George Osborne’s latest budget pretended to be many things it wasn’t. The Chancellor talked repeatedly about “borrowing falling” – yet, over the next three years, government borrowing on our half goes sharply up.
Osborne warned about “financial instability” and “storm clouds” on the economic horizon, yet he’s relying on growth assumptions that are surely too optimistic. While barely mentioning the referendum on EU membership, the Chancellor’s determination to avoid Brexit pervaded almost every paragraph of his 63-minute Commons statement.
Far from being “a budget for the next generation” – a phrase Osborne wielded 18 times – his policies were aimed at attracting as many “Remain” voters as he could, while doing as little as possible to offend those still on the fence.
Rather than a “long-term budget” (19 mentions), the package was designed for the next three months, ahead of the EU vote on 23rd June that will determine the Chancellor’s political future.
What we’ve just seen, then, was possibly the most short-term “long-term budget” in history. And, all of it presented under a sugar-coating – or, at least, a headline-grabbing tax on sugary drinks. Bound to get the chattering classes chuntering (“G&T slimline, anyone?”), Osborne’s flab-fighting “sugar levy” was cynically tactical, broadening his appeal among non-Conservatives, while diverting attention from the statistical sleight of hand at the heart of this budget.
“Borrowing continues to fall”, the Chancellor told us. Really? It’s astonishing that, a full eight years after the financial crisis, and after a strong surge in growth and employment, the UK is still borrowing over £72bn a year.
Government debt stands at £1,591bn, 50pc up since Osborne took office, more than £50,000 per person in full or part-time employment. The government is spending £46bn annually on interest payments alone – more than on defence – and that’s with interest rates at historic lows. As the debt and rates spiral upwards, that interest bill can only rise, all at the expense of spending on public services.
Instead of cutting borrowing yesterday, the budget fine-print shows that, over the next three years, we’ll be adding another £116bn to our national debt – more than £36bn up on the borrowing projections in last November’s Autumn Statement. While rows about still unspecified spending cuts of £3.5bn over this Parliament fill our airwaves, who’s talking of a rise in projected borrowing over just four months that’s greater by a factor of ten?
We’ll probably end up borrowing even more, of course, than these already gargantuan numbers – not least if growth is lower than forecast. Since last November, some £5,000bn has been wiped off global stock markets. Morgan Stanley now warns clients of a 30pc chance of global recession over the next year. Many financiers privately judge the chances of a financial collapse to be far higher.
“As one of the most open economies in the world, the UK isn’t immune to global slowdowns and shocks,” Osborne told the Commons. Yet, over each of the next six years, the budget borrowing projections rest on growth of 2pc or more. While I obviously hope that happens, it amounts to a mighty optimistic assumption.
“We fix our plans to fit the figures, we don’t fix the figures to fit the plans,” declared the Chancellor yesterday, in a coded jibe at his Labour predecessor Gordon Brown. Yet, sifting through the budget tables, it’s striking – almost laughable – how the fiscal balances suddenly improve in 2019/20, just in time for the Osborne to fulfill his promise of “ending the deficit” within this Parliament.
In truth, the 2019/20 turnaround relies on a slew of fiscal tricks – a shift to the corporation tax timetable, a juggling of investment spending, a delayed cut to public sector pensions – along with an “aim to save a further £3.5bn” in that year, with no details of how such cuts will be achieved. These fiscal manipulations remind me – and I shudder to write this – of Brown at his most disingenuous.
Then we come to the EU referendum, the spectre of which loomed large as the Chancellor spoke. “There appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK’s new relationship with the EU were negotiated,” says the Office of Budget Responsibility, in a new report cited yesterday by Osborne.
Eurosceptic Tory backbenchers bristled that the independent OBR could produce words so politically charged, and so helpful to the Chancellor. But at least the OBR’s judgment was nuanced. The Leave camp should be much angrier at what appears in the Budget Red Book itself.
“Voting to leave the EU would create a profound economic shock and years of economic uncertainty,” asserted the hallowed Treasury document, which is supposed to be strictly factual, in a brazen display of campaigning rhetoric. Such an unqualified statement could have been written by Tory Minister Anna Soubry, who recently made the ludicrous claim that, if Britain leaves the EU, our trade with Europe will “go down almost absolutely to zero”.
This was a budget that threw scraps on corporation tax and business rates to small firms, with the changes coming in over the next few years, if Osborne remains in office. In other words, if the UK votes against Brexit. The Chancellor took some pots shots at big businesses – again, to avoid accusations of elitism, and appeal to non-Tories, in this increasingly febrile referendum campaign. There were assorted future goodies for the regions, too – new roads, lower bridge tolls, rail upgrades. In the fight against Brexit, after all, every vote could count.
This was a budget, above all, that was all about politics, with almost no economics. In sum, it was the budget that wasn’t.