raising the threshold at which people pay the higher 40% rate of income tax from £41,450 (USD62,175) to £42,285 (USD63,428) both of which are designed to target the lower middle classes in order to free up disposable income to stimulate growth and win votes in a core constituency. The other main tax cuts are a cut to a 21% rate corporation tax which obviously only helps corporations and a 1% cut to inheritance tax which only really helps the super-rich although lots of the aspirational middle classes like to pretend they are rich enough to pay inheritance tax. A planned 3pence/litre rise in fuel duty has also been scrapped. These tax cuts will mainly be funded to cuts to the incomes of the poorest in society with working age benefits such as unemployment benefits, sickness benefits, child tax credits and housing benefits being capped to a 1% annual increase and the state pension being capped at a 2.5% annual increase both of which are significantly lower then the roughly 3% rate of inflation that Britain has been experiencing.

The Chancellor has also found money to spend on big infrastructure projects such as £1bn (USD1.5bn) for road building, £1bn (USD1.5bn) to extend the Northern Line of the London Underground to a proposed Battersea Power Station re-development and £1bn (USD1.5bn) to fund school building. However as most of that money seems to be earmarked for free schools and academies that seems to be more an effort in social engineering rather then economics. There will be also £600 million (USD900million) for scientific research although having seen Britain's performance at COP18/CMP8 it's going to take a lot more then that to bring the sector up to standard. Firmly flicking the V signs at the COP/CMP the autumn statement also unveiled a natural gas strategy that will essentially see government money being given to private companies to extract shale gas however as previously mentioned Britain's heavy reliance on foreign natural gas in electricity production is now a significant strategic issue.

So I hope that people in the US have been paying attention to today's UK budget statement because in the fiscal cliff negotiations it is the British government that the Republicans are taking their inspiration from and frankly you'd be better off seeking economic advice from Robert Mugabe.

20:50 on 5/12/12.