Chancellor Osborne Will Use Autumn Statement to Claw Back Lost Political Ground

After the UK coalition government's awful autumn, which has seen it accused of repeatedly dancing to Labour's tune, chancellor George Osborne will this week get his chance to turn things around and move the political debate firmly back on to his own chosen territory of economic recovery.

When he stands up in the Commons on Thursday to deliver his annual autumn statement it will, for the first time, be against a backdrop of good economic news. The economy is finally healing with better than expected growth figures and some nice little windfalls from, for example, the sale of Royal Mail, which could mean borrowing around £15bn less than predicted.

Osborne will not use the words "I told you so", but that will be exactly what he means when he attacks Labour for getting it wrong on the economy and demands for a plan B.

The other phrase he will not use is "cost of living crisis", even though some of the measures he will announce will be aimed at addressing exactly that issue, which has been so successfully driven up the political agenda by Ed Miliband and forced a series of government U-turns including on energy prices and payday loans.

Instead he will talk repeatedly about the "responsible recovery" the government has created and is determined to continue supporting. He will be hugely boosted by figures from the Office for Budget Responsibility which are expected to show growth figures for 2013 revised up from the forecast 0.6% to 1.4% with predicted growth next year up from 1.8% to 2.3%.

As Osborne told the BBC's Andrew Marr show: "The economic plan is working and recovery is under way. But the job is not done. We want a responsible recovery."

The first part of that statement is the good news for the government and voters and it is exactly the message Osborne and David Cameron hoped they would be able to deliver at this point in the political cycle, in the run-up to the 2015 general election.

Osborne may be chancellor, but like his Labour predecessor Gordon Brown, he is a politician to his finger tips and his entire political strategy since 2010 has been aimed at getting the government into the position to make just these claims at just this point.

But over recent months he and Cameron have failed to capitalise on the economic change and have found themselves pushed around by Labour's popular, agenda-setting policies.

However, the second half of Osborne's statement foreshadows what could still be difficult news for both ministers and the voters. In effect, he was repeating his previous suggestion that a form of austerity is here to stay.

Inevitably, some of the positive bits of the autumn statement have already been announced, with plans to cut £50 a year off energy bills by removing green measures from suppliers the headline grabber.

But there are also likely to be policies to provide free primary school meals, as pledged by Nick Clegg in his conference speech, limit or freeze fuel duties, help for small businesses, make the marriage tax allowance transferable and push more cash into hard-pressed areas of the NHS to avert a winter crisis.

The proposal to remove the requirement on energy companies to improve efficiency in homes will be spread over a longer period, and there will be a £1,000 offer for new home buyers to insulate their homes, as well as incentives for landlords to improve energy efficiency when their tenants change.

But, in an announcement that immediately raised sceptical eyebrows, Cameron and Clegg - who unveiled the proposal alongside each other to play down suggestions of a coalition split - revealed it would be paid for by cracking down on tax avoidance.

Just about every chancellor in just about every financial statement just about every year has promised that and, by definition, it is impossible to put a figure on it.

It is also likely that, having already revealed some of the measures planned, there will be some surprises in the package aimed at grabbing some positive headlines on Thursday.

But perhaps the most difficult area will be welfare, which is already undergoing massive reform and sparking controversies over things like the bedroom tax.

Osborne repeated his view that welfare spending was "out of control" and more action was needed to see there were "very, very strong initiatives, to put it mildly" to ensure anyone who could work did work.

Meanwhile, all eyes will be on exactly what the chancellor decides to do with the wriggle room the better economic climate offers him. Will he go for modest and focused tax cuts or some targeted extra spending or to pay off the debt?

The answer will give the clearest signal of the direction in which the government will be driving between now and the general election.