Spin and bust?
Politically, the Chancellor did what he needed to. But if any of his presentation is based on spin or if there are hidden figures in the book, expect the ghost of omnishambles to return
Not been a good year for you has it, Mr. Osborne? Still recovering from the omnishambles of the budget, you stood up today, not so much as Scrooge but more Marley, with the ghosts of Christmases past, present, and future surrounding you.
So, with the chains of economic woes around his neck, how did Georgie do?
Funnily enough, the coalition appears to have learned from the budget and made sure that the news management allowed a steady trickle of gloomy stories out before the Chancellor opened his mouth, thus allowing him to announce some relatively good news on the mess that is our economy.
Indeed, this was more of a political statement than previously and it had to be. Battered by the BBC, battered by the gloom abroad, Osborne needed to deliver some good news.
Stressing strongly the independence of the Office for Budget Responsibility (OBR), the Chancellor pointed out that the deficit had already fallen by a quarter and was forecasted to fall further. Indeed, he started dishing out what good news he had almost immediately, pointing to exports to emerging countries doubling, 1.2m new jobs in the private sector, and a £33bn saving in debt interest compared with previous
But for the markets this is the message that was important: Was the government on target? Could it still maintain its promises to the bond markets and electorate?
Simply put - no.
It missed. It has missed by a year so far with the debt now forecasted to fall in 2017/2018 instead of a year earlier. Indeed, OBR forecasts that the debt will rise to 79.9 percent of GDP by 2016 and then, only then, will we start to see a fall. Indeed, don’t be fooled by that message. The rate will still be 2.5 percent higher than this year – some cuts.
But there is good news for the deficit – yes it is missing its target, but at least the forecasts say that the deficit will continue to fall from 7.9 percent this year to 4.2 percent. This means a fall in borrowing from
£159bn to an eventual figure of £49bn – if the OBR has got its sums right.
The problem I have with Osborne is the contrary statements within the speech.
He stands by the OBR’s view that bank credit is being squeezed, restricting growth for several years, but with the same pen he has signed off ridiculous legislation that attacks that very credit needed by industry and homeowners. He also says the banks must to continue to pay the “one-off” levy as their ongoing punishment.
He says that there will be money for 120,000 new homes but who will lend the money for these homes to be purchased? He says more money will be going into flood defences when it is building on flood plains that is the problem.
He announces a cut in corporation tax but then announces further money being poured into the HMRC, with £77m extra to investigate tax avoidance. Tax avoidance? That’s legal. Avoidance is legal;
I am wondering what sort of message this will send out to companies.
Indeed, who exactly will get hit by these investigations into businesses’ spending disciplines? I bet it won’t be those multi-national corporations that the lynch mob are so keen on at the moment – it will be the bedrock of this country, the small business.
Finally, the Chancellor said that there needed to be further savings in the Civil Service but then promptly maintained national pay for the NHS and the Civil Service - how does that work exactly, George?
A cursory look suggests this was a statement that was limited by circumstances, limited by politics, and limited by coalition.
It is a shame that he could not find a real way to take more people out of the tax system completely. It was a shame that he could not find a way to really cut spending in government. And it was a shame that he could not find a way of educating people about the dangers of us continuing this client state.
What did the market think? Has he done enough? The initial reaction was positive with the exchanges up and gilts slightly down.
So while the ghost of statement past is haunting the Chancellor, the ghost of statement present was broadly managed to expectation. Will the ghosts of statements future be brighter?
Over the next few days the figures will be crunched, the data examined. Politically, the Chancellor needed a sensible, sober presentation, but if any of his presentation is based on spin, if his calculations are based on creative accounting, and if there are hidden figures in the book, expect the ghost of omnishambles to return.
Simon Miller is a Contributing Editor to The Commentator
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