For a statement initially viewed as “inconsequential” and “one to forget”, the political shockwaves from George Osborne’s mid-March budget continue to reverberate.
The rumblings over the planned £1.3bn-a-year “cut” to disability benefits, specifically Personal Independence Payments, started early. I use inverted commas because the Chancellor actually proposed a reduction in the planned increase in spending on PIPs – made to adults with long-term disabilities that restrict mobility and the completion of daily tasks.
PIPs expenditure is still set to rise, the budget documents show, from £16.2bn this year to £18.2bn in 2019. And the cost of the benefit has anyway already spiralled. As recently as 2013, the Office for Budget Responsibility put the PIPs bill for 2019 at around £14bn. Yet Osborne just allocated over £4bn more for PIPs spending that year in his latest budget.
George Osborne’s eighth budget was apparently aimed at “the next generation”. The Chancellor used this phrase on 18 occasions during his hour-long Commons statement. This was a policy package for “the long-term” Osborne told us an astonishing 19 times.
The budget also offered “major new commitments to national infrastructure projects” – the i-word getting no less than 10 mentions. What with the “sugar tax”, though, shaky fiscal rules and rows over disability benefit, last week’s infrastructure announcements haven’t received much attention.
It’s not surprising the Chancellor emphasized infrastructure in his latest Commons set piece. Better roads and railways are vital, after all, if Britain is to address its worsening “productivity problem”.
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.
“We have shown today that we’re not short of ammunition,” said Mario Draghi. The President of the European Central Bank, though, used the bullets he had to shoot himself – and what remains of the global economic recovery – in the foot.
On Thursday, the ECB fired its “big bazooka”. Central bankers in Frankfurt, in yet another bid to get the moribund Eurozone economy moving, created even more virtually-printed money while pushing already negative interest rates down further.
The ECB’s main refinancing rate was lowered from 0.05pc to zero, while the deposit rate dropped from -0.3pc to -0.4pc. So Eurozone commercial banks will be charged more to lodge excess reserves at the central bank, apparently encouraging them to extend loans to firms and households.