Six key questions for George Osborne to answer in his speech on Wednesday

Question Mark

Why is the government not meeting its deficit targets?

Despite his austerity drive, Osborne is almost certain to miss his deficit reduction plans this financial year. The big problem has been the pressure on income tax receipts from weak wage growth, which is in turn due to the large number of low-paying jobs in the economy and a sharp increase in self-employment. A rise in the income tax personal allowance to £10,000 has further cut receipts by taking more people out of paying income tax – a lot of the recent rise in employment has been at the low end of the pay scale.

The Office for Budget Responsibility, which publishes its latest independent predictions for the Treasury alongside the autumn statement, is expected to revise up its forecasts for borrowing.

It all points to more austerity down the line. But with an election around the corner Osborne will be careful about revealing the extent of the cuts to come. The Institute for Fiscal Studies thinktank estimates that if health, education and foreign development budgets remain ringfenced, other departments will need by 2018-19 to have cut their budgets by more than a third from the 2010 figure.

Why is growth slowing?

Osborne will put the blame for this at the door of the eurozone, the UK’s key export market, and instability in the global economy. But he will also emphasise that Britain is outpacing other advanced economies. Expect to hear from the chancellor that “the government’s long-term economic plan is working” and that external pressures underline how important it is to stick to the plan. Don’t expect to hear much about exactly what the plan is, or how it is working.

How will he fund Cameron’s tax cuts?

In October, the prime minister promised £7bn of tax cuts by 2020, aimed mainly at those on above average incomes. With the deficit reduction plans nowhere near on track, the proposed tax cuts were dismissed by Labour as “pie in the sky promises”.

There is little room for manoeuvre and it is hard to see how the tax cuts could be delivered without increases in other taxes and even more spending cuts. But Osborne has a handy excuse not to go into how Cameron’s cuts would be paid for: the autumn statement is delivered on behalf of the coalition government, not just the Conservatives.

How will he plug the NHS funding gap?

Osborne is expected to step in with at least some extra money for the NHS as it faces the worst budget crunch in its history. Its bosses are asking for an additional £8bn by 2020. Deputy prime minister Nick Clegg has raised the pressure by telling a press conference last week that the autumn statement will contain a pledge to spend an extra £1.5bn on the NHS. But Clegg did not give any details of where the money would come from. Perhaps Osborne will borrow an idea from Labour, whose shadow chancellor Ed Balls has said he would have given the £1bn of fines imposed for foreign exchange banking scandals to the NHS.

What can be done about Britain’s weak infrastructure?

Pledges to improve Britain’s roads are expected after the CBI business lobby group accused politicians of compromising progress by failing to tackle difficult decisions on long-term infrastructure. Its director general, John Cridland, said a tunnel under Stonehenge to relieve congestion to the south-west was top of his autumn statement wishlist. But an upgrade for the A303 should be just part of a wider push to bring the UK’s infrastructure up to levels in other advanced economies, say business groups. Again, Osborne will struggle to find money to pay for big projects. But with grumbling about roads so widespread he will probably see this as a good target for the few giveaways he can afford.

What will he do for the north?

With the recovery still uneven, and unemployment highest in the north-east, Osborne has been trumpeting plans for regional rebalancing by building a “northern powerhouse”. The autumn statement is expected to shed some light on quite how much money will be available to integrate transport in the north of England. Osborne has also said he is committed to boosting local powers. Any announcement may go some way to appeasing local leaders whose accusations that England is “overgoverned” from London have intensified in the wake of the Scottish referendum.

Powered by article was written by Katie Allen, for The Observer on Saturday 29th November 2014 21.30 Europe/London © Guardian News and Media Limited 2010